S&P Global will be the first foreign-owned ratings agency in China

October 23, 2020.
This file photo shows 55 Water Street, home of Standard & Poor's rating agency, in New York. (AP Photo/Henny Ray Abrams, File)

This file photo shows 55 Water Street, home of Standard & Poor's rating agency, in New York. (AP Photo/Henny Ray Abrams, File)

S&P Global will become the first wholly foreign-owned ratings agency approved to operate in China for exchange-traded bonds, in the latest effort by the Chinese government to open up the country's financial sector to the rest of the world.

S&P Global (China) Ratings, a subsidiary of S&P Global, said Thursday that it registered with the to operate its credit ratings business in China’s exchange-traded bond market.

The move makes S&P the first wholly foreign-owned credit ratings agency to be registered in China. It will be able to issue bonds and asset-backed securities that are registered and issued by the China Securities Regulatory Commission, excluding government bonds.

A representative from S&P told Fastinform that beyond bonds and securities, the unit can also rate originators, companies, bond issuers and other items specified by the Chinese regulator. 

“The CSRC filing marks an important milestone in our long-term commitment to China’s credit sector,” said Hongshan Chen, president and CEO of S&P Global (China) Ratings, which was formed in 2018.

“It enhances our ability to deliver transparent, globally understood credit ratings and research to the world’s second-largest bond market.” 

The agency's registered entrance into China gives it the most extensive business scope in China's domestic bond market for a foreign rating agency. S&P was also the first agency to gain access to China's interbank bond market in January 2019, and issued its first rating in July of last year.

“Since the very beginning of our business in China, we have been deeply encouraged by the enthusiasm from market participants for our offering. There is a genuine appetite for granular, independent credit ratings in this market," Chen said. 

"We believe we can meet this need while also playing a role in the ongoing development of China’s capital markets, offering something that is familiar to, and trusted by, investors around the world,” she continued.

Over the last few years, China's government has made an effort to open its financial markets to other countries and international businesses. The country provided 11 measures in July 2019 to guide how it would allow more foreign entities into the Chinese financial industry, "sooner rather than later."

 In June, JPMorgan Chase was approved to operate China's first fully foreign-owned futures company, which will offer services like securities brokerage, securities investment advisory and securities underwriting and sponsorship. 

Also in June, AIA Group was cleared to operate a foreign-owned life insurance subsidiary in mainland China, achieved through converting AIA's existing operations in the country into a wholly owned subsidiary. 

Tokyo-based Ueda Yagi Tanshi Co. was then approved in September to be the first wholly foreign-owned money broker to operate in China, establishing a new location in Beijing.