Credit rater seeks independent development after loosened limits

Fitch Ratings Inc has sold its minority stake in its China joint venture, sparking expectations that international ratings agencies might seek independent development in China, as the country has pledged to further open the credit rating sector to foreign players by removing ownership restrictions.

The global ratings agency announced on Monday the sale of its 49 percent equity interest in China Lianhe Credit Rating Co Ltd to Singapore's sovereign wealth fund GIC, without disclosing the value of the deal.

"The changes in the regulatory landscape provide an opportunity for us to consider and evaluate how we can best serve the needs of the local and global capital markets going forward," a Fitch spokesperson said in a written response to China Daily.

Theodore E. Niedermayer, chief financial officer of Fitch Group, said in a statement that Asia is a core strategic market for the group, and it will continue to invest and identify growth opportunities in the region.

Opening the Chinese credit rating sector to foreign players and removing ownership restrictions were part of the agreements reached by President Xi Jinping and United States President Donald Trump in a meeting last April.

International credit rating agencies have shown growing interest in the Chinese market, as the country accelerated the opening of its $11.7 trillion bond market by launching a bond-trading link between the mainland and Hong Kong last July.

Moody's Investors Service, a rival of Fitch Ratings, said in a written response to China Daily on Tuesday that it is encouraged by the Chinese government's policies that open up the Chinese capital markets, including the credit rating industry.

Moody's currently holds a non-controlling stake in its Chinese JV - China Chengxin International Credit Rating Co, while S&P Global Ratings has a partnership with Shanghai Brilliance Credit Rating & Investors Service Co.

Industry experts said that foreign credit rating agencies' intention to seek independent operations in China will bring more competition, and will help draw more capital from overseas investors into the local Chinese bond market.

Kong Fanshun, a senior fixed-income analyst at CreditEase, said that the bigger presence of foreign credit rating agencies in China would help overseas investors identify risks in the Chinese bond market and lift overseas investment enthusiasm in Chinese credit products.

"China's credit rating market is in the very early stages of development, and it lacks a mature credit system and a proper risk pricing mechanism," Kong said.

"One big challenge for foreign players that tend to charge higher fees with higher standards is how to gain clients and turn a profit in the Chinese market where companies are used to obtaining high credit ratings with lower costs," he added.