Mainland credit rating agency opens HK arm

A mainland credit rating agency is moving overseas for the first time by expanding into the Hong Kong market.

The decision, analysts said, aims to give mainland agencies a bigger say in the global financial system as mainland companies gain a greater presence overseas.

China Chengxin (Asia Pacific) Credit Ratings Co Ltd, a subsidiary of the credit rating agency China Chengxin Credit Management Co Ltd, started its Hong Kong business on Tuesday.

That made it the first rating company from the mainland to obtain an operating license from the Hong Kong Securities and Futures Commission.

"This is a milestone in the internationalization of mainland rating institutions," said Mao Zhenhua, the founder and chairman of China Chengxin Credit Management.

"China Chengxin (Asia Pacific) is taking a gradual approach to developing its business in the international market," said Philip Li, managing director of the Hong Kong subsidiary.

The company's Hong Kong business will concentrate on providing services for corporate debts issued in Hong Kong.

"Over time, the Hong Kong business will expand into more complicated products, such as ratings on the credit of structural debts and other financial products," Li said.

One product of interest will be yuan-denominated bonds. The market for those financial instruments has grown very quickly, he said.

About 40 billion yuan ($6.3 billion) in renminbi bonds were issued in Hong Kong in the first five months of 2012, up 40 percent year-on-year.

Last year, Hong Kong issued 107.9 billion yuan worth of the bonds, doubling the amount of the previous year, data showed.

Charles Li, chief executive of Hong Kong Exchanges and Clearing Ltd, said on Tuesday that the mainland's credit rating industry has developed quickly in the past 20 years.

"This is the first time that a company from the mainland has expanded its business in the global market," Li said. "It will have great potential, as well as the fast development of the offshore market for the renminbi."

As more mainland capital goes overseas, an increasing number of companies are eager to obtain the services of qualified local rating agencies, specialists said.

Gu Shengzu, a deputy to the National People's Congress Standing Committee, said authorities should ensure that domestic credit rating agencies' development plans accord with national financial strategies.

"Currently, the global rating business is monopolized by the three biggest rating companies － Fitch Ratings, Moody's and Standard & Poor's," Gu, from the top legislature, said. "The internationalization of mainland rating companies must occur at a faster pace to maintain financial security."

China Chengxin also released a sovereign credit rating report for 30 countries on Tuesday.

Credit is becoming more difficult to obtain globally as the eurozone's debt troubles worsen and the world's economic recovery slows, according to the report.

"Emerging countries will suffer from weak demand in the long term, putting pressure on their attempts to boost domestic demand and adjust their economic structure," the report said.