China May Form More Credit Ratings Agencies

The head of the People’s Bank of China said Sunday that the financial institutions should reduce their reliance on foreign credit-rating agencies and that the nation is considering forming its own such entities which would be backed by the government. 

Zhou Xiaochuan, China’s central bank governor, made the comments in a speech at a financial forum in Beijing, according to Bloomberg news. China has been critical of the independence of the so-called “big three” ratings firms of Moody’s, Standard & Poor’s and Fitch Ratings and has questioned their independence from the firms they review. The country has sought an alternative to those firms and in September of 2010 set up its own rating company, called China Credit Rating Co., which makes investors pay for ratings rather than borrowers.

Lu Zhengwei, Shanghai-based chief economist at Industrial Bank Co.,  who was rated the nation’s best analyst in 2010 by the newspaper China Business News, was quoted by Bloomberg saying, “With the rapid expansion in China’s bond market, we need rating companies that are familiar with the Chinese situation. We see comments from rating companies during this round of the crisis have influenced the financial market to a large degree. It’s no surprise China is paying attention to them.”