Chinese Regulator Orders S&P China to “Rectify” After Disclosure Failures

October 2 2025

People walk past the China Securities Regulatory Commission (CSRC) sign at its building on the Financial Street in Beijing, China July 9, 2021. REUTERS/Tingshu Wang/File Photo

In a signal that underscores Beijing’s tightening grip over financial infrastructure, China’s securities authority, the China Securities Regulatory Commission (CSRC) issued a firm directive on October 2 to S&P Credit Ratings (China) Co Ltd, a local arm of S&P Global, demanding immediate “comprehensive rectification” of its operations and stronger quality controls. The letter, published on the CSRC’s website, accused the ratings unit of failing to follow proper disclosure procedures in its work, without detailing the specific violations.

The directive stressed that S&P China must adhere to principles of prudence and consistency in its ratings business and comply with all relevant regulations going forward. In response, S&P Global’s China Ratings division confirmed it had received the letter and pledged to take “necessary steps” to address the regulator’s concerns and enhance alignment with regulatory requirements.

This move is part of a broader regulatory push in China to clamp down on the credit ratings sector. The CSRC has in recent months flagged inconsistencies and low transparency across several domestic rating agencies, warning that excessively optimistic or uniform ratings undermine market discipline. In its letter to S&P China, the regulator cited lapses in disclosure and potential inconsistency in rating practices concerns that echo earlier public criticism of the nearly universal issuance of “AAA” ratings to new corporate bonds in China.

Analysts see the action as reflective of Beijing’s effort to reassert control over key financial gatekeepers, particularly where foreign or foreign-affiliated firms operate. While S&P is among the large global agencies with a presence in China, domestic competition in rating has long been dominated by homegrown players, some with close connections to state-linked institutions.

S&P’s China arm has previously faced scrutiny itself: in earlier years it was fined for procedural violations and was flagged in past inspections. But the tone of the recent CSRC letter suggests renewed urgency. The regulator’s insistence that S&P act quickly to correct operations is a signal that it will monitor compliance closely.

For market participants, the directive raises questions about the independence, credibility, and consistency of China’s bond rating ecosystem. If foreign-backed agencies like S&P are being pressured to tighten oversight, domestic players may feel even more obliged to align with regulatory expectations raising the specter of uniform ratings grades rather than differentiated risk assessments.

At the same time, the regulator’s demand for “consistency” suggests that one of the issues may be the appearance of ratings volatility or contradictions across assessments for similar issuers. Too much variation or too many deviations from domestic norms could have drawn scrutiny.

In issuing the warning, the CSRC did not impose a public fine or suspension, but the requirement of swift “comprehensive rectification” implies that noncompliance may result in harsher consequences. S&P will need to reassess internal practices, including disclosure protocols, staff registration, audit processes, and how it justifies rating decisions especially in a market where foreign agencies may already operate under tighter constraints.

This episode is part of a broader narrative in China’s financial oversight: regulators in recent years have increased scrutiny over bond, audit, insurance, and securities sectors, with enforcement actions used as signals to market actors. For credit rating firms in particular, the challenge is balancing independent risk assessment with regulatory expectations that maintain political and economic stability.

Looking ahead, the way S&P responds will influence how foreign rating agencies are perceived in China, and how much leeway they have in expressing differentiated views on credit risk. A more controlled or compliant ratings environment may limit investors’ ability to distinguish among credit quality levels. At the same time, a fully revoked or degraded S&P China could hamper investor confidence in third-party assessments of Chinese credit instruments.

This is not simply a technical intervention. It signals a deeper fault line: who controls the narrative of risk and how ratings are used as tools in capital markets that blend state oversight with market mechanisms. As China continues to promote the internationalization of its bond markets, the credibility of ratings will be put to the test.