China’s Cut-Rate Credit Rankings Raise Alarms as Defaults Loom
This article is for subscribers only.
Few were surprised when China’s Anhui province unveiled plans in April for a 25.8 billion yuan ($4.2 billion) debt sale, part of the ruling Communist Party’s widely publicized effort to jumpstart a municipal bond market.
The deal was shocking, though, for market insiders because of what they found in the fine print: Anhui will pay just 50,000 yuan for a credit rating on the bonds. That fee, from Beijing-based Golden Credit Rating International Co., is a fraction of the 250,000-yuan price floor that rival China Lianhe Credit Rating Co. says was agreed by major ratings companies under the guidance of the central bank about eight years ago.