Core Viewpoint - The article discusses the transformation of the credit rating industry in China, highlighting the overwhelming dominance of AAA-rated bonds in the market, driven by factors such as "state-owned enterprise faith," changes in issuer structure, intense competition, and regulatory reforms [1][6][13]. Group 1: Market Trends - In 2025, AAA-rated bonds accounted for over 90% of new credit bond issuances, a significant increase of nearly 97% compared to 2016 [3][9]. - The proportion of AAA-rated bonds among newly issued corporate bonds reached 85% in the first eight months of 2025, up from 40% in the same period in 2016 [5][10]. - The share of private enterprises in bond issuance has drastically decreased, with only 1% of issuers being private in 2025, down from 37% in 2016 [6][14]. Group 2: Investor Behavior - The decline in market defaults has reinforced the "state-owned enterprise faith," with a 73% year-on-year decrease in bond market defaults in the first half of 2025 [15]. - Investors are increasingly relying on internal rating systems rather than external ratings due to concerns over inflated ratings [11][13]. Group 3: Rating Agency Dynamics - The competitive landscape among rating agencies has intensified, with issuers pressuring agencies to provide AAA ratings, leading to a dilution of rating standards [16][19]. - The number of rating agencies has increased, resulting in a price and rating competition that undermines industry standards [19][20]. - Regulatory scrutiny has intensified since 2021, with multiple agencies facing penalties for non-compliance, highlighting the need for improved governance and compliance within the industry [23][24]. Group 4: Future Outlook - Industry leaders emphasize the importance of maintaining long-term survival and reputation, suggesting that agencies should focus on quality over quantity in their ratings [22][26]. - Recommendations for addressing the inflation of credit ratings include improving the rating fee model, creating a balanced competitive structure, and enhancing regulatory frameworks [26].