S&P Becomes China’s First Wholly Foreign-Owned Ratings Agency for Exchange-Traded Bonds

S&P Ratings (China) Co. Ltd., New York-listed S&P Global Inc.’s wholly owned subsidiary on the Chinese mainland, announced (link in Chinese) Thursday it has registered with the country’s securities watchdog to carry out credit ratings business in China’s exchange-traded bond market, making it the first wholly foreign-owned credit ratings agency to do so.

Set up in June 2018, S&P Ratings (China), won approval from China’s central bank to rate bonds in the larger interbank market in January 2019, making it the first wholly foreign-owned credit ratings agency in the domestic bond market. The agency issued its first rating on an onshore bond in July 2019.

The latest registration with the China Securities Regulatory Commission (CSRC) allows S&P Ratings (China) to rate bonds and asset-backed securities registered with the regulator that are traded or listed for transfer on the country’s exchange-traded bond market, with the exception of government bonds, the company said. The agency will also be able to rate bond issuers.

Hongshan Chen, president and CEO of S&P Ratings (China), said in a statement that the CSRC filing “enhances our ability to deliver transparent, globally understood credit ratings and research to the world’s second-largest bond market” and that it marks an important milestone in the agency’s expansion in China.

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Chinese regulators and some market participants have high hopes for the entry of foreign ratings agencies, which may force their domestic counterparts to strengthen standards and improve compliance awareness.

In November, China unveiled new regulations to tighten scrutiny of the credit ratings industry in the wake of a corruption scandal involving Dagong Global Credit Rating Co. Ltd. and a series of bond defaults by highly rated companies. The measures stipulate the responsibilities of credit ratings firms, explicitly ban certain activities — such as soliciting bribes or providing consulting services to bond issuers — and detail punishments and fines that could amount to 50% of income received for a particular project or rating that is found to violate regulations.

Douglas Peterson, president and CEO of S&P Global told Caixin last year: “The way we’re thinking about entering the market is that we’re going to add another voice in the market applying our global technology and experience, but using local expertise and knowledge for delivering this type of research and analytics for investors’ benefit.”

“There is a genuine appetite for granular, independent credit ratings in this market,” Chen said.

Contact reporter Timmy Shen (hongmingshen@caixin.com) and editor Gavin Cross (gavincross@caixin.com)

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