Fitch gets China nod for domestic ratings business

China has given the green light to the Chinese unit of global credit ratings agency Fitch Ratings Ltd to operate in the country's onshore markets, a further sign of accelerating its financial opening-up and attracting overseas investors, experts said.

The People's Bank of China, the central bank, said on Thursday it has permitted Fitch (China) Bohua Credit Ratings Ltd, the fully owned unit of Fitch Ratings, to start services. The access given to the ratings agency can be seen as a part of the implementation of the "Phase One" trade deal between China and the United States, said the PBOC.

Increasing the level of openness of the financial services industry is seen as an important measure by Chinese policymakers for the sustainable and healthy development of the Chinese economy.

The New York-based Fitch Ratings became the second foreign ratings agency to enter the mainland market, following its peer Standard & Poor's in 2019.

Its local unit has got permission to rate financial institutions, including banks, non-banking financial institutions and insurers, and their securities, and structured finance bonds in China's interbank market, according to an announcement from the National Association of Financial Market Institutional Investors.

"We are delighted to receive the approval to provide credit rating services to China's bond market. We are confident that market participants will value our independent analysis, transparent methodologies and rigorous ratings process in line with international best practice," said Danny Chen, CEO of Fitch Bohua.

A team of analysts, business development and support staff is already in place as the company continues to add staff, the ratings agency said.

"China is a core growth market for Fitch Ratings. We are committed to supporting the development and internationalization of the country's capital markets. Fitch Bohua strengthens Fitch Ratings' franchise significantly in Asia-Pacific, as we continue to make other strategic investments in the region," said Kwong Li, head of Asia-Pacific Business Management for Fitch Ratings.

PBOC Governor Yi Gang declared the specific measures and a timetable for increasing the level of openness of the financial services industry at the Boao Forum for Asia in April 2018. He called for accelerated financial opening up, suggesting domestic financial services, including asset management, pension and health insurance companies, to learn from the experiences of foreign financial institutions.

"In the Phase One of the trade deal signed between China and the United States, China's specific commitments in the banking sector are consistent with the country's opening up of its financial industry, and will help broaden the scope of business for foreign banks operating there, especially for banks that see China as a strategically important market, in areas such as securities investment, fund custody services and debt underwriting," said Yulia Wan, vice-president and senior analyst at Moody's Investors Service.

The central bank has vowed to further promote the opening up of China's credit ratings industry to mitigate financial risks and improve financial conditions of smaller businesses.