China’s stocks are continuing to meltdown in the new year, and further plummeted on Feb. 2. In response to the negative movements in the market, authorities at the central bank of China—the People’s Bank of China—announced a total fine of 34.46 million yuan ($4.8million) for China’s six major rating agencies, including S&P Credit Ratings (China).
Economists believe that the punishment directed at the six major rating agencies is related to things that the firms said which China’s ruling Chinese Communist Party (CCP) didn’t like, such as revealing the real situation of China’s economy.
On Feb. 2, the central bank announced its decision to impose administrative penalties on the agencies, including China Chengxin International, Shanghai New Century Credit Rating, S&P China, China Securities Pengyuan, Lianhe Credit Rating, and Far East Credit Rating.
The central bank claimed that five of them violated the principle of consistency, four had failed to conduct credit rating business in accordance with statutory rating procedures and business rules, and four had violated independence requirements.
Among them, S&P China was warned and fined 2.12 million yuan ($300,000), and the company’s rating analysis director was also fined 30,000 yuan ($4,200).
China Securities Pengyuan Credit Rating Co., Ltd. was warned and fined 6 million yuan ($844,000), its executive vice president was fined 30,000 yuan ($4,200), and its vice president was fined 90,000 yuan ($12,600). Shanghai New Century Credit Rating Investment Service Co., Ltd. was fined 7.2675 million yuan ($1.02 million), and its director and executive vice president was fined 100,000 yuan ($14,000).
China Chengxin International Credit Rating Co., Ltd. was fined 7.685 million yuan ($1.08 million) for violating independence requirements and the principle of consistency. The company’s vice president was fined 30,000 yuan ($4,200); the other vice president was fined 130,000 yuan ($18,250).
Punishing Rating Agencies for Transparent Reporting
Liang Shaohua, former chief compliance officer of an asset management company in China, told The Epoch Times: “The stock market has fallen sharply. At the beginning of this year, everyone said that 2800 points, 2700 points, and 2900 points would be the bottom points. Now, it seems that under such a bad economic situation, there is no bottom.”“The policies of Xi Jinping and the Chinese Communist Party have led to the collapse of the Chinese economy,” he said. “The stock market is an economic indicator and has been going down. Other indicators, such as GDP growth, power generation, and people’s income, are easy for the CCP to fake.
“But the stock market is about real money. As an economic indicator, it cannot be faked, or they shut the stock market down,” he said.
On the day the stock market plummeted, the Chinese Communist Party’s (CCP) official media—such as People’s Daily, Xinhua News Agency, and CCTV—were still claiming that people hold an optimistic view for the Chinese economy.
Mr. Liang said, “The stock market keeps melting down, which is constantly exposing the CCP’s lies about the economy’s improvement.”
“Because the rating agencies said things the CCP didn’t like to hear, and they are not optimistic about the Chinese economy, the authorities imposed fines on them. The rating reports of credit rating agencies are the true reflection of China’s economic situation. The stock market will fall whether there is a rating or not. It is not the rating reports that cause the decline of China’s economy and the stock market,” he said.
Previously, several credit rating agencies expected that China’s financial risks would continue to rise. Among them, S&P China said in its report that due to the weak real estate industry, China’s economic downturn risk is high, which will further have a negative impact on real estate sales.
Taiwanese economist Huang Shicong told The Epoch Times on Feb. 3 regarding the heavy fines, “It’s because credit rating agencies have downgraded the outlook for the Chinese stock market, or downgraded the Chinese stock market and national ratings. Of course, this will cause the withdrawal of capital, and even investors’ doubts about the future, with no confidence in the economy. The central bank punishes credit rating agencies in an attempt to stop them from publishing analytical reports that are unfavorable to China’s economy.”
“At this time, the central bank should be thinking about how to introduce plans to stimulate the economy rather than punish credit rating agencies. If you look at it from a normal capitalist perspective, you will think this behavior is quite stupid,” he said.
On Feb. 2, after the stock market plummeted, thousands of posts by Chinese investors flooded the social media account of the U.S. Embassy in China on Weibo. They posted messages under an embassy post about rescuing giraffes and another on the “Joint Statement on the Third Anniversary of the Myanmar Military Coup,” calling on the United States to take over the Chinese stock market; some even publicly condemned the CCP’s system of governance and its officials; while others pleaded that the United States send aircraft carriers over, saying “the Chinese will open the way for you.”
