Sense of inclusion

9 December 2016 By Rachel Morarjee

Regulators may allow foreign ratings agencies into the onshore market. That might comfort overseas investors enough to persuade index compilers to include Chinese bonds. The trick will be stimulating competition in a market twisted by government guarantees.

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China has proposed fully open its credit rating market to foreign participants. The Ministry of Commerce (MOFCOM) and the National Development and Reform Commission (NDRC) - the government's top planning agency - jointly published on Dec. 7 draft foreign investment guidelines aimed at removing restrictions on credit investigation and ratings services.

The government's foreign investment catalog for 2015 restricted foreign investment into credit investigations and ratings services. At present, global rating agencies can only have minority stakes in joint-venture operations in China.

Allowing greater participation of international rating agencies in China's credit market should help attract foreign investors to China's $7 trillion bond market. Moody's Investors Service said they were "encouraged by the policies of the Chinese government to open the Chinese capital markets, including the CRA industry," but were still studying the implications of the announcement.

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