China Ratings Startup Challenges System Where Even AAAs Default
- Inflated onshore ratings offer little clue to credit quality
- Firm founded by frustrated buy-side analysts sees opportunity
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A spate of defaults by Chinese borrowers with seemingly impeccable onshore ratings has left antsy investors in the world’s second-largest credit market craving credible research to distinguish good debt from bad. Now a little known startup is seeking to tap that demand and is winning fans.
Though not exactly a household name, Shenzhen-based Ratingdog has slowly been carving out a name for itself within China’s corporate-bond community by flagging risks well before defaults occur. Some creditors and fund managers, long used to seeing domestic raters assign “AAA” and “AA” levels for even defaulters, are turning to independent research firms such as Ratingdog to navigate a nascent market amid a liquidity crisis.