China unveiled credit rating standards for the sovereignty entity of a central government, the first sovereign credit rating standards in China, aiming broader participation in global credit rating. The standards were announced by Dagong Global Credit Rating Co., Ltd, one of the first domestic rating agencies in China.  The sovereign credit rating standards would be able to evaluate the willingness and ability of a central government to repay its commercial financial debts as stipulated in contracts, said the company. The rating results could reflect the relative possibility of a central government to default as a debtor, and the rating is based on the country’s overall credit value, according to Dagong.  Elements of credit risks will include the country’s political environment, economic power, fiscal status, foreign debt and liquidity, said the company, adding that it judges the credit of a sovereign entity on the basis of a comprehensive evaluation of its fiscal strength and foreign reserves.

Luo Ping, head of the training center under China Banking Regulatory Commission, said the launch of the sovereign credit rating standards would help improve the transparency of credit rating information, and would strengthen China’s position in the international financial arena.  Source: Xinhua May 24, 2009

BIIA Newsletter June 2009 Issue