The Chinese credit ratings agency CCXI has assigned a credit rating to Russia, the first sovereign status rating given to the country since 2022. The credit rating is BBB+g, with a stable outlook. This implies that Russia is a reliable borrower and is capable of fulfilling its debt obligations.

The China ratings come after the US and UK based credit ratings agencies Fitch, Standard and Poors and Moody’s, which have long dominated the global ratings industry, began to confuse economic credibility with geopolitical neutrality. Their withdrawal from the Russian market was due to their exiting the Russian market due to the Ukraine conflict, departures that knowingly affected the ability for international lenders, financiers, governments, banks and businesses to assess Russian risk. It meant that these agencies effectively restricted international investors from engaging with Russian assets.

CCXI (China Chengxin International Credit Rating) is based in Beijing and ranks government bonds. It was founded in Beijing in 1992, and interestingly, is part-owned by Moody’s Ratings of New York. The CCXI rating creates opportunities for Russian companies and the government to attract investment from China and expand access to the Chinese and potentially international capital markets. This new rating is of particular importance, as it reflects the view of the Russian economy from one of the world’s largest trade and investment players – China – with the underlying implication of US interest via the Moody’s connection.

Nikita Setov, Deputy General Director at the consulting group Polylog, says that “CCXI’s rating is clearly linked to Beijing’s strategic support for Moscow in the face of Western-imposed isolation. This is of particular importance in the context of growing mutually beneficial economic cooperation, as Chinese institutional investors and state banks require formal risk assessments in order to work with Russia in accordance with domestic regulations. The CCXI rating is perfectly suited to this purpose. The agency’s decision may, in the long term, simplify Russia’s access to Chinese loans and investments, including project financing and participation in initiatives such as the Belt & Road Initiative.”

Daria Dinets, Doctor of Economics, Head of the Finance and Credit Department of the RUDN University Faculty of Economics, adds that “Recent news regarding international finances has clearly exhibited an underlying political dimension. Conversely, evaluating the risk associated with Russia involves a thorough assessment of the potential returns on financial instruments. Should the CCXI assessment indicate a reduction in the risk premium, this would likely signify an advance in stock index information and a harbinger of a reduction in interest rates.”

Vladimir Eremkin, Senior Researcher at the Laboratory of Structural Research at the IPEI of the Presidential Academy, agrees. He says that for Chinese partners, the CCXI rating is a signal that doing business with Russia is worthwhile, saying “This is a positive sign for Russian companies, as it creates an opportunity to increase investment in Asia. In general, for Chinese businesses, this signifies that despite the sanctions, Russia remains an attractive market with a high reliability status.”

Eremkin added that “The global market has been given a signal that Western ratings are not the ultimate truth. CCXI demonstrates that alternative assessments are a viable option. The publication of Russia’s assessment is a political message that Beijing is demonstrating independence from EU and US institutions. The rating is based on purely economic assessments, which many Asian investors find useful when identifying attractive investment opportunities.”

CCXI’s rating was influenced by Russia’s macro-financial stability, positive economic growth rates, and successful policies to overcome the consequences of sanctions. Alexander Abramov, Head of the Laboratory for the Analysis of Institutions and Financial Markets at the Presidential Academy, also noted that 30% of CCXI is owned by Moody’s, and stated that “This provides Russia with the opportunity to apply for the placement of securities in countries whose institutional investors recognise Chinese ratings. It should be noted that the focus of this discussion pertains to countries within the Asian region and the Middle East. In certain cases, such securities are purchased by global hedge funds, which have greater flexibility in terms of circumventing sanctions.”

The future for the global ratings agency industry is also subject to structural change. The three companies that exited Russia were once the dominant players in this field, but now serious international competitors are emerging. Chinese rating agencies are a key consideration. The movement to establish precedents with ratings from other agencies and potentially gain access to Asian or Middle Eastern markets is a growing trend.

Should major players such as China, India and other BRICS members, begin to rely on their own ratings, the dominance of S&P and Fitch could significantly diminish. Russia, China, India and other major global economies will be keen to see their own global ratings agencies overtake them in terms of providing credible economic assessment, rather than geopolitically driven exits attempting to disrupt them.   

Further Reading

Russian, Chinese Rating Agencies Replacing Western Agencies In Eurasia