Greater China Defaults Lowest In Six Years

Defaults in Greater China (mainland China, Hong Kong, Macao, and Taiwan) fell to two in 2023, down from a record high of 14 in 2022. The default count of two (including one confidential issuer) is the lowest since 2017 (see table 1). This compares with the global default counts for the same period, which closed the year at 153--nearly double the long-term average.

The survival bias in our portfolio, following such defaults and the withdrawal of our ratings on them, tilted the rated universe toward the investment-grade level (see "Corporate Top Trends Update: Asia-Pacific Corporate Credit in 2024: Taking The Slow Road," published on RatingsDirect on Jan. 30, 2024). Meanwhile, both defaults in 2023 came from the real estate sector.

Greater China's speculative-grade default rate declined to 1.3% in 2023, from 4.9% in 2022, reaching a five-year low (see chart 1). Globally, the 2023 speculative-grade default rate was 3.7%, up sharply from 1.9% in 2022.

This default and rating transition study includes industrials, utilities, financial institutions (banks including their branches, brokerages, asset managers, and other financial entities), and insurance companies with long-term local currency ratings from S&P Global Ratings.

We calculated all default rates on an issuer-weighted basis. The default rates that we refer to as weighted averages in this study use the number of issuers at the beginning of each year as the basis for each year's weight. (For a detailed explanation of our data sources and methodology, see Appendix I.)

Table 1

Greater China corporate default summary
Year	Total defaults*	Investment grade defaults	Speculative grade defaults	Default rate (%)	Investment grade default rate (%)	Speculative grade default rate (%)
2000	1	0	0	0.00	0.00	0.00
2001	0	0	0	0.00	0.00	0.00
2002	1	0	0	0.00	0.00	0.00
2003	1	0	1	0.75	0.00	1.33
2004	0	0	0	0.00	0.00	0.00
2005	0	0	0	0.00	0.00	0.00
2006	1	0	1	0.63	0.00	1.45
2007	1	0	1	0.81	0.00	2.63
2008	3	0	3	2.08	0.00	6.38
2009	4	0	4	2.48	0.00	8.00
2010	1	0	1	0.68	0.00	2.70
2011	0	0	0	0.00	0.00	0.00
2012	2	0	1	0.51	0.00	1.43
2013	2	0	2	0.97	0.00	3.08
2014	2	0	1	0.40	0.00	1.32
2015	6	0	6	2.02	0.00	7.23
2016	1	0	0	0.00	0.00	0.00
2017	1	0	1	0.22	0.00	0.80
2018	3	0	2	0.40	0.00	1.27
2019	9	0	6	1.03	0.00	3.08
2020	7	0	7	1.24	0.00	4.09
2021	10	0	8	1.45	0.00	5.48
2022	14	0	6	1.12	0.00	4.88
2023	2	0	1	0.20	0.00	1.33
Average	3	0	2	0.71	0.00	2.35
Median	2	0	1	0.57	0.00	1.38
Standard deviation	4	0	3	0.73	0.00	2.46
Minimum	0	0	0	0.00	0.00	0.00
Maximum	14	0	8	2.48	0.00	8.00
*This column includes companies that were no longer rated at the time of default. We only include post-withdrawal defaults pertaining to bankruptcy filings. Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

Our study of corporate defaults in Greater China identified a clear negative correspondence between ratings and defaults: The higher the issuer credit rating, the lower the observed default frequency.

The one-year average Gini ratio--a measure of the relative ability of ratings to differentiate risk--was 92.15% in Greater China. This signifies a very strong ability of ratings to differentiate relative credit risk across the ratings spectrum. The three-year Gini ratio for Greater China was 86.04%. By comparison, the global one-year Gini ratio was 82.63%, and the global three-year Gini ratio was 75.16% (see table 2).

Gini ratios are measures of the rank-ordering power of ratings over a given time horizon. They show the ratio of actual rank-ordering performance to theoretically perfect rank ordering (for details on the Gini methodology, refer to Appendix III).

Table 2

Corporate Gini coefficients by region (%)
	--Time horizon--
Region	One-year	Three-year	Five-year	Seven-year
Global	82.6	75.2	71.7	69.2
U.S.	80.5	72.4	68.8	66.3
Europe	89.9	85.0	82.6	79.8
Asia	90.2	85.0	79.8	76.0
Greater China	92.1	86.0	81.4	77.4
Note: The Asian figures are for the period 1993-2023. Greater China figures are for the period 2000-2023. Global, U.S., and rest are for the period from 1981-2023. Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

Greater China has a combination of a high proportion of investment-grade companies, which tend to default less than their lower-rated peers, and a strong Gini ratio, indicative of reliable rank-ordering efficacy of credit ratings. Issuers in the investment-grade categories are overall better equipped to weather deteriorating credit conditions than those in the lower rating categories such as 'B' and 'CCC'. These rating categories are where most downgrades and defaults would likely converge if market conditions deteriorated.

Investment-Grade Issuers Account For Majority Of Greater China Rated Pool

Of issuers rated by S&P Global Ratings based in Greater China, the speculative-grade population shrank year over year for the fifth consecutive year by 19% to 61 in 2023, from 75 in 2022 (see chart 2). The investment-grade population inched down to 421 from 423 for the same period.

The declining trend for newly rated corporate issuers in Greater China continued as 14 came to market in 2023, compared with 34 the previous year, a 22-year low. The tally of companies rated by S&P Global Ratings in Greater China was 482 at end-2023, down by 3.2% from 498 issuers at end-2022.

Given the strong presence of state-owned enterprises in Greater China, there is an inherent relationship between the rating on the sovereign and many corporations based in Greater China. On June 28, 2023, S&P Global Ratings affirmed its unsolicited 'A+' long-term and 'A-1' short-term sovereign credit ratings on China.

The outlook on the long-term rating on China is stable, reflecting our view that the country will maintain above-average growth over the next two years, its fiscal performance will start to improve over the next two to three years. (see "China Ratings Affirmed At 'A+/A-1'; Outlook Stable," June 28, 2023, and "China," Dec. 14, 2023).

The share of investment-grade issuers in Greater China rose to 87.3% in 2023, from 84.9% in 2022, compared with 51.7% globally, 44.9% in the U.S., and 56.4% in Europe. This distinction is particularly important as ratings also correspond strongly to the cost of debt: The higher the rating, the lower the cost of debt.

In Greater China, the percentage of unchanged ratings was 91.2% in 2023 (versus 78.8% in 2022 and 76.7% in 2021). By comparison, the percentage of unchanged ratings globally was 76.0% in 2023, 76.1% in 2022, and 74.9% in 2021.

The new issuers in Greater China in 2023 were predominantly rated in the 'BBB' rating category, keeping with the trend over the past four years since 2019. In 2023, the pool of rated issuers for corporations in Greater China shrank by about 3%. The pool decreased by 7.4% in 2022, 2.2% in 2021, and 2.7% in 2020.

For 2023, the median rating for Greater China was 'BBB+' (higher than the global median rating of 'BBB-' in 2023), with a median rating of 'BBB+' for financial issuers and 'BBB' for nonfinancial issuers. By comparison, the U.S. median rating in 2023 was 'BB', with a financial median rating of 'A-' and nonfinancial median rating of 'BB-'. The global median ratings were 'BBB+' for financials and 'BB' for nonfinancials.

Still More Upgrades Than Downgrades In 2023

In 2023, downgrades of issuers that were rated as of Jan. 1, 2023 through to Dec. 31, 2023, were at a 24-year low (two). This is much lower than the volume of the upgrades (12) in Greater China (see chart 3), yielding a downgrade-to-upgrade ratio of 0.17 to 1 (a 24-year low, as well). By comparison, the downgrade-to-upgrade ratio was 0.85 to 1 in 2022 and an average (weighted) of 1.7 to 1 during 2000-2023.

The number of rated issuers in Greater China grew rapidly--from 79 by end of 2000 to a peak of 582 at the end of 2018. It declined to 482 by the end of 2023. The growth in ratings was concentrated particularly in the 'A' and 'BBB' categories.

All of S&P Global Ratings default studies have found a clear correlation between ratings and defaults. Over every time horizon, lower ratings correspond to higher default rates (see chart 4). We found the same when examining the data by rating as well as by region. As the Gini ratios show, the ability of corporate ratings to serve as effective measures of relative risk remains intact over time, particularly in low-default years.

For all rated corporates in Greater China, the default rate was 0.2% in 2023, lower than the 1.1% in 2022. In contrast, the global default rate for all rated corporates rose to 1.8% in 2023 (with a total of 153 defaults), from 1.0% (with a total of 85 defaults) in the prior year (see chart 5 and table 3).

