Despite the broad relationship between the two scales, they are different and there is no correspondence between the two. Both scales serve the same purpose: to provide better credit differentiations and greater granularity on rating results. Our computer-based analysis of indicative credit quality, detailed below, shows the results of S&P Global (China) Ratings are more widely distributed, due to the removal of any constraint related to sovereign credit rating that may be applicable in the S&P Global Ratings methodology.
S&P Global (China) Rating methodologies are largely based on S&P Global Ratings frameworks, but have been modified and adapted for local application in China. To help investors better understand the general relationship between the two scales, we performed a literature review of 143 Chinese companies, applying S&P Global (China) Methodology of ratings for public information.
The chart below shows S&P Global (China) Ratings opinion on the indicative credit quality distribution of 143 companies. This sample covers almost all business sectors, the entities being selected from a pool of more than 200 companies on which S&P Global Ratings has exceptional ratings. We have chosen to exclude certain entities from this documentary analysis, in particular Hong Kong-subsidiaries of Chinese companies or offshore financing platforms which are less likely to be issuers in the domestic market. The graph also includes the breakdown of a larger pool of 1,700 companies to show how this fits with our view of differentiated credit quality.
From the graph, we can observe a broad relationship between the two rating scales, with the indicative distribution of credit quality by S&P Global China Ratings of 143 companies spanning the entire spectrum of [AAAspc] at [Bspc-] and lower. For companies rated in category A by S&P Global Ratings, their indicative credit quality on S&P Global (China) The rating scale can be somewhere between [AAAspc] and [AAspc-], on four different notches. Companies rated in the BBB category by S&P Global Ratings may have an indicative credit quality ranging from [AAspc+] at [BBBspc+] on the S&P Global (China) Rating scale.
This wider distribution can be attributed to differences in the basic analytical approaches used in our respective business methodologies, to sovereign credit quality constraints that may be applicable to S&P Global credit ratings, as well as to differences in credit ratings. analytical approaches associated with any benefit of increasing support from a group or government. potentially applicable to a given issuer.
In general, the ratings of companies with higher credit quality may vary more widely on the two scales, while any rating difference for entities with lower credit quality is generally smaller. It should be emphasized that this is based on our observation and is not absolute, and that there is no one-to-one correspondence between the results of S&P Global (China) S&P Global Ratings and Ratings.
An overview of our approach to RMB bonds issued by foreign institutions in China (Panda Bonds) offers another perspective on the relationship between the two scales. The S&P Global (China) Ratings The Panda Bond rating methodology is a separate framework. In this context, for foreign issuers who carry out the majority of their activities abroad, we generally refer to the credit opinion of S&P Global Ratings on the entity and use it as a starting point to arrive at S&P Global (China) Determination of the rating of ratings.
Source: S&P Global (China) Notes.
Copyright © 2021 by S&P Ratings (China) Co., Ltd. All rights reserved.
As shown in the chart above, when S&P Global Ratings considers a foreign issuer to have relatively lower credit quality (typically lower than the BBB category), S&P Global (China) Ratings can assign a similar view of credit quality with adjustments typically up to 2 notches. When S&P Global Ratings considers a foreign issuer to have better credit quality, S&P Global (China) Ratings may assign a credit quality view generally within a range of 2 to 5 notches above the credit quality opinion of S&P Global Ratings.
According to our Panda bond rating methodology, the indicative credit quality of foreign issuers follows similar trends to that of domestic issuers according to S&P Global (China) The other ratings methodologies of Ratings, with some correlation with the credit opinions of S&P Global Ratings. However, in both cases, there is no one-to-one correspondence relationship with S&P Global Ratings.
This report does not constitute a rating action.
(Note: This document is prepared in English and Chinese. The English translation is for reference only, and the Chinese version will prevail if there is any inconsistency between the English version and the Chinese version.)
S&P Global (China) Ratings is the first wholly foreign-owned credit rating agency to provide independent credit ratings in the Chinese domestic market. Its ratings and knowledge are based on the principles and objectivity of S&P Global Ratings, the world’s leading provider of credit ratings. We provide our opinions and research on relative credit risk; market participants obtain independent information to help support the growth of transparent and liquid debt markets within China and all over the world. For more information, visit www.spgchinaratings.cn.
Copyright © 2021 by S&P Ratings (China) Co., Ltd. All rights reserved.
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SOURCE S&P Global Ratings