Ratings scandal prompts action from Chinese regulator

Author: Karry Lai | Published: 18 Oct 2018

China is toughening its oversight of the national ratings industry in direct response to the Dagong Global Credit Rating incident and numerous corporate bond defaults. But this renewed focus on investment transparency and deleveraging could be met with some obstacles.

Guan Jianzhong, chairman of DagongIn August, Dagong, one of China’s biggest debt rating agencies was banned from adding any new securities rating business for a year. The company was offering good ratings to issuers in exchange for money. For instance, Kaidi New Energy Group was given an AA rating in early 2018 but then defaulted on RMB18 billion ($2.6 billion approximately) in June - it was then downgraded four times to a C rating. The company was also found to have chaotic internal governance, hiring senior management with no relevant expertise and losing original documents of some of its rating services. Shaun Ansell, head of legal and compliance Asia Pacific,...