China economy

S&P Global set to be first foreign company to run ratings business in China

The sector has been closed to foreign players for 20 years

PUBLISHED : Thursday, 24 May, 2018, 10:10pm
UPDATED : Thursday, 24 May, 2018, 10:10pm

S&P Global, the US credit rating agency, will establish a self-run ratings business in China, a market closed to foreign players for two decades, Simon Jin, its head of Greater China, said on Thursday.

“Following Chinese regulatory changes that permit foreign ownership of domestic ratings companies, S&P Global Ratings plans to establish its own company in China,” said Jin.

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So far, foreign rating agencies have had to work with a Chinese partner, and S&P had a partnership with Shanghai Brilliance Credit Rating & Investors Service Company.

Independent ratings by the US rating agency could further open up China’s US$11 trillion bond market to international investors, who tend to distrust Chinese rating agencies as these tend to give only above AA ratings to domestic issuers.

Beijing pledged to open up its financial services market last year, including the credit rating business, to foreign ownership, as it vowed to continue opening up to foreign investment.

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The decision by S&P also comes at a time when trade tensions between Beijing and Washington have de-escalated – this week trade delegations from both sides called a truce as they put plans for tariffs on hold. Further negotiations between the two countries, however, remain clouded by uncertainty.

“We believe this option allows us to build the model that best suits our business and clients alike, while aligning well with the policy goals of local regulators.

“The establishment process is a gradual one and we will announce further details, including timing, in due course,” said Jin.