Table 3

Global corporate default summary
Year	Total defaults*	Investment grade defaults	Speculative grade defaults	Default rate (%)	Investment grade default rate (%)	Speculative grade default rate (%)	Total debt defaulting (bil. $)
1981	2	0	2	0.1	0.0	0.6	0.1
1982	18	2	15	1.2	0.2	4.5	0.9
1983	12	1	10	0.8	0.1	3.0	0.4
1984	14	2	12	0.9	0.2	3.3	0.4
1985	19	0	18	1.1	0.0	4.3	0.3
1986	34	2	30	1.7	0.2	5.7	0.5
1987	19	0	19	0.9	0.0	2.8	1.6
1988	32	0	29	1.4	0.0	3.9	3.3
1989	44	3	35	1.8	0.2	4.7	7.3
1990	70	2	56	2.7	0.1	8.1	21.2
1991	93	2	65	3.2	0.1	11.0	23.7
1992	39	0	32	1.5	0.0	6.1	5.4
1993	26	0	14	0.6	0.0	2.5	2.4
1994	21	1	15	0.6	0.1	2.1	2.3
1995	35	1	29	1.0	0.0	3.5	9.0
1996	20	0	16	0.5	0.0	1.8	2.7
1997	23	2	20	0.6	0.1	2.0	4.9
1998	57	4	49	1.3	0.1	3.7	11.3
1999	109	5	92	2.1	0.2	5.6	39.4
2000	136	7	109	2.5	0.2	6.2	43.3
2001	229	7	172	3.7	0.2	9.7	118.8
2002	226	13	159	3.5	0.4	9.3	190.9
2003	120	3	89	1.9	0.1	5.0	62.9
2004	56	1	38	0.8	0.0	2.0	20.7
2005	40	1	31	0.6	0.0	1.5	42.0
2006	30	0	26	0.5	0.0	1.2	7.1
2007	24	0	21	0.4	0.0	0.9	8.2
2008	127	14	89	1.8	0.4	3.7	429.6
2009	268	11	223	4.2	0.3	9.9	627.7
2010	83	0	64	1.2	0.0	3.0	97.5
2011	53	1	44	0.8	0.0	1.8	84.3
2012	83	0	66	1.1	0.0	2.6	86.7
2013	81	0	62	1.0	0.0	2.2	97.3
2014	60	0	45	0.7	0.0	1.4	91.6
2015	113	0	94	1.4	0.0	2.8	110.3
2016	163	1	143	2.1	0.0	4.2	239.8
2017	95	0	83	1.2	0.0	2.5	104.6
2018	82	0	71	1.0	0.0	2.1	131.7
2019	118	2	92	1.3	0.1	2.5	183.2
2020	225	0	198	2.8	0.0	5.5	353.4
2021	72	0	60	0.8	0.0	1.7	66.3
2022	85	0	71	1.0	0.0	1.9	107.0
2023	153	2	127	1.8	0.1	3.7	222.4
Average	79	2	64	1.4	0.1	3.9	85.2
Median	60	1	49	1.2	0.0	3.0	39.4
Standard deviation	66	3	53	0.9	0.1	2.6	128.3
Minimum	2	0	2	0.1	0.0	0.6	0.1
Maximum	268	14	223	4.2	0.4	11.0	627.7
*This column includes companies that were no longer rated at the time of default. Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

The 2023 speculative-grade corporate default rate for Greater China declined to 1.3% from 4.9% in 2022, the lowest level since 2018 (1.3%) (see chart 6). Globally, the speculative-grade corporate default rate increased, to 3.7% in 2023 from 1.9% in 2022. Similarly, the U.S. speculative-grade corporate default rate rose to 4.5% from 1.7% over the same period.

Table 4

Summary of Greater China annual corporate rating changes (%)
Year	Issuers as of Jan. 1	Upgrades (%)	Downgrades* (%)	Defaults (%)	Withdrawn ratings (%)	Changed ratings (%)	Unchanged ratings (%)	Downgrade/ upgrade ratio
2000	70	4.3	7.1	0.0	4.3	15.7	84.3	1.7
2001	79	5.1	3.8	0.0	3.8	12.7	87.3	0.8
2002	88	14.8	17.0	0.0	8.0	39.8	60.2	1.2
2003	134	0.7	3.0	0.7	11.2	15.7	84.3	4.0
2004	133	9.8	2.3	0.0	3.0	15.0	85.0	0.2
2005	150	27.3	4.7	0.0	6.0	38.0	62.0	0.2
2006	160	10.0	5.0	0.6	35.6	51.3	48.8	0.5
2007	124	13.7	7.3	0.8	10.5	32.3	67.7	0.5
2008	144	6.9	13.2	2.1	10.4	32.6	67.4	1.9
2009	161	4.3	13.0	2.5	14.9	34.8	65.2	3.0
2010	148	15.5	4.1	0.7	7.4	27.7	72.3	0.3
2011	161	9.3	12.4	0.0	5.6	27.3	72.7	1.3
2012	198	1.0	9.6	0.5	9.6	20.7	79.3	9.5
2013	207	9.7	7.2	1.0	7.7	25.6	74.4	0.8
2014	248	6.9	10.5	0.4	4.0	21.8	78.2	1.5
2015	297	4.7	8.8	2.0	6.1	21.5	78.5	1.9
2016	362	3.6	13.0	0.0	7.2	23.8	76.2	3.6
2017	451	5.5	11.8	0.2	9.5	27.1	72.9	2.1
2018	504	8.5	6.0	0.4	7.5	22.4	77.6	0.7
2019	582	4.3	6.5	1.0	12.2	24.1	75.9	1.5
2020	565	1.8	5.3	1.2	10.8	19.1	80.9	3.0
2021	550	8.7	4.2	1.5	8.9	23.3	76.7	0.5
2022	538	4.8	4.1	1.1	11.2	21.2	78.8	0.8
2023	498	2.4	0.4	0.2	5.8	8.8	91.2	0.2
Weighted average		6.8	8.1	0.8	9.0	24.6	75.4	1.7
Average		7.7	7.5	0.7	9.2	25.1	74.9	1.7
Median		6.2	6.8	0.6	7.8	23.5	76.5	1.2
Standard deviation		5.9	4.2	0.7	6.4	9.5	9.5	2.0
Minimum		0.7	0.4	0.0	3.0	8.8	48.8	0.2
Maximum		27.3	17.0	2.5	35.6	51.3	91.2	9.5
This table compares the net change in ratings from the first to the last day of each year. All intermediate ratings are disregarded. *Excludes downgrades to D, shown separately in the default column. Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

Table 5

New Greater China issuers corporate ratings classification
	--First rating--
Year	AAA	AA	A	BBB	BB	B	CCC/C	Total	% IG	% SG
2000	0	0	2	3	1	6	0	12	42%	58%
2001	0	2	1	8	0	1	0	12	92%	8%
2002	0	2	3	12	14	28	1	60	28%	72%
2003	0	0	1	10	3	1	1	16	69%	31%
2004	0	0	4	8	6	0	0	18	67%	33%
2005	0	0	0	7	8	2	0	17	41%	59%
2006	0	0	3	4	11	7	0	25	28%	72%
2007	0	0	9	4	5	13	1	32	41%	59%
2008	0	1	13	10	9	1	0	34	71%	29%
2009	0	0	6	4	1	2	2	15	67%	33%
2010	0	1	3	8	8	5	0	25	48%	52%
2011	0	2	4	6	22	11	0	45	27%	73%
2012	0	0	7	8	8	5	0	28	54%	46%
2013	0	2	12	22	17	7	1	61	59%	41%
2014	0	0	20	24	7	10	1	62	71%	29%
2015	0	4	24	31	11	6	2	78	76%	24%
2016	0	0	15	46	34	8	0	103	59%	41%
2017	0	4	14	18	26	33	1	96	38%	63%
2018	0	0	10	35	33	39	4	121	37%	63%
2019	0	0	11	19	17	14	4	65	46%	54%
2020	0	1	5	24	10	8	3	51	59%	41%
2021	0	0	9	18	10	9	2	48	56%	44%
2022	0	0	2	17	2	4	9	34	56%	44%
2023	0	0	4	6	2	1	1	14	71%	29%
Total	0	19	182	352	265	221	33	1072	52%	48%
IG--Investment grade. SG--Speculative grade. Includes issuers that are assigned a new rating after default as well as those companies that receive a rating for the first time. Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

Higher Ratings Are Consistent With Fewer Defaults

Higher-rated entities appear to take a longer time to default than lower-rated entities. We have also found this to be true for issuers in Greater China, using the initial rating and last rating as the reference points (see table 6). Greater China entities rated 'B' took an average of 3.2 years to default--less than the average of 6.0 years to default for 'BB'-rated entities.

The exception to this pattern for Greater China is in the 'BBB' rating category, which had an average of 5.3 years to default.

Of the defaulters from 2000-2023 in Greater China, 95.8% were initially rated speculative grade, and they averaged 3.5 years from initial rating to default.

Defaults in Greater China total 72 from 2000-2023, compared with 2,722 defaults globally during the same time frame.

Table 6

Time to default from original rating among corporate defaulters (Greater China versus global)
Original rating	Defaults	Average years from original rating	Median years from original rating	Standard deviation of years from original rating
Greater China (2000-2023)
AAA	N.A.	N.A.	N.A.	N.A.
AA	N.A.	N.A.	N.A.	N.A.
A	N.A.	N.A.	N.A.	N.A.
BBB	3	5.3	4.5	3.1
BB	22	6.0	4.7	3.8
B	31	3.2	2.7	2.9
CCC/C	16	0.6	0.4	0.6
Total	72	3.6	2.6	3.5
Global (1981-2023)
AAA	8	18.0	18.5	11.4
AA	33	17.2	19.3	10.5
A	101	14.4	11.4	9.5
BBB	234	9.6	7.7	7.0
BB	686	7.2	5.5	5.8
B	1885	5.1	3.8	4.4
CCC/C	462	2.1	1.3	2.6
Total	3409	5.9	4.0	5.7
N.A.--Not available. Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

Default rates by rating modifier (the plus or minus after the rating) show that lower rating categories historically have higher default rates on average, though variability is possible in any given year (see table 7). Nevertheless, the data from past default cycles indicates that most defaults stemmed from the lowest ratings.

