Chinese alternative to Fitch and Moody’s to challenge credit rating system

Chinese alternative to Fitch and Moody’s to challenge credit rating system
China is set to offer its alternative to the big three US credit rating agencies, Moody's, Fitch, and Standard and Poor's. The Universal Credit Rating group is due to launch next month in Hong Kong, and is a joint Chinese, Russian, and American venture.

The US ratings agency Egan-Jones Ratings Co and Russian RusRating will become partners with Dagong Global Credit Rating in the undertaking. The new agency will start with around 20 analysts aiming to gradually grow to more than 100.

UCRG will be the second such venture based in Hong Kong after China Chengxin, which established an office in Hong Kong in August last year.

The project is aimed at boosting China’s influence on the global ratings system, and challenging the prevalence of the big American firms. The impartiality of their work has been questioned since the global financial crisis in 2008. 

Many experts say the ratings agencies are largely to blame for fuelling the crisis with their inaccurate and excessively high ratings for problematic asset-backed securities, which led to the credit crunch.

According the Chairman of Beijing-based Dagong, Guan Jianzhong, the current system is ill disposed and favors developed economies, the China Daily reports.

"We hope that UCRG will bring a new perspective to the current ratings landscape and help build a new credit ratings system," Guan Jianzhong who will also be chairman of UCRG, said. He added that UCRG plans to create a new credit ratings system that will accurately disclose credit risks between creditors and debtors in six years time.

Sean Egan, the president of Egan-Jones, said UCRG's aim is to provide an alternative ratings system, by bringing in new partners from different countries.

"The current system is New York-centered. UCRG will bring the perspective of China and Russia to the table. That means UCRG will get a different rating results from the big three," he said.