China introduces ratings on local government bonds

Credit ratings will be introduced to a local government bond-issuance pilot, in a move to enhance risk prevention, the Ministry of Finance announced on Friday.
The ratings will come in nine levels, which are AAA, AA, A, BBB, BB, B, CCC, CC and C. The AAA rating indicates an extremely low default risk, with C suggesting inability to repay debts, according to a document released by the ministry.
The new rule came after four more local governments - Beijing, Jiangxi, Ningxia and Qingdao - were allowed to issue bonds directly last month. A total of 10 local governments are authorized for independent bond issuance and repayment. Bond-issuance by local government was initiated in October 2011.
Local governments are required to publicize credit ratings for their bonds, the local economic development, fiscal income and expenditures, as well as the liabilities, according to the new rule.
This information must be made public at least five working days prior to the new bonds issuance, according to the rule.
The local governments in the pilot program are also required, on an annual basis, to conduct comprehensive credit ratings on their bonds issued with different maturity terms, including five years, seven years and ten years, the document said.