Yan Yan , Chairman of China Chengxin International Credit Rating Co., Ltd. and Chairman of China Chengxin (Asia Pacific) Credit Rating Co., Ltd.
The internationalization path of Chinese credit rating agencies should not be limited to bond rating business in the capital market. It should help domestic market operators better understand and grasp various overseas financial risks, help overseas market operators better understand the essential connotation of China's new development pattern, and cultivate new advantages for my country to participate in international cooperation and competition under the new situation. It should accelerate research capacity building and enrich and innovate financial service models.
In recent years, my country's high-quality financial development and opening-up have been steadily advancing, fruitful results have been achieved, and its global influence has continued to increase. Credit rating is an important basic institutional arrangement in the financial market and one of the hubs of the international monetary and financial system. In the process of continuous high-level financial opening-up, my country's rating industry must also keep up with the pace of opening-up, accelerate the process of "going out", enhance international voice, and contribute to maintaining the stability and security of my country's economy and finance in an open environment and promoting the smooth development of cross-border investment, financing and economic and trade cooperation. In recent years, with the strong support of national policies and regulatory authorities, my country's rating industry has accumulated certain practical experience in the international development, laying a solid foundation for subsequent exploration of international business layout. In the future, based on the high-level opening-up of finance, China's rating industry needs to improve both internally and externally, strengthen its own "hard power", accelerate the process of internationalization, enhance international competitiveness and voice, and help the overall situation of the country's opening-up.
The high-level opening-up of finance has been steadily expanded.
It is time for the rating industry to “go global”
Promoting high-level financial opening-up is one of the core issues in building a financial power. In recent years, under the leadership of the CPC Central Committee, China's financial opening-up has continued to advance with remarkable achievements, which has also put forward higher requirements for the international development of credit ratings. Especially in the context of an increasingly complex external environment, it is even more necessary to take the initiative in ratings to maintain the stability of China's sovereign ratings and ensure China's continued high-level opening-up.
The high level of financial opening requires Chinese rating agencies to provide international credit rating services to match it
High-level financial opening up to the outside world is an important driving force for the reform and development of my country's financial industry and an inevitable requirement for building a financial power. Under the leadership of the Party Central Committee, China's high-level financial opening up to the outside world has made steady progress, forming a new pattern of comprehensive opening up with a larger scope, wider fields and deeper levels. In October 2023, the Central Financial Work Conference emphasized the need to "strive to promote high-level financial opening up and ensure national financial and economic security." my country's financial market has made remarkable achievements in opening up to the outside world, and its influence in the international financial market has increased significantly. So far, China's capital market has grown into the second largest capital market in the world. As of the end of 2023, the scale of domestic bonds held by overseas institutions and individuals accounted for about 2.4% of the bond market stock, and the cumulative issuance scale of panda bonds was close to 800 billion yuan. Deepening financial opening up to the outside world is the general trend, and credit rating, as an important infrastructure in the financial market, also needs to accelerate "going global" and provide matching international credit rating services. On the one hand, as China's financial market becomes more open, it is necessary for Chinese rating agencies to provide internationally recognized rating results to provide reference for pricing financial products and avoid turbulence in the financial market caused by the loss of pricing power. On the other hand, in the process of financial opening up, , Chinese-funded rating agencies are required to timely communicate changes in bond and entity credit qualifications to market participants through initial rating, regular tracking, irregular tracking and other rating actions, to help global investors correctly understand the domestic financial market, and to provide regulatory authorities with Cross-border risk management provides reference.
The reconstruction of the global financial governance structure requires taking the initiative in rating to safeguard national financial security
As the core of the international credit rating system, sovereign ratings not only directly affect the debt-raising capacity of sovereign countries, but also affect the financing costs of a country's financial institutions and enterprises and the stability of the foreign exchange market through the "ceiling effect". Against the background of my country's continued financial opening-up, the reconstruction of the global financial governance structure, the intensification of the game between major powers, and the increasingly complex external environment, it is of great significance to take the initiative in ratings to maintain the country's financial stability and financial security. In December 2023 and April 2024, Moody's and Fitch successively downgraded my country's sovereign rating outlook, which had a certain impact on market confidence. However, from the actual performance of China's economy, foreign rating agencies obviously underestimated the strong resilience of China's economy, the effectiveness of policies and fiscal sustainability, and failed to fully objectively and scientifically evaluate my country's sovereign credit, which may have a negative impact on the international financing of Chinese companies and national financial security. Although from a historical perspective, the impact of the three major international rating agencies' downgrade of China's sovereign rating on China's economy is very limited, but international experience such as the European debt crisis and the Russia-Ukraine conflict shows that frequent downgrades of sovereign ratings during economic downturns can easily trigger debt crises or impact the stability and financial security of the rated countries' financial markets. Therefore, we need Chinese rating agencies to actively voice the "Chinese voice" and guide the international capital market to correctly, comprehensively and objectively view the Chinese economy. In the context of opening up, my country's rating industry needs to continue to promote internationalization and output rating opinions that are more in line with the country's interests, so as to seize the initiative in rating, get rid of the constraints of the three major international rating agencies and other Western rating agencies on my country in the financial field, and better maintain the country's financial stability and financial security.
