Chinese ratings industry handed bonds test

The completion of 10 Chinese local government bonds in October has transformed the industry in more ways than one.

China’s local governments were allowed for the first time to tap the bond markets for funds directly, issuing Rmb109.2 billion $17.9 billion, which was a big enough step.

But the move was also significant for the development of the local ratings industry, whose agencies are allowed, also for the first time, to evaluate the risks associated with Chinese public sector borrowing.

Previously, debt issued by local governments tended to be done in the name of the Ministry of Finance, was unrated and came with...