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Chinese credit rating agency opens in Europe

Photo: Milan: highly rated? (Courtesy of ©iStockphoto.com/fazon1)
Milan: highly rated?

Italy's second largest city is to be home to the first European office of Dagong, the Chinese credit rating agency. It is expected that the company's Milan office could get official approval to begin operations as early as next month (June). It is currently waiting on final authorisation from the European Securities and Markets Authority (ESMA), the EU financial regulatory body.

Once operational, the Milan office will employ more than 40 analysts as a joint venture between Dagong Global and Mandarin Capital Partners, a Sino-Italian private equity fund. It will undertake rating activities for banks and corporate entities, while any sovereign state rating activity will be conducted by the company's head office in Beijing.

It is believed this Europe-based rival to Standard & Poor's, Moody's and Fitch Group (the three ratings agencies that together share 95% of the global market) is intended to boost Chinese investments in Europe by providing Mainland companies with clear indications of the value and rating of local industry prospects.

It is a timely launch, given that Chinese investors are currently switching away from sovereign state bond investments and considering the acquisition of both brands and local industries. A rating by a China-based agency could be a useful guide for Chinese investors looking to evaluate opportunities in the European market.

Milan decision surprises industry observers

The selection of Italy as Dagong's first European operation – with more apparently planned in the coming years – has caused raised eyebrows among the EU business community. Despite retaining something of an industrial base, the country is not seen as one of the main European hubs for financial services.

The Italian press has carried some concerns that the arrival of this Chinese newcomer reflects expectations that a number of local businesses, weakened by the prevailing European financial conditions, could be ripe to be acquired at knockdown rates. Some have even suggested the agency could be instrumental in artificially lowering the value of companies in order for purchasers to secure a better deal. Others, however, maintain that the arrival of a Chinese ratings agency is inevitable given the level of the country's acquisitions in Europe.

from Alessio Pulsinelli, Milan Office

Content provided by Picture: HKTDC Research
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