Research On Bond Credit Rating Under The Rigid Payment Breaking

When China’s bond market was first established,it was mainly to serve stateowned enterprises and economic development policies.The government used its own credibility to provide implicit guarantees,which resulted in the rigid payment.Rigid payment was a transitional state in the course of our economic system,and the default rate in the bond market was zero for a long time.And to some extent,this phenomenon has masked a series of problems arising from the long-standing principal-agent relationship and weak credit risk assessment base in the industry.In2014,the default of "11 Chao Ri Bond" broke the rigid payment and increased the credit risks in the bond market.The default of the 2020 AAA-rated Yongmei Holding bond default triggered a debt crisis,which raised market concerns about the quality of credit ratings.The incident exposed many problems with the credit rating index system and credit rating system,which both reduced the credibility of the industry and seriously hindered the development of the bond market.Therefore these problems need to be solved.This paper uses theoretical and case study approaches to uncover the credit rating issues behind the case by reviewing it after the fact.In the theoretical part,this paper compares the literature on rigid payment and bond credit rating and explains the relevant concepts.After that,the paper uses information asymmetry,transaction costs and principal-agent theory to analyze the role of bond credit rating and the causes of the problem.In the case study section,this paper analyzes bond credit rating problems under the rigid payment breaking and uses the default of Yongmei Holding bonds as a typical case for in-depth discussion.Through the above two parts of the study,this paper analyzes the problems in the current credit rating index system and credit rating system,and the specific conclusions.Credit rating problems in China are closely related to rigid payments.The problems include insufficient consideration of macroeconomic indicators,failure to analyze the actual resource dispatching capacity of the parent company in the group in terms of its capital management capacity and shareholding relationship,overestimation of the strength and willingness of external supporters.On this basis,the paper also traces the problems of the credit rating system.It suggests that the issuer-pay model dominates the market.Besides,supporting laws,regulations and supervision are inadequate.Finally,based on the results of the case study,the paper gives suggestions on improving the credit rating index system and the institutions under the rigid payment breaking.