Market needs good credit rating agencies
Updated: 2007-12-03 11:54
There are more than 50 credit rating agencies around China. But all the fledgling corporate market in Shanghai needs is a few good ones that can win the trust and respect of both issuers and investors.
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"What we in China lack is a unified standard of rating that complies with the highest international standards and at the same time takes into account China's particular business conditions," says Yan Yan, vice-chairman of China Chengxin Securities Rating Co Ltd, which is widely considered to be a leader in the credit rating field.
"While learning from international credit rating standards, Chinese agencies are also trying to incorporate the different conditions of Chinese companies and industries," Yan adds.
Previous efforts by Yan and other credit rating experts to establish such a system received only passing interests from the corporate sector because bond issues were limited to large State-owned enterprises. In addition, the repayment of interest and capital by the issuers of those bonds is guaranteed by banks.
Things are changing. Under new rules introduced by the China Securities Regulatory Commission in June, all Chinese corporations that can meet the specified requirements can issue bonds without bank guarantees. At least two enterprises have issued bonds under the new rules and more are expected to come.
Such activities have thrust credit rating agencies onto center stage. The role they play is widely seen to be crucial to the development of China's long-term capital market, which is expected to become a major source of funding to finance future expansion of thousands of Chinese enterprises.
"The establishment of a sound credit rating system is essential to strengthening the infrastructure of the bond market," says Li Fei, an economist at KBC Goldstate Asset Management in Shanghai.
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