China opens local bond ratings to global agencies
The move is intended to promote more accurate risk assessment and pricing in the nation's huge corporate debt market and comes hot on the heels of a long-awaited "BondConnect" scheme that links China's US$9 trillion bond market with overseas investors
The People’s Bank of China (PBOC) has published new rules allowing foreign rating agencies to assess the credit risks of the country’s bonds, a move that could promote more accurate risk assessment and pricing in the nation’s huge corporate debt market.
Under the previous framework, global ratings agencies could only have minority stakes in joint-venture operations in the country and could not issue ratings on local bonds.
Foreign credit rating agencies must now be registered under the PBOC, have a certain level of experience, show sound corporate governance and be generally accepted by qualified institutional investors, according to the notice, which was published on the central bank’s website on Monday evening.
To qualify, foreign credit ratings agency must not have been involved in any major illegal acts in the past three years and must not be subject to any investigations regarding illegal activity, the notice added.
In December last year, the Ministry of Commerce and the National Development and Reform Commission – the government’s top planning agency – jointly published draft foreign investment guidelines aimed at removing restrictions on credit investigation and ratings services.
China and Hong Kong launched a long-awaited “BondConnect” scheme on Monday that links China’s US$9 trillion bond market with overseas investors, the latest step in Beijing’s efforts to liberalize and strengthen the country’s capital markets.
The launch of the program was timed to coincide with the 20th anniversary of Hong Kong’s handover to China and trading will initially be “northbound,” meaning foreign investors will be able to buy and sell Chinese bonds.