Fitch Shanghai Office Hunt Flags China's Fast Market Growth

  • Firm plans to double number of China employees in three years
  • Optimistic about China bond market's growth, says Fitch's Li

Kwong Li, head of greater China at Fitch Ratings Ltd., is looking for a bigger office in Shanghai. The company expects to double its headcount in the nation within three years as the corporate bond market grows.

Fitch may increase its headcount in its China offices in the financial hub and in Beijing to about 60 from 31 in three years, Li said in an interview in Shanghai. The expansion would include employees on its research and business development teams. China’s outstanding corporate and government bonds have more than quadrupled in the past 10 years to 36.6 trillion yuan ($5.7 trillion), according to Chinabond data.

“We are optimistic about the potential development of China’s bond market,” Li said. “The central bank wants to allow more foreign investors into the nation’s bond market. Investors will become more diversified and more companies can issue bonds.”

Premier Li Keqiang is seeking to accelerate expansion of the world’s third-biggest corporate note market as Chinese companies struggle with debt payments amid the weakest economic growth in a quarter century. The central bank said in February that most types of overseas financial institutions will no longer require quotas to invest in the interbank bond market, which accounts for the bulk of debt in the nation.

Information Sought

“When more foreign investors buy bonds in China’s market, they may require more information about international rating agencies’ ratings and views on those issuers so that they can compare bonds they invest in here with bonds they invest in elsewhere,” Li said.

More than 60 percent of Chinese locally rated AAA bonds issued by listed firms may have default risk consistent with what Bloomberg’s quantitative, independent default risk model deems below-investment-grade companies.

Fitch also expects to expand the team in Hong Kong to 100 within three years from about 70 now.

China said in July it plans to allow international ratings companies to publish their credit scores on local government securities.

Rising debt defaults in China have driven investors to seek opinions from global rating companies, said Li. At least seven firms have missed local note payments this year, already reaching the tally for the whole of last year.

“There have been almost zero defaults that generate losses for investors in China,” said Li. “Local governments or other related parties have helped to bail out the defaulted companies. But over the long term, we will see defaults that result in losses.”

— With assistance by Judy Chen

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