The national level and regulatory authorities attach great importance to the international development of the rating industry
In recent years, the national level and regulatory authorities have attached great importance to the international development of the rating industry, and have repeatedly encouraged domestic rating agencies to expand their international business in important international conferences and documents. In June 2022, General Secretary Xi Jinping proposed at the 14th BRICS Leaders’ Meeting that “the BRICS countries should expand cross-border payment and credit rating cooperation and improve the level of trade, investment and financing facilitation”, which will help Developing countries represented by the BRICS countries have established credit rating cooperation and exported views that are more in line with the interests of emerging market countries; in the same month, the Business Management Department of the People's Bank of China issued the "Action Plan to Comprehensively Promote the High-Quality Development of Beijing's Credit Information System and Promote the Formation of a New Development Pattern" 》, encourage issuers to hire at least one local rating agency in the registration process of Chinese-funded US dollar bonds, and gradually increase the voice of local rating agencies in the international capital market. Under the guidance of regulatory authorities and relying on the unique advantages of credit rating agencies as capital market infrastructure, Chinese rating agencies have actively carried out international business practices and achieved remarkable results, laying a solid foundation for further international development. Since 2012, mainstream Chinese-funded rating agencies have successively set up subsidiaries or branches in Hong Kong as windows to the international market, actively speaking out in the global capital market. On March 31, 2023, CCXAP was recognized by the Hong Kong Mandatory Provident Fund Schemes Authority as the first Chinese-funded credit rating agency to carry out relevant business. The application scenarios of international bond ratings of Chinese-funded rating agencies have been further expanded, and the application scenarios of Chinese-funded rating agencies have been further expanded. The "going out" strategy of credit rating agencies is of far-reaching significance. At the same time, Chinese-funded rating agencies are actively improving the global rating series, carrying out sovereign rating business, and promoting the reshaping of my country's voice in global governance. On May 25, 2023, China Chengxin International downgraded the sovereign credit rating of the United States from AAA g to AA + g , and continued to be included in the watch list for possible downgrades, which had a huge impact on the international financial market and highlighted the sovereign ratings of Chinese-funded rating agencies. international influence. In addition, Chinese rating agencies have also extensively participated in global financial governance by publishing credit risk reports on countries along the “Belt and Road” and establishing international credit rating alliances with Russia, Pakistan and other countries, increasing the influence of my country’s financial institutions in the global capital market.
International development of the rating industry
Complementary to financial opening up
Under the general trend of open development, the international development of the rating industry and the opening up of finance complement each other. The continuous advancement of financial opening up creates opportunities for Chinese rating agencies to expand the international rating market, and the "going out" of the rating industry will also help further promote the opening up of finance to a higher level.
The accelerated opening-up of the financial sector provides opportunities for the international development of the rating industry
After more than thirty years, with the leap-forward development of China's capital market, China's rating industry has grown rapidly. Currently, there are 15 Chinese-funded rating agencies, which have entrusted more than 8,000 rated bond issuers, and some mainstream rating agencies have begun international business. Explore and have some experience in international rating. With the significant improvement in the level of internationalization of China's financial market, the global influence of RMB assets is increasing day by day. While a large number of overseas investment and financing institutions have entered the domestic capital market, more and more Chinese-funded enterprises have gone overseas for financing, which has contributed to the internationalization of Chinese-funded rating agencies. Development creates broad market space. First, the continued deepening of capital market cooperation and interconnection, encouraging domestic companies to actively utilize foreign capital, and the development of the panda bond market will help expand the market demand for ratings. For example, in March 2024, in order to support high-quality enterprises to utilize foreign debt efficiently and conveniently, the National Development and Reform Commission issued the "Notice on Supporting High-quality Enterprises to Borrow Medium and Long-term Foreign Debts to Promote the High-Quality Development of the Real Economy (Draft for Comment)", which set the international credit rating to Investment grade (BBB - and above) or domestic credit rating AAA is one of the criteria for defining high-quality companies. Secondly, with the widespread development of international investment and financing cooperation, the demand for risk assessment and management is increasing, which will help drive the increase in demand for rating services and the output of rating opinions of Chinese-funded rating agencies. In the future, the rating industry's "going out" will steadily advance along with my country's high-level financial opening-up process.
