Holding firm fundamentals constant, credit ratings of the Chinese firms have increased by one notch on average during 2009-2017. The rating standard relaxation coincides with rating inflation, as the feedback effects of higher ratings that help reduce financing cost and improve investment and...

This paper creates default-probability-(PD)-implied credit ratings for Chinese firms following the S&P global rating standard. The domestic credit rating agency (DCRA) ratings are higher than the PD-implied ratings by ten notches on average for the identical level of default risk, implying that...

Issuer-paid rating standards in the Chinese corporate bond sector have been significantly loosened from 2006 to 2020. The average ratings rose by 1.73 notches for firms with the same fundamental strength. Loose ratings correspond to lower yield spreads and increased borrowing. Firms held more...