Table 7

Greater China corporate annual default rates by rating modifier (%)
	AAA	AA+	AA	AA-	A+	A	A-	BBB+	BBB	BBB-	BB+	BB	BB-	B+	B	B-	CCC/C
2000	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2001	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2002	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2003	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	20.00
2004	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2005	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2006	N/A	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	6.67	0.00	0.00	0.00	0.00
2007	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	100.00
2008	N/A	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	9.09	16.67	0.00	20.00	N/A	0.00
2009	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	10.00	25.00	25.00	100.00
2010	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	33.33
2011	0.00	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2012	0.00	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	5.56	0.00	0.00	0.00
2013	0.00	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	8.33	0.00	0.00	100.00
2014	0.00	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	33.33
2015	0.00	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	3.85	9.09	9.09	0.00	100.00
2016	0.00	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2017	0.00	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	11.11	0.00
2018	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	33.33
2019	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.78	3.45	6.25	27.27
2020	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	53.85
2021	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	13.64	7.41	0.00	60.00
2022	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	8.33	6.25	25.00	66.67
2023	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	50.00
Average	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.38	1.13	2.41	2.97	3.06	32.41
Median	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	23.64
Standard deviation	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.86	3.65	4.21	6.60	7.58	37.71
Minimum	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Maximum	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	9.09	16.67	13.64	25.00	25.00	100.00
N/A--Not applicable. Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

A Closer Look At Greater China Defaulters And Industry Profile

Although the two Greater China defaults in 2023 were from the real estate sector, the sector's default rate fell to 3.0% from 7.4% in 2022--a result of a swathe of defaults befalling weaker issuers over the previous two years. Other sectors' annual corporate default rates were zero.

The publicly rated defaulter in 2023 is Sunac China Holdings Ltd.; we withdrew the issuer credit rating on the company in 2022.

Table 8

Greater China annual corporate default rates by industry (%)
Year	Aerospace / auto / capital goods /metal	Consumer /service	Energy and natural resources	Financial institutions	Forest and building products/homebuilders	Healthcare / chemicals	High tech / computers / office equipment	Insurance	Leisure time / media	Real estate	Telecoms	Transport	Utility
2000	0.00	0.00	n/a	0.00	0.00	N/A	N/A	0.00	N/A	0.00	N/A	0.00	0.00
2001	0.00	0.00	n/a	0.00	0.00	0.00	N/A	0.00	N/A	0.00	n/a	0.00	0.00
2002	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	0.00	0.00	0.00	0.00
2003	0.00	0.00	0.00	0.00	0.00	N/A	10.00	0.00	0.00	0.00	0.00	0.00	0.00
2004	0.00	0.00	0.00	0.00	0.00	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2005	0.00	0.00	0.00	0.00	0.00	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2006	12.50	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2007	16.67	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2008	0.00	28.57	12.50	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2009	50.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	5.26	0.00	0.00	0.00
2010	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	12.50	0.00
2011	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2012	0.00	0.00	0.00	0.00	0.00	10.00	0.00	0.00	N/A	0.00	0.00	0.00	0.00
2013	0.00	0.00	0.00	0.00	10.00	0.00	0.00	0.00	0.00	0.00	0.00	10.00	0.00
2014	0.00	0.00	5.56	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2015	0.00	7.14	4.35	0.00	22.22	0.00	0.00	0.00	0.00	1.67	0.00	8.33	0.00
2016	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2017	0.00	0.00	3.70	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2018	0.00	0.00	2.63	0.00	0.00	0.00	6.67	0.00	0.00	0.00	0.00	0.00	0.00
2019	1.54	0.00	2.04	0.00	6.90	3.70	0.00	0.00	0.00	0.00	9.09	0.00	0.00
2020	0.00	2.56	4.55	0.00	0.00	0.00	6.25	0.00	0.00	2.78	0.00	0.00	2.86
2021	0.00	0.00	0.00	0.00	7.89	5.26	0.00	0.00	0.00	6.25	0.00	0.00	0.00
2022	0.00	3.03	0.00	0.00	3.70	0.00	0.00	0.00	0.00	7.41	0.00	0.00	0.00
2023	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	3.03	0.00	0.00	0.00
Average	3.36	1.72	1.61	0.00	2.11	0.95	1.04	0.00	0.00	1.10	0.41	1.28	0.12
Median	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Standard deviation	10.76	5.94	3.05	0.00	5.15	2.55	2.76	0.00	0.00	2.21	1.94	3.53	0.58
Minimum	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Maximum	50.00	28.57	12.50	0.00	22.22	10.00	10.00	0.00	0.00	7.41	9.09	12.50	2.86
N/A--Not applicable. Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

Table 9

Greater China one-year corporate default rates by broad sector (%)
	--All financials--			--All nonfinancials--
Year	One-year	Three-year	10-year	One-year	Three-year	10-year
2000	0.00	0.00	0.00	0.00	0.00	3.45
2001	0.00	0.00	0.00	0.00	0.00	3.33
2002	0.00	0.00	0.00	0.00	2.94	5.88
2003	0.00	0.00	0.00	2.00	2.00	4.00
2004	0.00	0.00	0.00	0.00	0.00	3.77
2005	0.00	0.00	0.00	0.00	1.54	6.15
2006	0.00	0.00	0.00	1.43	2.86	7.14
2007	0.00	0.00	0.00	1.33	4.00	8.00
2008	0.00	0.00	0.00	3.70	8.64	11.11
2009	0.00	0.00	0.00	4.65	5.81	10.47
2010	0.00	0.00	0.00	1.39	2.78	5.56
2011	0.00	0.00	0.00	0.00	3.57	9.52
2012	0.00	0.00	0.00	0.87	3.48	11.30
2013	0.00	0.00	0.00	1.64	5.74	9.84
2014	0.00	0.00	0.00	0.65	3.90	9.74
2015	0.00	0.00		3.28	3.83
2016	0.00	0.00		0.00	1.36
2017	0.00	0.00		0.36	1.44
2018	0.00	0.00		0.63	3.45
2019	0.00	0.00		1.57	4.46
2020	0.00	0.00		1.92	4.38
2021	0.00	0.00		2.37	3.86
2022	0.00			1.89
2023	0.00			0.36
Median	0.00	0.00	0.00	1.10	3.46	7.14
Standard deviation	0.00	0.00	0.00	1.29	2.07	2.91
Minimum	0.00	0.00	0.00	0.00	0.00	3.33
Maximum	0.00	0.00	0.00	4.65	8.64	11.30
"All financials" refers to financial institutions and insurance combined. Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

Transition Tables And Cumulative Default Rates

Analysis of rating transitions in 2023 suggests that ratings behavior in Greater China continues to align with global trends, which have shown a negative correspondence between credit rating and default.

Overall, higher-rated issuers in Greater China showed greater ratings stability in 2023 than speculative-grade issuers. For example, 100% of Greater China issuers rated 'AA' at the beginning of 2023 (Jan. 1, 2023) were still rated 'AA' at the end of the year (Dec. 31, 2023), and the comparable share for issuers rated 'B' was only 36.4%. A total of 50% of 'CCC'/'C' issuers at the start of the year defaulted through the year and the rest had their ratings withdrawn (see tables 10-11).

We also track defaults even after the ratings on the issuers are withdrawn. Consider the following hypothetical scenario. An issuer is rated in January 2023, undergoes a rating withdrawal in May 2023, and defaults in December 2023. This issuer will count in the 2023 trailing-12-month default rate. In the trailing-12-month default rate for June 2023, this hypothetical issuer will not count because it was not rated at the start of the period (June 2023). Please see Appendix I for more details.

Table 10

2023 one-year corporate transition rates--China versus global (%)
From/to	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
Greater China
AAA	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
AA	0.0	100.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
A	0.0	0.0	97.1	0.0	0.0	0.0	0.0	0.0	2.9
BBB	0.0	0.0	0.4	96.1	0.0	0.0	0.0	0.0	3.4
BB	0.0	0.0	0.0	1.6	83.9	1.6	0.0	0.0	12.9
B	0.0	0.0	0.0	0.0	0.0	36.4	0.0	0.0	63.6
CCC/C	0.0	0.0	0.0	0.0	0.0	0.0	0.0	50.0	50.0
Global
AAA	100.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
AA	0.0	96.8	1.4	0.0	0.0	0.0	0.0	0.0	1.8
A	0.0	0.1	96.8	1.0	0.0	0.0	0.0	0.0	2.0
BBB	0.0	0.0	1.6	92.7	1.0	0.4	0.1	0.1	4.1
BB	0.0	0.0	0.2	3.9	85.7	3.8	0.3	0.2	6.0
B	0.0	0.0	0.0	0.1	4.2	79.1	5.8	1.2	9.5
CCC/C	0.0	0.0	0.0	0.0	0.0	7.3	47.4	30.9	14.4
NR--Not rated. Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

For average one-year transition rates, the long-term (2000-2023) trends of ratings behavior were similar for Greater China and global rated issuers (see table 11). After one year, the average percentage of issuers that retained the same rating were the following for 'AAA', 'AA', and 'B':

• 'AAA': 85.7% for Greater China and 87.3% for global;
• 'AA': 88.9% for Greater China and 87.6% for global; and
• 'B': Only 61.2% for Greater China and 75.0% for global.

