In Depth: Why China Ratings Agencies Didn’t See the Corporate Default Wave Coming

In the wake of the market-rocking bond default by state-owned miner Yongcheng Coal last November, one particularly unsettling fact stood out.

Just one month before the cash-strapped state-owned enterprise (SOE) revealed it couldn’t repay the 1.03 billion yuan ($159.5 million) in principal and interest due on Nov. 10, it had received the highest AAA rating from China Chengxin International Credit Rating Co. Ltd. — one of the country’s top ratings firms.