The internationalization of the rating industry is beneficial to enhancing the international voice of rating and better participation in global governance
Credit rating is an important indicator for measuring credit risk in current international trade and financial rules. Improving my country's international voice in rating will help to participate more deeply in international rule consultation and formulation, international economic and financial policy coordination and other practices, and exert influence in global financial governance that is equivalent to my country's economic strength. At the same time, credit rating is also the most commonly used pricing reference in the financial market, and the pricing power of financial products is an important indicator for measuring a country's voice in the international financial market. The three major international rating agencies have always occupied a dominant position in the overseas capital market and have the pricing power of the overseas capital market. In addition, since the credit ratings given to Chinese companies by the three major international rating agencies in the overseas capital market are generally low, Chinese companies often bear relatively high financing costs. Against the background of the continuous advancement of financial opening up, the international influence and recognition of the rating results of Chinese rating agencies will be enhanced, which will help Chinese companies obtain fair pricing in overseas financing, improve financing efficiency, and make more full use of international financial resources. In addition, improving the voice and influence of ratings will also help avoid the impact of international rating agency rating adjustments on cross-border capital flows and RMB exchange rate fluctuations in my country's capital market, and help achieve the RMB internationalization strategy of seeking progress while maintaining stability.
The internationalization of the rating industry will help improve the efficiency of cross-border investment and financing and promote high-level two-way opening of finance.
The decision-making and behavior of relevant entities in the capital market must be based on information. At present, my country's two-way opening of the capital market has achieved fruitful results, but the poor cross-border information flow has, to a certain extent, restricted the pace of opening up of the capital market. The "going out" of the rating industry will help break the barriers to cross-border credit information flow and promote the capital market to a higher level of opening up. On the one hand, Chinese rating agencies have a better understanding of China's national conditions and risk characteristics, and can more accurately reveal the credit status of Chinese companies, which will help foreign investors better understand domestic market entities, promote fair pricing for domestic issuers' overseas financing, and improve the ability of domestic companies to utilize international resources. At the same time, Chinese rating agencies convey more views to foreign investors, which can help global investors correctly understand the domestic capital market. On the other hand, by expanding overseas rating business, rating agencies actively communicate with foreign companies, investors and rating agencies, and strengthen the understanding and analysis of overseas credit risks, which can provide more channels for domestic investors to understand overseas market risks and subject credit characteristics, and help domestic investment institutions improve their overseas asset allocation capabilities.
Supervision and guidance and internal and external improvement of institutions,
Continue to enhance my country's international rating influence and voice
Based on the goal of high-level financial opening-up, my country's credit rating industry still needs to accelerate its pace of international development. On the one hand, this requires the rating agencies themselves to continuously enhance their "hard power", actively plan international development paths, and enhance their international competitiveness; on the other hand, it also requires regulatory authorities to provide standardized guidance and accelerate the cultivation of Chinese credit rating agencies with international influence.
It is a national strategy to enhance the international voice of my country's rating agencies and cultivate influential Chinese rating agencies.
Credit ratings may affect the financial stability and financial security of a country or even the global financial market. Therefore, we should pay more attention to credit ratings at the national level and elevate the international voice of Chinese rating agencies to a national strategy, so as to master a powerful weapon to maintain domestic financial stability in the future when the financial market is more deeply open. At the same time, through policy support and guidance, we should focus on cultivating influential Chinese rating agencies and enhance their international voice. First, we should accelerate the cultivation of leading rating agencies with international competitiveness and strive to accumulate the good reputation of our rating agencies. We can rely on the large domestic market to cultivate effective market demand and encourage credit rating agencies to become bigger and stronger. At the same time, we should strengthen the supervision and management of the credit rating industry, and on this basis encourage internal integration of the industry, accelerate the cultivation of leading rating agencies with industry dominance and international competitiveness, and enhance the credibility of China's rating industry. Second, we should adapt to the needs of the international market, promote more competitive rating agencies to participate in international business, and enhance their international voice. We can further actively promote the rating services of Chinese rating agencies in the international market and promote Chinese rating agencies to "go global". It is recommended that the Chinese government or government-supported institutions, such as the National Development and Reform Commission, the Ministry of Finance, state-owned enterprises, policy banks, China Railway Corporation, etc., actively use the rating results of domestic rating agencies when raising funds in overseas markets, support the accumulation of market data by local institutions, and expand the international visibility of Chinese rating agencies.
