China Orders S&P’s Ratings Arm to Fix Compliance Gaps Amid Crackdown

Key Takeaways

• Regulatory Action: Chinese authorities ordered S&P Global’s mainland unit to “rectify” its operations over failures in consistency and disclosure.
• Industry Crackdown: The move is part of a broader campaign targeting inflated Triple A ratings, low fees, and conflicts of interest in China’s ratings sector.
• Domestic Firms Penalized: Agencies including China Bond Rating, Golden Credit Rating, and China Lianhe have faced fines and warnings in recent months.
• S&P History: The agency was fined Rmb2.1mn last year and has pledged compliance with regulatory requirements.
• Market Impact: The crackdown reflects Beijing’s effort to restore credibility to ratings underpinning trust in China’s bond markets.

Deep Dive

Chinese regulators have ordered S&P Global’s mainland credit ratings unit to “rectify” its business practices, marking the latest escalation in Beijing’s ongoing crackdown on the country’s credit ratings industry. The move, reported by the Financial Times, reflects mounting concerns over low fees, inconsistent ratings, and the prevalence of top-tier grades in China’s corporate bond market.

In a letter sent this week, the Beijing branch of the China Securities Regulatory Commission accused S&P’s subsidiary of “failing to adhere to the principle of consistency” in its ratings and not properly disclosing information. The regulator said the agency must “immediately initiate comprehensive rectification” of its operations.

The warning comes against a backdrop of heightened scrutiny of China’s ratings sector. Nearly all newly issued corporate bonds in China now receive Triple A designations, a dramatic shift from 2016, when less than half carried the top grade. Regulators have voiced concerns that companies are “shopping” for higher assessments and that fees are being kept artificially low to attract business.

In recent months, several domestic ratings firms have faced penalties. In August, the People’s Bank of China fined China Bond Rating Rmb3.3mn ($463,000) for governance breaches and imposed additional fines on employees. Golden Credit Rating was fined Rmb629,000 for undercutting fees and inconsistent assessments. Other firms, including China Lianhe Credit Rating and CSCI Pengyuan, have been reprimanded for practices ranging from providing advisory tips to clients on boosting ratings to blurring the line between marketing and evaluation.

S&P itself faced a Rmb2.1mn penalty last year following a regulatory inspection. In a statement to the Financial Times, the agency said it was “committed to taking the necessary steps to address the points raised and ensuring compliance with the regulatory requirements.”

Global ratings agencies have long sought a foothold in China’s vast bond market, which opened further to international investors in the 2000s as part of the country’s financial liberalization drive. Both Fitch and S&P now operate wholly owned local subsidiaries, while Moody’s holds a minority stake in a domestic firm.

For Beijing, the enforcement push signals an effort to rein in an industry whose credibility underpins investor confidence. For S&P, it represents both a reputational test and a reminder of the challenges of operating under China’s evolving regulatory regime.

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