Ratings Firms Face Challenges in China

The transcript discusses the entry of foreign credit rating firms into China, highlighting the opportunities and challenges in one of the world's largest bond markets. It examines the potential impact on Chinese companies, particularly regarding borrowing costs and investment mandates. The discussion also touches on the regulatory implications and the Chinese regulators' efforts to liberalize the market, aiming for better risk pricing and increased competition in the rating industry.

What significant change did China agree to in May regarding foreign rating companies?

• Allow them to issue ratings on local corporate bonds

• Prohibit them from entering the Chinese market

• Require them to partner with local firms

• Limit their operations to government bonds

What is a potential consequence for Chinese companies if foreign rating firms provide lower ratings?

• No change in borrowing costs

• Increased borrowing costs

• Decreased borrowing costs

• Immediate improvement in credit ratings

How might foreign rating companies affect Chinese fund managers' investment strategies?

• They will experience reduced competition

• They will face fewer regulations

• They will have more investment options

• They may need to adjust their strategies due to tougher ratings

What is one of the goals of Chinese regulators in allowing foreign rating firms into the market?

• To liberalize the markets and improve risk pricing

• To restrict foreign investment

• To increase government control over ratings

• To eliminate local rating companies

What has the Chinese bond Clearinghouse indicated about local corporate bond ratings?

• Local ratings are too low

• Foreign ratings are unnecessary

• All ratings are accurate and timely

• Some are overrated and adjustments are slow