Bond Connect may lead to access for foreign agencies to rate onshore bonds

The newly-launched Bond Connect will accelerate the pace of reform of China’s domestic onshore bond market, which may also open up access for international credit rating agencies, the South China Morning Post has learnt.

It could be “very soon” that Beijing will allow foreign institutions to rate China’s onshore bonds, a ground-breaking move that has been sought-after by foreign investors for years, Pan Gongsheng, deputy governor of the People’s Bank of China (PBOC) told the Post on Monday.

“We are actively doing research,” Pan said, adding the opening up could be expected “within this year”.

China’s current rules restrict foreign investment in credit investigations and ratings services. At present, global rating agencies can only have minority stakes in joint-venture operations in China, and they can only grant independent ratings to Chinese firms’ overseas entities and debt issuance.

As the rating of bonds by Chinese rating agencies are seen as lenient, international investors have hesitated to rely on them, analysts say.