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  • Playing in the big leagues: Assessing China’s potential systemically important banks

    06 Mar 2019
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    The report assess the systemic importance of China’s banks by applying a fundamental multi-factor methodology to evaluate the risks any given bank might pose to the financial system.
  • Creditworthiness of Chinese provincial governments

    20 Feb 2019
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    Credit quality of Chinese provincial governments capturing their relative strength in multiple aspects appears to be converging to the average. Only a few provincial-level governments in China stand out for their stronger credit quality. 
  • Request for comment: Green evaluation criteria

    16 Dec 2018
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    Pengyuan International, a Hong Kong-based credit agency, publishes a draft of its evaluation criteria for green bonds, for public consultation. The framework aims to evaluate the potential contribution of debt instruments to low-carbon and climate-resilient society.
     

  • China property: Credit profiles to improve on lower land acquisitions and solid sales

    31 Oct 2018
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    Unchanged policy stance, continuing sales momentum, slowing land acquisitions, steady growth of property funding, improving working capital efficiency and declining leverage are the main factors in a forecast for China's property sector. 

  • Pengyuan International issues a request for comments on general structured finance rating criteria

    19 Oct 2018
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    Pengyuan International, a Hong Kong-based credit rating agency, publishes a call for public consultation on its general structured finance rating criteria. It invites investors and market participants to submit comments within 30 days. 


     

  • Request for Comments - Industry Credit Guidelines: Chinese Homebuilders and Property Developers

    05 Aug 2018
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    HONG KONG, 3 August 2018. Pengyuan International (“PENGYUAN”) has today released its  Industry Credit Guidelines for the Chinese Homebuilders and Property Developers for public consultation.

     

    These criteria will be effective immediately on the date of final publication. We intend to complete a review of all affected ratings, if any, within the next six months. We expect no impacts on our current rating portfolio. We would appreciate comments on these draft criteria from investors and other market participants. The request-for-comment versions of these reports are available via the links below.

     

     

    Our Industry Credit Guidelines: Chinese Homebuilders and Property Developers describe our analytical approach to assessing the credit risks of companies that have more than 50% revenue generated from China homebuilder and property developer industry. These criteria are developed within the framework of PENGYUAN’s General Corporate Rating Criteria and are supplementary to our General Corporate Rating Criteria. In addition to the credit ratios that are used in the Corporate Rating Criteria, PENGYUAN considers specific credit factors that capture the risks from China homebuilder and property developer industry, which are assessed to derive a company’s indicative credit score. 

  • Request for Comments - Government-Related Entities Criteria

    05 Aug 2018
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    HONG KONG, 3 August 2018. Pengyuan International (“PENGYUAN”) has today released its Government-Related Entities (GRE) Rating Criteria for public consultation.

     

    These criteria will be effective immediately on the date of final publication. We intend to complete a review of all affected ratings, if any, within the next six months. We expect no impacts on our current rating portfolio. We would appreciate comments on these draft criteria from investors and other market participants. The request-for-comment versions of these reports are available via the links below.

     

    Our Government-Related Entities Rating Criteria set forth PENGYUAN’s approach to rating GREs in the corporate (including project finance), financial institution, insurance and public finance sectors globally. In our opinion, an issuer’s affiliation with the government may have a positive, negative or neutral impact on its overall creditworthiness. One of our primary considerations in analyzing a GRE is whether its credit profile may be enhanced by potential extraordinary support from the government in the event of financial distress, or conversely, impaired by potential extraordinary adverse interventions from the government should the government experience financial difficulties.

  • Requests for Comments: Chinese Local Government Rating Criteria

    24 May 2018
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    HONG KONG, 23 May 2018. Pengyuan International has today released its Chinese Local Government Rating Criteria for public consultation. These criteria will be effective immediately on the date of final publication, and we intend to complete the review of all affected ratings, if any, within six months thereafter. We expect no impact on our current rating portfolio.

    We would appreciate comments on these draft criteria from investors and other market participants. The request-for-comment version of the Criteria and analyst contact details are available via the following link:

    Chinese Local Government Rating Criteria: http://www.pyrating.com/Methodology/Index/10008.html

    Our Chinese Local Government Rating Criteria describe our top-down approach to assessing the credit risks of all local governments (LGs) and assigning issuer credit ratings (ICRs) and issuance credit ratings to LGs in China. We explain how we assess the key rating factors (namely a LG’s economic strength, budgetary strength, debt burden, liquidity, and governance and financial management) that together drive a LG’s relative credit strength compared to peer LGs reporting directly to the same higher-level government. We combine the relative strength score of the LG with the rating on its higher-level government and our other analytical considerations to determine ICR on the LG. 

