China should pay greater attention to the development of its credit
rating industry in the process of establishing a market-oriented
economy, experts have said.
"The credit rating business grows with the socialization of
financial control and securitization of financial means, which the
Chinese economic authorities are intending to do in coming years,"
said Bernard de Lattre, a senior official with Fitch, the world's third
largest rating agency.
As
a professional service which unveils the risk in capital markets
and serves the investing public, the credit rating business has
become a major tool of supervision, said Lattre, group managing
director of Fitch, who is responsible for business in Asian
countries.
However, China's credit rating business is still in its initial
stage, according to Wing Wu, chief executive officer of China
Chenxin International Credit Rating Co Ltd, the largest credit
rating agency in China.
Rating agencies in China are not completely independent. "Many
problems appeared 10 years ago, when China began to develop the
industry and these problems still exist to some extent and some
problems have become even worse," Wu said.
The rating criteria system is not standardized, the business scope
is narrow, the law is outdated, the information is not available
and the results of credit ratings are not fully used, he said.
False figures from clients also threaten the objectivity of the
credit ratings due to slack management.
The industry needs support from the government, because the whole
credit system is a systematic work, Wu and Lattre agreed.
The government should stipulate an "entrance qualification," Lattre
said.
In
developed countries such as the United States, over-intervention in
the rating industry is not advocated. But the situation in China is
different because China's reform is being carried out under the
leadership of the government, he said.
"Applying rating results of approved agencies to capital market
management is an important way to promote the rating industry," he
said.
The "exit rule" is also an inseparable factor for the development
of the rating industry.
As
China will soon access the World Trade Organization (WTO), Chinese
rating agencies should take the opportunity and participate in
international competition in order to improve themselves, Lattre
and Wu agreed.
"China's financial sector will open up to international society
step by step after the WTO accession," Wu said.
Only if Chinese rating agencies really experience international
competition can they find a foothold in the international capital
market, he said.
On
the other hand, Chinese rating agencies need to increase
communication and co-operation on standardizing industry practice,
perfecting rating techniques, improving credit rating standards and
strengthening self-discipline.
(China
Daily November 3, 2001)