Based on the transition analysis for a two-year horizon, lower ratings also tend to display less stability than higher ratings (see table 12). Because of sample sizes, there are occasional deviations. These deviations have lowered the stability rate for certain rating categories because of the relatively high withdrawal rate of these issuers.

Transitions at the rating modifier also display the same relationship mostly, though differences in sample size occasionally create slight variations between adjacent rating categories (see table 13).

Table 11

Average one-year corporate transition rates (%)
From/to	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
Greater China (2000-2023)
AAA	85.7	14.3	0.0	0.0	0.0	0.0	0.0	0.0	0.0
AA	2.0	88.9	7.5	0.0	0.0	0.0	0.0	0.0	1.6
A	0.0	1.2	94.3	1.8	0.0	0.0	0.0	0.0	2.7
BBB	0.0	0.0	2.5	90.8	1.5	0.0	0.0	0.0	5.1
BB	0.0	0.0	0.0	2.2	74.3	4.9	0.2	0.3	18.1
B	0.0	0.0	0.0	0.1	4.1	61.2	4.3	2.9	27.4
CCC/C	0.0	0.0	0.0	0.0	0.0	8.4	33.7	32.5	25.3
Global (1981-2023)
AAA	87.3	8.9	0.5	0.0	0.1	0.0	0.1	0.0	3.1
AA	0.5	87.6	7.6	0.5	0.0	0.1	0.0	0.0	3.8
A	0.0	1.5	89.2	4.7	0.2	0.1	0.0	0.0	4.1
BBB	0.0	0.1	3.1	87.1	3.3	0.4	0.1	0.1	5.8
BB	0.0	0.0	0.1	4.5	78.6	6.4	0.5	0.6	9.3
B	0.0	0.0	0.1	0.1	4.5	75.0	4.9	3.0	12.5
CCC/C	0.0	0.0	0.1	0.1	0.4	13.3	45.0	26.0	15.1
The Greater China figures are for the time period from 2000-2023. NR--Not rated. Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

Table 12

Average one-year corporate transition rates (%)
From/to	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
Greater China (2000-2023)
AAA	71.4	28.6	0.0	0.0	0.0	0.0	0.0	0.0	0.0
AA	4.3	77.7	14.6	0.0	0.0	0.0	0.0	0.0	3.4
A	0.0	2.2	88.6	3.8	0.0	0.0	0.0	0.0	5.4
BBB	0.0	0.0	5.3	82.9	2.7	0.0	0.0	0.0	9.1
BB	0.0	0.0	0.1	4.3	58.3	6.8	0.6	0.9	29.1
B	0.0	0.0	0.0	0.4	5.7	39.9	4.1	6.6	43.4
CCC/C	0.0	0.0	0.0	0.0	1.2	8.6	11.1	42.0	37.0
Global (1981-2023)
AAA	76.0	16.0	1.4	0.1	0.2	0.1	0.1	0.0	6.1
AA	0.8	76.9	13.5	1.2	0.2	0.1	0.0	0.1	7.3
A	0.0	2.7	79.7	8.3	0.6	0.2	0.0	0.1	8.2
BBB	0.0	0.1	5.7	76.4	5.3	0.9	0.2	0.4	11.0
BB	0.0	0.0	0.2	7.8	62.2	9.6	0.9	1.8	17.3
B	0.0	0.0	0.1	0.3	7.4	56.4	5.8	7.1	22.9
CCC/C	0.0	0.0	0.1	0.4	0.8	17.2	21.9	35.7	24.0
The Greater China figures are for the time period from 2000-2023. NR--Not rated. Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

Table 13

Average one-year transition rates for Greater China corporates by rating modifier, 2000-2023 (%)
	--Ratings--
From/to	AAA	AA+	AA	AA-	A+	A	A-	BBB+	BBB	BBB-	BB+	BB	BB-	B+	B	B-	CCC/C	D	NR
AAA	85.71	14.29	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
AA+	11.63	88.37	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
AA	0.00	20.59	70.59	8.82	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
AA-	0.00	0.00	5.71	81.14	10.29	0.57	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.29
A+	0.00	0.00	0.22	4.63	86.12	6.17	0.44	0.22	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.20
A	0.00	0.00	0.00	0.14	3.88	89.93	2.88	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	3.17
A-	0.00	0.00	0.00	0.00	0.25	4.79	88.02	3.78	0.50	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.65
BBB+	0.00	0.00	0.00	0.00	0.12	0.12	6.24	85.29	4.24	0.24	0.12	0.00	0.00	0.00	0.00	0.00	0.00	0.00	3.65
BBB	0.00	0.00	0.00	0.00	0.00	0.00	0.37	7.99	83.78	2.95	0.37	0.00	0.00	0.00	0.00	0.00	0.00	0.00	4.55
BBB-	0.00	0.00	0.00	0.00	0.00	0.00	0.15	0.75	6.33	80.39	4.07	0.30	0.30	0.15	0.00	0.00	0.00	0.00	7.54
BB+	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.49	4.67	73.22	6.88	1.23	0.25	0.25	0.00	0.00	0.00	13.02
BB	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.26	0.26	0.26	5.47	62.76	11.72	1.56	0.00	0.26	0.26	0.26	16.93
BB-	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.25	0.25	0.76	5.30	55.56	9.34	2.27	0.76	0.25	0.76	24.49
B+	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.33	0.99	5.59	49.34	12.17	2.63	1.97	2.96	24.01
B	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.66	1.97	6.56	51.80	7.54	2.30	2.30	26.89
B-	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.85	0.00	0.00	0.85	0.00	3.42	37.61	15.38	4.27	37.61
CCC/C	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	4.82	1.20	2.41	33.73	32.53	25.30
NR--Not rated. Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

The negative correspondence between ratings and defaults in Greater China holds true over time, as the cumulative average default rates illustrate (see tables 14-15 and chart 8). On average, for 2000-2023, all rated Greater China issuers had a default rate of 0.8% in the first year after they were rated, and 1.5% in the second year. Issuers rated in the 'BB' category had a default rate of 0.3% in the first year after they were rated, and 0.9% in the second year. Issuers rated in the 'B' category had a default rate of 2.9%, on average, in the first year, and 6.5% in the second.

The stability rates of entities rated 'B-' are lower than both 'B' and 'CCC'/'C'-rated entities because of relatively higher withdrawals and transitions to not rated. The cumulative average default rates in the 'CCC'/'C' rating category repeat in years two to 10 because of a limited sample size and a limited number of 10-year periods in 2000-2023 in Greater China (14 10-year samples), compared with a larger sample of 1981-2023 globally (33 10-year samples).

Table 14

Corporate average cumulative default rates by rating category (%)
From/to	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10
Greater China (2000-2023)
AAA	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
AA	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
A	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
BBB	0.0	0.0	0.1	0.1	0.2	0.3	0.5	0.7	0.9	0.9
BB	0.3	0.9	1.5	2.7	3.6	4.1	4.9	5.9	6.8	7.7
B	2.9	6.5	9.5	10.7	12.7	14.8	16.4	17.2	17.5	17.5
CCC/C	32.5	42.3	43.6	44.9	44.9	44.9	44.9	44.9	44.9	44.9
Investment grade	0.0	0.0	0.0	0.1	0.1	0.1	0.2	0.3	0.5	0.5
Speculative grade	2.6	4.7	6.2	7.5	8.7	9.8	10.9	11.7	12.4	12.8
All rated	0.8	1.5	2.0	2.4	2.9	3.3	3.7	4.1	4.4	4.6
Global (1981-2023)
AAA	0.0	0.0	0.1	0.2	0.3	0.4	0.5	0.6	0.6	0.7
AA	0.0	0.1	0.1	0.2	0.3	0.4	0.5	0.5	0.6	0.7
A	0.0	0.1	0.2	0.3	0.4	0.5	0.7	0.8	0.9	1.1
BBB	0.1	0.4	0.7	1.0	1.4	1.7	2.0	2.3	2.6	2.9
BB	0.6	1.8	3.2	4.6	5.9	7.1	8.1	9.1	9.9	10.7
B	3.0	7.0	10.5	13.4	15.7	17.6	19.0	20.2	21.2	22.2
CCC/C	26.0	36.0	41.4	44.5	46.7	47.7	48.8	49.5	50.1	50.6
Investment grade	0.1	0.2	0.4	0.6	0.8	1.0	1.2	1.4	1.5	1.7
Speculative grade	3.5	6.8	9.6	11.8	13.7	15.2	16.5	17.5	18.4	19.3
All rated	1.5	2.9	4.1	5.1	6.0	6.7	7.3	7.8	8.2	8.7
The Greater China figures are for the time period from 2000-2023. Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

The default rates in the 'CCC'/'C' category are much higher than those in the higher rating categories. The relatively small sample sizes of some rating categories in Greater China may add volatility to default rates and occasionally cause them to deviate from both global trends and expectations, as is the case in the 'BB-' through 'B' rating categories (see table 15).

