As Moody's, Fitch, and S&P Global set up shop in China, investor concern rises due to the possibility of inflated credit ratings. Only two American non-financial corporations can tout a triple-A rating, compared to 17% of bonds in China.
“We believe that considering the size, dimensions and extent of diversification of China’s domestic capital market, there needs to be a set of special rating standards and rating methodology that fit the local situation,” S&P said in a document written in Chinese. One result, though, is that a triple-A rating from S&P in China won’t be equivalent to a triple-A in the U.S. or other developed markets. “If the ratings show little credit differentiation and do not reflect true credit risks, then investors will not give much credence to them,” said Prashant Singh, an emerging-markets portfolio manager of debt at Neuberger Berman.