Keep up with national strategies and accelerate the international development of the rating industry
The rating industry can "go global" by relying on the national strategy of opening up to the outside world and exploring feasible paths for international development. In the early stage of the development of my country's rating industry "going global", Chinese rating agencies can accumulate international rating experience and resources by deepening the Hong Kong offshore bond market, open up the international financial market, and gradually enhance the influence of rating results, laying the foundation for a wider layout of international business in the future. Relying on the deepening China-ASEAN economic and trade cooperation, the continuously expanding "circle of friends" of the "Belt and Road" initiative, and the increasingly sound BRICS cooperation mechanism, and taking into account the difficulty of business development and the basis for cooperation, the rating industry may expand its international business layout in steps according to the path of "ASEAN countries-'Belt and Road' countries-BRICS countries-European and American countries", and finally achieve a global business layout. In this process, the international cooperation model of rating agencies can be continuously innovated. First, give priority to promoting Chinese rating agencies with rich rating experience and certain market influence to carry out bilateral/multilateral cooperation, and promote Chinese rating agencies to "go global". Second, strengthen bilateral/multilateral rating mutual recognition under the promotion of government and supervision, and gradually cultivate the international influence and voice of Chinese rating agencies. The third is to explore the establishment of a credit rating alliance, strengthen the exchange of rating methods and systems among alliance countries, promote the establishment of a regional credit rating system, and rely on international cooperation to enhance the international influence and competitiveness of Chinese rating agencies.
Establish a rating system that is different from the three major international rating agencies and maintain my country's rating initiative
Considering the importance of sovereign rating stability to maintaining financial and economic stability, it is crucial for Chinese rating agencies to establish a rating system that can represent China and emerging market countries. Based on the existing sovereign rating practice experience, Chinese credit rating agencies can fully combine the systems and national conditions of different countries to establish a sovereign rating system that conforms to the new global financial market development and governance system, improve independence and credibility, and strengthen risk early warning capabilities. At the same time, promote the expansion of the sovereign rating scope of Chinese rating agencies and further improve the recognition and influence of sovereign rating results. In addition to sovereign ratings, Chinese credit rating agencies can also continuously improve the global rating sequence standards that are in line with the international market, provide subject credit ratings from an international perspective, cover more industries, securities, and currencies, and help the financing of partner countries and the realization of my country's major strategic goals.
Improve the "hard power" of rating agencies and enhance the international competitiveness of my country's rating agencies
The most important factor that determines the international development prospects of the rating industry is still the quality of rating services. In the future, rating agencies need to continue to strengthen their own capacity building and enhance their ability to serve domestic and foreign investors. On the one hand, rating agencies need to seize the policy window period, focus on changing rating concepts, optimize rating methods, technologies and systems, gradually increase the differentiation of rating results, and better play the risk disclosure and early warning functions of credit ratings. In addition, rating agencies can also increase technology investment, use digital technology as a means to integrate financial technology into credit risk assessment and rating early warning, and enhance rating early warning capabilities. On the other hand, Chinese credit rating agencies should also increase their efforts to promote business diversification, innovation and transformation development, and better serve the diversified risk assessment needs of domestic and foreign investors. The internationalization path of Chinese credit rating agencies should not be limited to bond rating business in the capital market. It should start from helping domestic market operators better understand and grasp various overseas financial risks, helping overseas market operators better understand the essential connotation of China's new development pattern, and cultivating new advantages for my country to participate in international cooperation and competition under the new situation. It should accelerate research capacity building, enrich and innovate financial service models, gradually form a diversified business structure, better play the basic role of credit in financial risk identification, monitoring, analysis, management, and disposal, and meet the needs of domestic and foreign investors for diversified comprehensive risk management services.