Table 15

Greater China corporate average cumulative default rates by rating notch, 2000-2023 (%)
From/to	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10
AAA	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
AA+	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
AA	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
AA-	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
A+	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
A	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
A-	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
BBB+	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
BBB	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.3	0.7	0.7
BBB-	0.0	0.0	0.2	0.4	0.6	0.9	1.5	1.9	2.3	2.3
BB+	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.8
BB	0.3	1.1	2.2	3.5	4.9	5.3	5.3	5.9	7.6	8.3
BB-	0.8	1.5	2.3	4.3	5.5	6.5	8.4	10.5	11.4	12.5
B+	3.0	6.6	11.5	13.7	16.2	20.1	22.6	24.2	24.8	24.8
B	2.3	5.3	7.1	7.8	9.2	10.2	11.3	11.3	11.3	11.3
B-	4.3	9.5	10.4	10.4	12.7	12.7	12.7	12.7	12.7	12.7
CCC/C	32.5	42.3	43.6	44.9	44.9	44.9	44.9	44.9	44.9	44.9
Investment grade	0.0	0.0	0.0	0.1	0.1	0.1	0.2	0.3	0.5	0.5
Speculative grade	2.6	4.7	6.2	7.5	8.7	9.8	10.9	11.7	12.4	12.8
All rated	0.8	1.5	2.0	2.4	2.9	3.3	3.7	4.1	4.4	4.6
The Greater China figures are for the time period from 2000-2023. Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

Gini Ratios And Lorenz Curves

A quantitative measure of ratings performance indicates the relative rank ordering of ratings in Greater China is consistent across various time horizons. To measure ratings performance, or ratings accuracy, the cumulative share of issuers by rating is plotted against the cumulative share of defaulters in a Lorenz curve to render the accuracy of their rank ordering visually. For definitions and methodology, refer to Appendix III.

Our calculations indicate that the one-year transition to default in Greater China shows an average one-year Gini coefficient of 92.1%, a three-year Gini of 86.0%, and a five-year Gini of 81.4% (see table 2).

If corporate ratings only randomly approximated default risk, the Gini coefficient would be zero. On the other hand, if corporate ratings were perfectly rank ordered so that all defaults occurred only among the lowest-rated entities, the Lorenz curve would capture all of the area on chart 12 above the diagonal, and its Gini coefficient would be 1.

As expected, the Gini coefficients decline as the time horizon lengthens because longer time frames allow for more credit degradation among higher-rated entities.

In the one-year Greater China Lorenz curve, for example, 100% of defaults occurred in the speculative-grade category, while speculative-grade ratings constituted only 30.5% of all Greater China corporate issuers (see chart 9).

The three-year Lorenz curve shows that speculative-grade issuers constituted 99.1% of defaulters and 32.6% of the entire sample (see chart 10).

The five-year Lorenz curve shows that speculative-grade issuers constituted 97.6% of defaulters and only 33.7% of the entire sample (see chart 11).

If the rank ordering of ratings had little predictive value, the cumulative share of defaulting corporate entities and the cumulative share of all entities would be nearly the same.

Appendix I: Default Methodology And Definitions

This long-term corporate default and rating transition study uses S&P Global Market Intelligence's CreditPro® database of long-term local currency issuer credit ratings. Most tables and charts in this study are the direct output of the CreditPro® application, while others are based on manipulation of the underlying database.

An issuer credit rating reflects S&P Global Ratings' forward-looking opinion of a company's overall creditworthiness. This opinion focuses on the obligor's capacity and willingness to meet its financial commitments as they come due. It does not apply to any specific financial obligation because it does not take into account the nature and provisions of the obligation, its standing in bankruptcy or liquidation, its statutory preferences, or the legality and enforceability of the obligation. It is not necessary for a company to have rated debt to have an issuer credit rating.

Although the ratings on a company's very senior forms of secured debt, particularly ones with strong covenants, could occasionally be higher than the issuer credit rating on the company, specific issues are typically rated as high as or lower than these issuer ratings, depending on their relative priority within the company's debt structure. If they are speculative grade, issuer credit ratings are generally two notches higher than subordinated debt ratings. Otherwise, they are generally one notch higher. Therefore, although a 'BB+' issuer credit rating is generally paired with a 'BB-' subordinated debt rating, an 'AA' issuer credit rating usually corresponds to a 'AA-' subordinated rating.

S&P Global Ratings Research's ongoing enhancement of the CreditPro® database used to generate this study could lead to outcomes that differ to some degree from those reported in previous studies. However, this poses no continuity problem because each study reports statistics back to Dec. 31, 1980. Therefore, each annual default study is self-contained and effectively supersedes all previous versions.

Issuers included in this study

This study analyzes the rating histories of over 1,100 Greater China entities that S&P Global Ratings rated from Jan. 1, 2000, through Dec. 31, 2023. While S&P Global Ratings rated issuers in Greater China prior to 2000, we limited the scope of analysis to issuers rated from 2000-2023. These include industrials, utilities, financial institutions, and insurance entities with long-term local currency ratings. The analysis excludes public information ("pi") ratings and ratings based on the guarantee of another company. Structured finance vehicles, public-sector issuers, and sovereign issuers are the subjects of separate default and transition studies, and we excluded these from this study. Additionally, entities included in this study have business operations in Greater China, regardless of the market they are incorporated in.

To avoid overcounting, the CreditPro® database excludes subsidiaries with debt that is fully guaranteed by a parent or with default risk that is considered identical to that of a parent. The latter are entities with obligations that are not legally guaranteed by a parent but that have operating or financing activities that are so inextricably entwined with those of the parent that it would be impossible to imagine the default of one and not the other. At times, however, some of these subsidiaries might not yet have been covered by a parent's guarantee, or the relationship that combines the default risk of parent and subsidiary might have come to an end or might not have begun. We included such subsidiaries for the period during which they had a distinct and separate risk of default.

Emerging markets in this study consist of the following subregions:

Asia-Pacific--Bangladesh, Bhutan, British Indian Ocean Territory, China, Fiji, Hong Kong Special Administrative Region of China, India, Indonesia, Macao Special Administrative Region of China, Malaysia, Mongolia, Pakistan, Papua New Guinea, Philippines, Sri Lanka, Taiwan, Thailand, and Vietnam

EMEA--Angola, Armenia, Azerbaijan, Bahrain, Belarus, Bosnia and Herzegovina, Bulgaria,Benin, Cote d'Ivoire, Croatia, Cyprus, Egypt, Estonia, Gabon, Georgia, Ghana, Hungary, Jordan, Kazakhstan, Kenya, Kuwait, Latvia, Lebanon, Lithuania, Mauritius, Montenegro, Morocco, Namibia, Nigeria, Oman, Poland, Qatar, Republic of Moldova, Russia, Saudi Arabia, Slovakia, South Africa, Tunisia, Turkey, Ukraine, United Arab Emirates, and Uzbekistan

Latin America and Caribbean--Argentina, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Grenada, Guatemala, Honduras, Jamaica, Mexico, Panama, Paraguay, Peru, Trinidad and Tobago, and Uruguay

Frontier markets in this study consist of the following subregions:

Asia-Pacific--Cambodia and Marshall Islands

EMEA--Liberia, Syrian Arab Republic, and Togo

Latin America and Caribbean--Aruba, Bahamas, Curacao, Netherlands Antilles*, Turks and Caicos Islands, and Venezuela

*The Netherlands Antilles was dissolved in 2010.

Europe in this study consist of the following economies:

Austria, Belgium, British Virgin Islands, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hungary, Iceland, Ireland, Isle of Man, Italy, Jersey, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Monaco, Montenegro, Netherlands, Norway, Poland, Portugal, Republic of Moldova, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, and United Kingdom.

Asia-Pacific in this study consist of the following economies:

Bangladesh, Bhutan, British Indian Ocean Territory, Brunei Darussalam, Cambodia, China, Fiji, Hong Kong Special Administrative Region of China, India, Indonesia, Japan, Korea, Macao Special Administrative Region of China, Malaysia, Marshall Islands, Mongolia, Pakistan, Papua New Guinea, Philippines, Singapore, Sri Lanka, Taiwan, Thailand, and Vietnam.

Issuers with withdrawn ratings

S&P Global Ratings withdraws ratings when an entity's entire debt is paid off or when the program or programs rated are terminated and the relevant debt extinguished. For the purposes of this study, a rating may be withdrawn as a result of mergers and acquisitions. Others are withdrawn because of a lack of cooperation, particularly when a company is experiencing financial difficulties and refuses to provide all the information needed to continue surveillance on the ratings, or at the entity's request.

Definition of default

An obligor rated 'SD' (selective default) or 'D' (default) is in payment default on one or more of its financial obligations (rated or unrated) unless S&P Global Ratings believes that such payments will be made within five business days, irrespective of any grace period. S&P Global Ratings also lowers a rating to 'D' upon an issuer's filing for bankruptcy or taking a similar action that jeopardizes payments on a financial obligation.

A 'D' rating is assigned when S&P Global Ratings believes that the default will be a general default and that the obligor will fail to pay all or substantially all of its obligations as they come due. S&P Global Ratings assigns an 'SD' rating when it believes that the obligor has selectively defaulted on a specific issue or class of obligations but will continue to meet its payment obligations on other issues or classes of obligations in a timely manner. A selective default includes the completion of a distressed exchange offer, whereby one or more financial obligations is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.

'R' (regulatory intervention) indicates that an obligor is under regulatory supervision owing to its financial condition. This does not necessarily indicate a default event, but the regulator might have the power to favor one class of obligations over others or pay some obligations and not others. On July 5, 2019, we removed the 'R' symbol from all rating scales.

