S&P Global’s breakthrough into China’s domestic ratings scene is promising to bring a new level of clarity to foreign investors hoping to take a bigger slice of the country’s $12tn bond market.
The New York-based credit rating agency this week became the first foreign company to gain approval from China’s central bank to start assessing domestic bonds, following a year-long process to gain a foothold in the local market, the world’s third largest. The move could help to unlock flows into a market where foreign investors currently hold about 3 per cent of the total bonds outstanding, according to the central bank.
But asset managers have flagged the perils of trying to compete with China’s domestic agencies, which routinely offer issuers high ratings. There are also questions as to whether S&P could come under pressure from the government to give better ratings to some state-backed debt issuers.