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The Chinese credit rating industry: Internationalisation, challenges and reforms

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  • Bush, Chunping

Abstract

Chinese credit rating agencies play a key role in China’s economic reforms and the modernisation of the Chinese bond markets at a time when the Chinese bond market holds the second largest position in the world. This article provides a critical analysis of the internationalisation and challenges of the Chinese credit rating agencies in order to provide an updated understanding of the Chinese credit rating system. It evaluates the legal framework of the Chinese credit rating system and its recent reforms, with a view to providing some critical evaluation of the weaknesses and strengths of China’s approach in dealing with major problems facing the Chinese rating industry. In order to boost the bond market, China embraced a new era of internationalisation, which was set to change the landscape of the Chinese rating industry. China showed new momentum in tightening the discipline of its domestic credit rating agencies and started to allow SOEs to default in more recent times. Moreover, the current legal framework governing the Chinese rating industry provides a robust protection for rating victims, although it lacks strength in dealing with other major defects of the industry, such as conflicts of interest and lack of transparency.

Suggested Citation

  • Bush, Chunping, 2022. "The Chinese credit rating industry: Internationalisation, challenges and reforms," Journal of Economics and Business, Elsevier, vol. 118(C).
    • Handle: RePEc:eee:jebusi:v:118:y:2022:i:c:s0148619521000503
    DOI: 10.1016/j.jeconbus.2021.106032
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    References listed on IDEAS

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    1. Liping Zheng, 2012. "Are Sovereign Credit Ratings Objective? A Tale of Two Agencies," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 2(5), pages 1-3.
    2. Xianfeng Jiang & Frank Packer, 2017. "Credit ratings of domestic and global agencies: What drives the differences in China and how are they priced?," BIS Working Papers 648, Bank for International Settlements.
    3. Livingston, Miles & Poon, Winnie P.H. & Zhou, Lei, 2018. "Are Chinese credit ratings relevant? A study of the Chinese bond market and credit rating industry," Journal of Banking & Finance, Elsevier, vol. 87(C), pages 216-232.
    4. Haizhou Huang & Ning Zhu, 2007. "The Chinese Bond Market: Historical Lessons, Present Challenges and Future Perspectives," Yale School of Management Working Papers amz2582, Yale School of Management, revised 21 Sep 2009.
    5. Poon, Winnie P.H. & Chan, Kam C., 2008. "An empirical examination of the informational content of credit ratings in China," Journal of Business Research, Elsevier, vol. 61(7), pages 790-797, July.
    6. Lawrence J. White, 2010. "Markets: The Credit Rating Agencies," Journal of Economic Perspectives, American Economic Association, vol. 24(2), pages 211-226, Spring.
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    Cited by:

    1. Wang, Yan & Tian, Xu, 2023. "Underwriter strength and credit spread of corporate bond issuance," Finance Research Letters, Elsevier, vol. 58(PC).
    2. Zenno, Yoshihiro & Aruga, Kentaka, 2023. "Investing the factors affecting green bond investments in China: Cases for Beijing and Shenzhen," MPRA Paper 116203, University Library of Munich, Germany.
    3. Yoshihiro Zenno & Kentaka Aruga, 2023. "Investigating Factors Affecting Institutional Investors’ Green Bond Investments: Cases for Beijing and Shenzhen," Sustainability, MDPI, vol. 15(6), pages 1-16, March.
    4. Ke Sun, 2022. "Do Rating Change Announcements Transfer Effective Information? Test on the Effectiveness and Sustainability of Credit Rating in China," Sustainability, MDPI, vol. 14(21), pages 1-15, October.

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