Preferred stock is not considered a financial obligation; thus, a missed preferred stock dividend is not normally equated with default.

We deem 'D', 'SD', and 'R' issuer credit ratings to be defaults for the purposes of this study. A default is assumed to take place on the earliest of: the date S&P Global Ratings revised the rating(s) to 'D', 'SD', or 'R'; the date a debt payment was missed; the date a distressed exchange offer was announced; or the date the debtor filed or was forced into bankruptcy.

When an issuer defaults, it is not uncommon for S&P Global Ratings to subsequently withdraw the 'D' rating. For the purposes of this study, if an issuer defaults, we end its rating history at 'D'. If any defaulting entity reemerges from bankruptcy, or otherwise restructures its defaulted debt instruments, thereby reestablishing regular, timely payment of all its debts, we reenter this issuer into the database as a new entity. Its rating history after the default event is included in all calculations as entirely separate from its experience leading up to its earlier default.

Calculations

Static pool methodology  S&P Global Ratings Research conducts its default studies on the basis of groupings called static pools. For the purposes of this study, we form static pools by grouping issuers by rating category at the beginning of each year that the CreditPro® database covers. Each static pool is followed from that point forward. All entities included in the study are assigned to one or more static pools. When an issuer defaults, we assign that default back to all of the static pools to which the issuer belonged.

We use the static pool methodology to avoid certain pitfalls in estimating default rates. This is to ensure that default rates account for rating migration and to allow for default rates to be calculated across multi-period time horizons. Some methods for calculating default and rating transition rates might charge defaults against only the initial rating on the issuer, ignoring more recent rating changes that supply more current information. Other methods may calculate default rates using only the most recent year's default and rating data, which may yield comparatively low default rates during periods of high rating activity because they ignore prior years' default activity.

The pools are static in the sense that their membership remains constant over time. Each static pool can be interpreted as a buy-and-hold portfolio. Because errors, if any, are corrected by every new update and because the criteria for inclusion or exclusion of entities in the default study are subject to minor revisions as time goes by, it is not possible to compare static pools across different studies. Therefore, every new update revises results back to the same starting date so as to avoid continuity problems.

Entities that have had ratings withdrawn--that is, revised to not rated--are surveilled with the aim of capturing a potential default. Because static pools only include entities with active ratings as of the beginning date of a given pool, we exclude entities with withdrawn ratings, as well as those that have defaulted, from subsequent static pools. If the rating on an entity is withdrawn after the start date of a particular static pool and the entity subsequently defaults, we will include it in that static pool as a default and categorize it in the rating category of which it was a member at that time.

For instance, the 2000 static pool consists of all entities rated as of 12:01 a.m. on Jan. 1, 2000. Adding those entities first rated in 2000 to the surviving members of the 2000 static pool forms the 2001 static pool. All rating changes that took place are reflected in the newly formed 2001 static pool through the ratings on these entities as of 12:01 a.m. on Jan. 1, 2001. We used the same method to form static pools for 2000 through 2023.

Consider the following example: An issuer is originally rated 'BB' in mid-2006 and is downgraded to 'B' in 2008. This is followed by a rating withdrawal in 2010 and a default in 2013. We would include this hypothetical company in the 2007 and 2008 pools with the 'BB' rating, which was the rating on the issuer at the beginning of those years. Likewise, it would be included in the 2009 and 2010 pools with the 'B' rating. It would not be part of the 2006 pool because it was not rated as of the first day of that year, and it would not be included in any pool after the last day of 2010 because the rating had been withdrawn by then. Yet each of the four pools in which this company was included (2007-2010) would record its 2013 default at the appropriate time horizon.

Default rates  We calculated annual default rates for each static pool, first in units and then as percentages with respect to the number of issuers in each rating category. Finally, we combined these percentages to obtain cumulative default rates for the 24 years covered by the study.

Issuer-weighted default rates  All default rates that appear in this study are based on the number of issuers rather than the dollar amounts affected by defaults or rating changes. Although dollar amounts provide information about the portion of the market that is affected by defaults or rating changes, issuer-weighted averages are more useful measures of the performance of ratings.

Many practitioners utilize statistics from this default study and CreditPro® to estimate "probability of default" and "probability of rating transition." It is important to note that S&P Global Ratings' credit ratings do not imply a specific probability of default.

Cumulative average default rates  We derived cumulative default rates that average the experience of all static pools by calculating marginal default rates, conditional on survival (survivors being nondefaulters), for each possible time horizon and for each static pool, weight-averaging the conditional marginal default rates, and accumulating the average conditional marginal default rates. Conditional default rates are calculated by dividing the number of issuers in a static pool that default at a specific time horizon by the number of issuers that survived (did not default) to that point in time. Weights are based on the number of issuers in each static pool. Cumulative default rates are one minus the product of the proportion of survivors (nondefaulters).

For instance, the hypothetical weighted-average first-year default rate for 'B' rated entities in Greater China for all 24 pools was 2.9%, meaning that an average of 97.1% survived one year. Similarly, the second-year conditional marginal average was 3.7% for the first 23 pools (96.3% of those entities that did not default in the first year survived the second year) and 3.1% for the first 22 pools (96.9% of those entities that did not default by the second year survived the third year). Multiplying 97.11% by 96.25% results in a 93.47% survival rate to the end of the second year, which yields a two-year cumulative average default rate of 6.53%. Multiplying 96.86% by 93.47% results in a 90.53% survival rate to the end of the third year, which yields a three-year cumulative average default rate of 9.47%.

Time sample  This update limits the reporting of default rates in Greater China to the 24-year time horizon, and we based all calculations on the rating experience of that period. Global data is based on a 43-year time horizon. The maturities of most obligations are much shorter than 24 years. In addition, average default statistics become less reliable at longer time horizons because the sample size becomes smaller and the cyclical nature of default rates has a bigger effect on averages.

Default patterns share broad similarities across all static pools, suggesting that S&P Global Ratings' credit rating standards have been consistent over time. Adverse business conditions tend to coincide with default upswings for all pools. These upswings have hit speculative-grade issuers the hardest, but investment-grade default rates also increase during stressful periods.

Transition analysis

Transition rates compare issuer credit ratings at the beginning of a period with ratings at the end of the period. To compute one-year rating transition rates by rating category, we compared the rating on each entity at the end of a particular year with the rating at the beginning of the same year. An issuer that remained rated for more than one year was counted as many times as the number of years it was rated. For instance, an issuer continually rated from the middle of 2004 to the middle of 2011 would appear in the six consecutive one-year transition matrices from 2005-2010. All 2003 static pool members still rated on Dec. 31, 2015, had 12 one-year transitions, while entities first rated between Jan. 1, 2015, and Dec. 31, 2015, had only one.

Each one-year transition matrix displays all rating movements between letter categories from the beginning of the year through year-end. For each rating listed in the matrix's leftmost column, there are nine ratios listed in the rows, corresponding to the ratings from 'AAA' to 'D', plus an entry for "NR." For instance, the first panel of table 11, which corresponds to the 2023 static pool, shows that out of all 'BBB' rated entities at the beginning of that year, 96.1% were rated the same at year-end, while S&P Global Ratings had upgraded 0.43% to 'A', and so on.

Average one-year transition matrices were calculated on the basis of the one-year transition matrix just described. The ratios represent the historical incidence of the ratings listed in the first column changing to the ones listed in the top row over the course of the reference period.

Multiyear transitions  We also calculated multiyear transitions for periods of two to five years. In this case, we compared the rating at the beginning of the multiyear period with the rating at the end. For example, average two-year transition matrices were the result of comparing ratings at the beginning of the years 2000-2022 with the ratings at the end of the years 2001-2023 (see table 13). Otherwise, the methodology was identical to that used for single-year transitions.

Comparing transition rates with default rates  For more information on the differences between transition rates and default rates, please see the section "Comparing transition rates with default rates" in Appendix I of "Default, Transition, and Recovery: 2023 Annual Global Corporate Default And Rating Transition Study", published March 28, 2024.