     

     

    ANALYST CONTACTS MEDIA CONTACT OTHER ENQUIRIES
    Chief Analytics Officer
    Tony Tang

    tony.tang@pyrating.com
    +852 3615 8278
    media@pyrating.com contact@pyrating.com

    Sovereign and Public Finance
    Liang Zhong
    liang.zhong@pyrating.com
    +852 3615 8341

     
  • Request for Comments: Sovereign Rating Criteria

    25 Apr 2018
    447
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    HONG KONG, 25 Apr 2018. Pengyuan International has today released its Sovereign Rating Criteria for public consultation. These criteria will be effective immediately on the date of final publication, and we intend to complete the review of all affected ratings, if any, within six months thereafter. We expect no impact on our current rating portfolio. 

     

    We would appreciate comments on these draft criteria from investors and other market participants. The request-for-comment version of the Criteria and analyst contact details are available via the following link:

     

    Sovereign Rating Criteria: http://www.pyrating.com/Methodology/Index/10008.html 

     

    Our Sovereign Rating Criteria describe our analytical approach to assessing the credit risks of all sovereigns and assigning issuer credit ratings (ICRs) and issuance credit ratings to sovereigns. We explain in detail how we assess the key rating factors (namely a sovereign issuer’s debt burden, stage of economic development, economic fundamentals, institutions and policies and distinctive movers of underlying liquidity risk) that together drive a sovereign’s indicative credit score (ICS). We also outline our other analytical considerations, which, together with the ICS, will determine an entity’s Issuer Credit Rating.  

    For these criteria, we define a sovereign as a member state of United Nations or a state that runs its own government, enjoys fiscal independence and determines its own monetary regime.

    MEDIA CONTACT
    media@pyrating.com
     
    OTHER ENQUIRIES
    contact@pyrating.com

  • China’s Turning To “Tough Gradualism” In Disciplinng Local Government Borrowing Foretells Higher Risk of LGFV Default

    27 Feb 2018
    866
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    Creditors to China’s local government financing vehicles (LGFVs) may have some reasons to worry about their investment in these entities. Ministry of Finance in China vowed last month to break decisively the illusion of financial institutions about government bailing them out of hidden debt incurred by local governments (primarily through LGFVs). A central bank official even suggested to resort to a Detroit-type bankruptcy of local government (LGT) to break moral hazard in lending to LGFVs. These developments bring back the memory of the bankruptcy of GITIC (Guangdong International Trust and Investment Company), a high profile LGFV in China in 1999 amid mounting risk of local government hidden borrowing.
     
    However, history progresses in spiral, according to the guiding philosophy of Chinese policymakers. Thus, no wondering China appears to be getting closer to, yet is quite away from point where central government has to resort to default on LGFV bond to instill financial discipline and secure the systemic stability. Pengyuan International believes Chinese government is indeed turning to “tough gradualism” (gradually tightening discipline over LGT borrowing in practice) rather than “shock therapy” (allow LGFV default up-front); Accordingly, the risk that the first LGFV public bond default could strike in 2018 is picking up from very low level, but is still less than 50% in our estimate.  Nevertheless, further scrutiny over LGFV creditworthiness becomes increasingly necessary.
  • Asset-Backed Securitization (ABS) in China: Development and Risk

    26 Feb 2018
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    Asset-Backed Securitization (ABS) is relatively new to China’s financial market. It was introduced into China with a pilot securitization program in 2005 and was suspended in 2008 due to the panic of global credit crisis. Later on, the asset securitization was reinstated in 2012. However, China’s ABS market development was very slow until the explosion in 2014 after several policies in favor of asset securitization were issued. The growth was further spurred by the change of the ABS offering system from approval to registration system at the end of 2014. In 2017, the volume of domestic new issuances surged 64.7% to approximately CNY1,495 billion.
     
     
    The tremendous growth in China’s asset securitization market is driven by both government policies and market forces. While the origin, suspension, and development of China’s asset securitization are all initiated by the government, with the relaxation of policy constraints, the market factors start playing an increasingly important role in driving the market developments. On the supply side, banks have incentives to convert illiquid assets into marketable securities and transfer the loans off their balance sheet to release capital. Financially underserved corporates start using securitization as an alternate direct financing tool to diversify their funding sources and lower their funding costs. On the demand side, the developments of securitization are fueled by China households’ high
    saving ratios and the increased demand for safe and liquid assets by the asset management industry.

    While the developments of China’s asset securitization market are encouraging, the rapid expansions were accompanied by potential risks, such as misaligned incentives among the participants in the securitization process, a lack of transparency regarding underlying assets, and reliance on credit ratings and risk models which have not been tested by a stressed credit environment. These problems could possibly impede the potential benefits offered by securitization and hinder the development of China’s asset securitization market.

    Against the background, this report attempts to discuss some key issues in China’s securitization market. We start with a brief review on the history and recent developments of China’s asset securitization market. We also provide our outlook for the developments of major asset classes. We then use marketplace lending securitization and NPL securitization as examples to illustrate the potential issues in China’s securitization market. Finally, we discuss the future of China’s securitization market both from a policy and market perspective.