China’s credit rating agencies are standing by their triple A scores for troubled state-owned enterprises, even as a series of defaults reverberates through the country’s $4 trillion corporate debt market, reported the Financial Times.
Just five Chinese companies out of more than 5,000 have been downgraded to below double A ratings by domestic rating agencies since Yongcheng Coal and Electricity Holding Group, one of the country’s largest coal groups, kicked off a spate of defaults last month, according to data provider Wind.
Double A ratings are crucial in China as groups with lower ratings cannot issue publicly traded debt. More than 98% of the outstanding bond issuance in the country is backed by issuers graded double A or higher. Since it defaulted, Yongcheng has become one of the few companies to be relegated below this mark, said the FT.
“China’s rating agencies are even worse than [those] in the US,” said Andrew Collier, managing director of Orient Capital Research in Hong Kong. “They’re not only beholden to the customer but also [to] the government.”