Appendix II: Additional Tables

Table 16

Greater China static pool cumulative corporate default rates among all ratings, 2000-2023 (%)
Rating: All rated
		--Time horizon (years)--
Year	Issuers as of Jan. 1	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10
2000	70	0.0	0.0	0.0	0.0	0.0	0.0	0.0	1.4	1.4	1.4
2001	79	0.0	0.0	0.0	0.0	0.0	0.0	1.3	1.3	1.3	1.3
2002	88	0.0	1.1	1.1	1.1	1.1	2.3	2.3	2.3	2.3	2.3
2003	134	0.7	0.7	0.7	0.7	1.5	1.5	1.5	1.5	1.5	1.5
2004	133	0.0	0.0	0.0	0.8	0.8	0.8	1.5	1.5	1.5	1.5
2005	150	0.0	0.0	0.7	0.7	1.3	2.0	2.0	2.7	2.7	2.7
2006	160	0.6	1.3	1.3	1.9	2.5	2.5	3.1	3.1	3.1	3.1
2007	124	0.8	1.6	2.4	3.2	3.2	4.0	4.0	4.0	4.8	4.8
2008	144	2.1	4.2	4.9	4.9	5.6	5.6	5.6	6.3	6.3	6.3
2009	161	2.5	3.1	3.1	3.7	3.7	3.7	4.3	5.0	5.0	5.6
2010	148	0.7	0.7	1.4	1.4	1.4	2.0	2.0	2.0	2.7	2.7
2011	161	0.0	1.2	1.9	2.5	4.3	4.3	4.3	5.0	5.0	5.0
2012	198	0.5	1.5	2.0	4.0	4.0	4.5	5.6	5.6	5.6	6.6
2013	207	1.0	1.4	3.4	3.4	3.9	4.8	4.8	4.8	5.8	5.8
2014	248	0.4	2.4	2.4	2.8	3.6	3.6	3.6	4.4	5.6	6.0
2015	297	2.0	2.0	2.4	3.0	3.4	3.4	4.7	5.7	6.1
2016	362	0.0	0.3	0.8	0.8	0.8	1.9	2.8	3.0
2017	451	0.2	0.7	0.9	1.1	2.0	2.7	2.9
2018	504	0.4	1.2	2.2	3.0	3.8	4.0
2019	582	1.0	2.1	2.9	3.4	3.6
2020	565	1.2	2.1	2.8	3.0
2021	550	1.5	2.2	2.4
2022	538	1.1	1.3
2023	498	0.2
Summary statistics		Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10
Marginal average		0.8	0.7	0.5	0.4	0.5	0.4	0.4	0.4	0.3	0.2
Cumulative average		0.8	1.5	2.0	2.4	2.9	3.3	3.7	4.1	4.4	4.6
Standard deviation		0.7	1.1	1.2	1.4	1.6	1.6	1.6	1.7	1.9	2.0
Median		0.6	1.3	1.9	2.5	2.9	2.7	3.0	3.1	4.0	3.1
Minimum		0.0	0.0	0.0	0.0	0.0	0.0	0.0	1.3	1.3	1.3
Maximum		2.5	4.2	4.9	4.9	5.6	5.6	5.6	6.3	6.3	6.6
Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

Table 17

Greater China static pool cumulative corporate default rates among investment grade ratings, 2000-2023 (%)
Rating: Investment grade
		--Time horizon (years)--
Year	Issuers as of Jan. 1	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10
2000	29	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
2001	33	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
2002	43	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
2003	59	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
2004	69	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
2005	82	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
2006	91	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
2007	86	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
2008	97	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
2009	111	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
2010	111	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.9	0.9
2011	120	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.8	0.8	0.8
2012	128	0.0	0.0	0.0	0.0	0.0	0.0	0.8	0.8	0.8	0.8
2013	142	0.0	0.0	0.0	0.0	0.0	0.7	0.7	0.7	0.7	0.7
2014	172	0.0	0.0	0.0	0.0	0.6	0.6	0.6	0.6	1.2	1.2
2015	214	0.0	0.0	0.0	0.5	0.5	0.5	0.5	0.9	0.9
2016	273	0.0	0.0	0.4	0.4	0.4	0.4	0.7	0.7
2017	326	0.0	0.0	0.0	0.0	0.0	0.0	0.0
2018	347	0.0	0.0	0.0	0.0	0.0	0.0
2019	387	0.0	0.0	0.0	0.0	0.0
2020	394	0.0	0.0	0.0	0.0
2021	404	0.0	0.0	0.0
2022	415	0.0	0.0
2023	423	0.0
Summary statistics		Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10
Marginal average		0.0	0.0	0.0	0.0	0.0	0.0	0.1	0.1	0.1	0.0
Cumulative average		0.0	0.0	0.0	0.1	0.1	0.1	0.2	0.3	0.5	0.5
Standard deviation		0.0	0.0	0.1	0.1	0.2	0.2	0.3	0.4	0.5	0.4
Median		0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Minimum		0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Maximum		0.0	0.0	0.4	0.5	0.6	0.7	0.8	0.9	1.2	1.2
Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

Table 18

Greater China static pool cumulative corporate default rates among speculative grade ratings, 2000-2023 (%)
Rating: Speculative grade
		--Time horizon (years)--
Year	Issuers as of Jan. 1	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10
2000	41	0.0	0.0	0.0	0.0	0.0	0.0	0.0	2.4	2.4	2.4
2001	46	0.0	0.0	0.0	0.0	0.0	0.0	2.2	2.2	2.2	2.2
2002	45	0.0	2.2	2.2	2.2	2.2	4.4	4.4	4.4	4.4	4.4
2003	75	1.3	1.3	1.3	1.3	2.7	2.7	2.7	2.7	2.7	2.7
2004	64	0.0	0.0	0.0	1.6	1.6	1.6	3.1	3.1	3.1	3.1
2005	68	0.0	0.0	1.5	1.5	2.9	4.4	4.4	5.9	5.9	5.9
2006	69	1.4	2.9	2.9	4.3	5.8	5.8	7.2	7.2	7.2	7.2
2007	38	2.6	5.3	7.9	10.5	10.5	13.2	13.2	13.2	15.8	15.8
2008	47	6.4	12.8	14.9	14.9	17.0	17.0	17.0	19.1	19.1	19.1
2009	50	8.0	10.0	10.0	12.0	12.0	12.0	14.0	16.0	16.0	18.0
2010	37	2.7	2.7	5.4	5.4	5.4	8.1	8.1	8.1	8.1	8.1
2011	41	0.0	4.9	7.3	9.8	17.1	17.1	17.1	17.1	17.1	17.1
2012	70	1.4	4.3	5.7	11.4	11.4	12.9	14.3	14.3	14.3	17.1
2013	65	3.1	4.6	10.8	10.8	12.3	13.8	13.8	13.8	16.9	16.9
2014	76	1.3	7.9	7.9	9.2	10.5	10.5	10.5	13.2	15.8	17.1
2015	83	7.2	7.2	8.4	9.6	10.8	10.8	15.7	18.1	19.3
2016	89	0.0	1.1	2.2	2.2	2.2	6.7	9.0	10.1
2017	125	0.8	2.4	3.2	4.0	7.2	9.6	10.4
2018	157	1.3	3.8	7.0	9.6	12.1	12.7
2019	195	3.1	6.2	8.7	10.3	10.8
2020	171	4.1	7.0	9.4	9.9
2021	146	5.5	8.2	8.9
2022	123	4.9	5.7
2023	75	1.3
Summary statistics		Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10
Marginal average		2.6	2.1	1.6	1.3	1.4	1.2	1.2	1.0	0.7	0.5
Cumulative average		2.6	4.7	6.2	7.5	8.7	9.8	10.9	11.7	12.4	12.8
Standard deviation		2.5	3.4	4.1	4.6	5.4	5.4	5.5	5.9	6.6	6.8
Median		1.4	4.3	6.4	9.2	8.9	9.6	9.7	10.1	11.2	8.1
Minimum		0.0	0.0	0.0	0.0	0.0	0.0	0.0	2.2	2.2	2.2
Maximum		8.0	12.8	14.9	14.9	17.1	17.1	17.1	19.1	19.3	19.1
Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

Table 19

Greater China average two-year corporate transition rates, 2000-2023 (%)
From/to	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
AAA	71.4	28.6	0.0	0.0	0.0	0.0	0.0	0.0	0.0
AA	4.3	77.7	14.6	0.0	0.0	0.0	0.0	0.0	3.4
A	0.0	2.2	88.6	3.8	0.0	0.0	0.0	0.0	5.4
BBB	0.0	0.0	5.3	82.9	2.7	0.0	0.0	0.0	9.1
BB	0.0	0.0	0.1	4.3	58.3	6.8	0.6	0.9	29.1
B	0.0	0.0	0.0	0.4	5.7	39.9	4.1	6.6	43.4
CCC/C	0.0	0.0	0.0	0.0	1.2	8.6	11.1	42.0	37.0
NR--Not rated. Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

Table 20

Greater China average three-year corporate transition rates, 2000-2023 (%)
From/to	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
AAA	57.1	42.9	0.0	0.0	0.0	0.0	0.0	0.0	0.0
AA	6.5	68.4	20.0	0.0	0.0	0.0	0.0	0.0	5.1
A	0.0	2.8	84.0	5.1	0.0	0.0	0.0	0.0	8.1
BBB	0.0	0.0	7.8	75.8	3.4	0.1	0.1	0.1	12.8
BB	0.0	0.0	0.2	6.1	45.5	7.7	1.1	1.5	37.8
B	0.0	0.0	0.0	0.3	7.4	26.1	2.8	9.3	54.2
CCC/C	0.0	0.0	0.0	0.0	2.6	6.4	2.6	42.3	46.2
NR--Not rated. Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

Table 21

Greater China average three-year corporate transition rates, 2000-2023 (%)
From/to	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
AAA	28.6	71.4	0.0	0.0	0.0	0.0	0.0	0.0	0.0
AA	11.8	51.1	31.2	0.0	0.0	0.0	0.0	0.0	5.9
A	0.0	4.1	77.1	6.5	0.0	0.0	0.0	0.0	12.3
BBB	0.0	0.1	11.9	64.6	3.5	0.1	0.1	0.2	19.6
BB	0.0	0.0	0.2	8.6	30.9	8.2	0.6	3.4	48.2
B	0.0	0.0	0.0	0.0	6.5	13.1	1.6	12.4	66.4
CCC/C	0.0	0.0	0.0	0.0	0.0	1.7	0.0	38.3	60.0
NR--Not rated. Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

