The China Securities Regulatory Commission (CSRC) has revamped regulations on corporate bond issuances, under which, Chinese companies will no longer be required to obtain credit ratings before selling bonds in public markets. The new approach seeks to create a more market oriented approach to debt ratings. The latest move comes on the back of defaults by Chinese State-Owned Enterprises (SOEs) that were not rated accurately by local credit rating agencies besides instances of misconduct like in the case of Yongcheng Coal. The new rules remove a provision that issuers need to get a qualified rating company to grade new debt and does not require a AAA rating for selling bonds to institutional and retail investors. Issuers will now be able to rate their bonds on a voluntary basis. The new rules on the other hand clarify financial and credit record criteria for bond issuers, strengthen disclosure requirements and tighten supervisory requirements on issuers’ shareholders. Industry experts say that the new rules will increase competition for credible rating reports and better the rating quality thereby leading to better disclosure.
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