China promotes Asian rating system

Govt agencies to approve credit research center

A plan to set up a research center to promote the creation of an Asian credit rating system has been under review by several government agencies and will be approved by the end of June, an official with China's top economic planner said Monday.

The plan, proposed by entities such as Dagong Global Credit Rating Co, a leading Chinese credit company, has been submitted to authorities including the Ministry of Foreign Affairs and the National Development and Reform Commission (NDRC) and will be approved by the end of the month, Song Guangchao, secretary-general of the Credit Committee of China Information Industry Association under the NDRC, said at a summit on building Asian credit system held in Beijing on Monday.

The center will be responsible for proposing the plan on how to build an Asian credit rating system, coordinating the implementation of the plan and establishing an Asian credit information exchange platform and central database, Song said without giving details on when the center will be launched and how it will be operated.

"An Asian credit rating system can drive the development of Asian economy, and the absence of an universally accepted Asian credit rating system is one of the key reasons why Asia dose not realize adequate cross-border capital flows," Guan Jianzhong, chairman of Universal Credit Rating Group (UCRG) and chairman of Dagong Global Credit Rating Co, told reporters on the sidelines of the summit.

"The big challenge to establishing such a system is whether we can achieve consensus on the execution plan and road map. Rating technology is not the key problem because we have unique rating technology, theory and methodology and China can contribute its rating wisdom," Guan said.

Asia-based credit rating agencies, such as UCRG, the first regional and global agency based in Hong Kong, will be committed to improving the independence of Asia in risk assessment, Dominique de Villepin, former prime minister of France and chairman of UCRG International Advisory Council, said at the summit.

UCRG was jointly launched on June 25, 2013 by China's biggest ratings agency, Dagong Global Credit Rating Co, RusRating of Russia and Egan-Jones of the US, aiming to build a dual credit rating system which integrates sovereign rating and non-sovereign rating.

"Every credit issuer should receive two ratings, a local rating taking into account the specifics of its local environment and a global rating measured by global standards for cross-border investments. You always see better with two eyes than with one," Villepin said.

According to Guan, the new ratings are not intended to completely overturn the existing system dominated by the big three rating agencies but to complement and improve the existing system.

The big three rating agencies - Moody's Investors Service, Standard & Poor's Ratings Services and Fitch Ratings - which dominate the global ratings market, had come under fire for the inconsistency of their ratings during the financial crisis that began in 2007, leading to distrust toward credit rating.

Moody's and Fitch Ratings did not comment on the new initiative by UCRG when contacted by the Global Times on Monday.

"The rating decisions have been monopolized by few countries. The new international credit rating system initiated by China and other Asia countries and regions is key to preventing global financial risks, revitalizing the region's markets and stabilizing the regional economy," Zhang Zheng, vice dean of the School of Economics at the Peking University, said during the summit.

"It is one of the most important events since the World War II," he said.

"The big challenge for UCRG is that it will take time for it to gain reputation and win investors' trust. It could at first target the Chinese and Russian markets as well as underdeveloped markets which the big three rating agencies are not familiar with," Zhao Xijun, deputy dean of the School of Finance at the Renmin University of China, told the Global Times.