Table 22

Greater China corporate publicly-rated defaults, 2000-2023
Issuer	Market	Industry	Default date	Rating prior to default	Rating date for rating prior to default	Reason for default
Tianjin International Trust & Investment Corp.	China	Financial institutions	12/16/2000	NR	8/2/1999	Missed interest payment
Fujian International Trust & Investment Corp.	China	Financial institutions	1/24/2002	NR	8/2/1999	Liquidation
Mosel Vitelic Inc.	Taiwan	High Tech/Computers/Office Equipment	4/25/2003	NR	3/25/2003	Missed principal payment
Ocean Grand Holdings Ltd.	Hong Kong	Aerospace/Automotive/Capital Goods/Metal	7/25/2006	B	7/20/2006	Appointment of provisional liquidator
ASAT Holdings Ltd.	Hong Kong	Aerospace/Automotive/Capital Goods/Metal	8/3/2007	CCC	12/15/2006	Missed interest payment and debt restructuring
3D-Gold Jewellery Holdings Ltd.	Hong Kong	Consumer/Service sector	10/15/2008	BB	10/2/2007	Missed interest payment and request for standstill
ASAT Holdings Ltd. (A)	Hong Kong	Aerospace/Automotive/Capital Goods/Metal	2/2/2009	CC	12/16/2008	Missed interest payment
Asia Aluminum Holdings Ltd.	China	Aerospace/Automotive/Capital Goods/Metal	3/17/2009	CC	2/16/2009	Appointment of provisional liquidator
China Glass Holdings Ltd.	China	Aerospace/Automotive/Capital Goods/Metal	8/4/2009	CC	6/5/2009	Distressed exchange
Titan Petrochemicals Group Ltd.	Hong Kong	Transportation	7/21/2010	CC	12/8/2009	Distressed exchange
China Medical Technologies Inc.	China	Health Care/Chemicals	1/31/2012	B+	9/21/2010	Missed interest payment
Sino-Forest Corp.	China	Forest and building products/Homebuilders	3/30/2012	NR	8/30/2011	Missed interest payment
Winsway Enterprises Holdings Ltd.	China	Transportation	10/10/2013	CC	8/21/2013	Distressed exchange
China Forestry Holdings Co. Ltd.	China	Forest and building products/Homebuilders	11/19/2013	CCC-	8/4/2011	Missed interest payment
LDK Solar Co. Ltd.	China	High Tech/Computers/Office Equipment	10/21/2014	NR	9/8/2011	Missed principal payment
Hidili Industry International Development Ltd.	China	Energy and natural resources	10/22/2014	CC	9/18/2014	Distressed exchange
Kaisa Group Holdings Ltd.	China	Forest and building products/Homebuilders	1/5/2015	BB-	5/2/2014	Missed principal payment
Renhe Commercial Holdings Co. Ltd.	China	Real estate	1/8/2015	CC	11/26/2014	Distressed exchange
Winsway Enterprises Holdings Ltd. (A)	China	Transportation	4/27/2015	CCC	10/28/2013	Missed interest payment
Hidili Industry International Development Ltd. (A)	China	Energy and natural resources	11/4/2015	CCC-	4/27/2015	Missed interest and principal payment
China Shanshui Cement Group Ltd.	Hong Kong	Forest and building products/Homebuilders	11/13/2015	CC	11/6/2015	Missed principal payment
China Fishery Group Ltd.	Hong Kong	Consumer/Service sector	11/26/2015	CCC+	10/19/2015	Missed loan payment
MIE Holdings Corp.	Cayman Islands	Energy and natural resources	8/28/2017	CC	6/12/2017	Distressed exchange
Noble Group Ltd.	Bermuda	Energy and natural resources	3/20/2018	CC	1/30/2018	Missed interest and principal payment
China Huayang Economic and Trade Group Co. Ltd.	China	Aerospace/Automotive/Capital Goods/Metal	10/2/2018	B+	3/13/2018	Missed principal payment
China Automation Group Ltd.	Cayman Islands	Aerospace/Automotive/Capital Goods/Metal	11/25/2018	CC	11/14/2018	Distressed exchange
MIE Holdings Corp. (A)	Cayman Islands	Energy and natural resources	4/12/2019	CC	3/1/2019	Distressed exchange
Shandong Yuhuang Chemical Co. Ltd.	China	Health Care/Chemicals	11/29/2019	CC	11/22/2019	Missed principal payment
Qinghai Provincial Investment Group Co. Ltd.	China	Energy and natural resources	1/14/2020	CCC-	8/30/2019	Missed interest payment
Panda Green Energy Group Ltd.	Bermuda	Utility	1/21/2020	CC	12/18/2019	Distressed exchange
Tunghsu Group Co. Ltd.	China	High Tech/Computers/Office Equipment	2/21/2020	CCC-	11/19/2019	Missed interest and principal payment
Yida China Holdings Ltd.	Cayman Islands	Real estate	3/27/2020	CC	2/26/2020	Distressed exchange
Yihua Enterprise (Group) Co. Ltd.	China	Consumer/Service sector	5/11/2020	CCC	7/26/2019	Missed interest payment
Sunshine 100 China Holdings Ltd.	Cayman Islands	Real estate	3/2/2021	CCC-	7/3/2020	Distressed exchange
Sichuan Languang Development Co. Ltd.	China	Forest and building products/Homebuilders	7/13/2021	CCC-	6/18/2021	Missed principal payment
Sunshine 100 China Holdings Ltd. (A)	Cayman Islands	Real estate	8/11/2021	CCC-	3/4/2021	Missed principal payment
Fantasia Holdings Group Co. Ltd.	Cayman Islands	Real estate	10/5/2021	CCC	9/29/2021	Missed principal payment
Sinic Holdings (Group) Co. Ltd.	Cayman Islands	Forest and building products/Homebuilders	10/19/2021	CC	10/4/2021	Missed interest and principal payment
China Aoyuan Group Ltd.	Cayman Islands	Real estate	12/6/2021	CCC	11/16/2021	Missed principal payment
China Evergrande Group	Cayman Islands	Real estate	12/17/2021	CC	9/15/2021	Missed interest payment
Guangzhou R&F Properties Co. Ltd.	China	Real estate	4/8/2022	CC	12/15/2021	Distressed exchange
R&F Properties (HK) Co. Ltd.	Hong Kong	Real estate	1/13/2022	CC	12/15/2021	Distressed exchange
Greenland Holding Group Co. Ltd.	China	Real estate	11/15/2022	CC	11/2/2022	Missed principal payment
Greenland Holding Group Co. Ltd.	China	Real estate	6/21/2022	CC	5/30/2022	Distressed exchange
E-House (China) Enterprise Holdings Ltd.	China	Consumer/Service sector	10/3/2022	NR	2/28/2022	Chapter 15
Sunac China Holdings Ltd.	Cayman Islands	Real estate	9/19/2023	NR	3/23/2022	Chapter 15
Excludes 26 confidential issuers. NR--Not rated. Sources: S&P Global Ratings Credit Research & Insights and S&P Global Market Intelligence's CreditPro®.

Appendix III: Gini Methodology

We utilize the Lorenz curve, a graphical representation of the proportionality of a distribution, as one measure of ratings performance, and we summarize this via the Gini coefficient. For this study, the Lorenz curve is plotted with the x-axis showing the cumulative share of issuers, arranged by rating, while the y-axis represents the cumulative share of defaulters, also arranged by rating. For both axes of the Lorenz curve, the observations are ordered from the low end of the ratings scale ('CCC'/'C') to the high end ('AAA').

As an example, if 'CCC'/'C' rated entities made up 10% of the total population of issuers at the start of the time frame examined (x-axis) and 50% of the defaulters (y-axis), then the coordinate (10, 50) would be the first point on the curve. If S&P Global Ratings' corporate ratings only randomly approximated default risk, the Lorenz curve would fall along the diagonal. Its Gini coefficient--which is a summary statistic of the Lorenz curve--would thus be zero. If corporate ratings were perfectly rank ordered so that all defaults occurred only among the lowest-rated entities, the curve would capture all of the area above the diagonal on the graph (the ideal curve), and its Gini coefficient would be 1 (see chart 12).

The procedure for calculating the Gini coefficients is illustrated in chart 31: Area B is bounded by the random curve and the Lorenz curve, while area A is bounded by the Lorenz curve and the ideal curve. The Gini coefficient is defined as area B divided by the total of area A plus area B. In other words, the Gini coefficient captures the extent to which actual ratings accuracy diverges from the random scenario and aspires to the ideal scenario.

Related Research

• Default, Transition, and Recovery: 2023 Annual Emerging And Frontier Markets Corporate Default And Rating Transition Study, May 28, 2024
• Default, Transition, and Recovery: 2023 Annual Global Corporate Default And Rating Transition Study, March 28, 2024
• Asia-Pacific Corporate Credit In 2024: Taking The Slow Road, Jan. 30, 2024

The use of the term "methodology" in this article refers to data aggregation and calculation methods used in conducting the research. It does not relate to S&P Global Ratings' methodologies, which are publicly available criteria used to determine credit ratings.

Ratings Performance Analytics:	Nick W Kraemer, FRM, New York + 1 (212) 438 1698; nick.kraemer@spglobal.com
Credit Research & Insights:	Christine Ip, Hong Kong + 852 2532-8097; christine.ip@spglobal.com
	Patrick Drury Byrne, Dublin (00353) 1 568 0605; patrick.drurybyrne@spglobal.com
Research Contributor:	Lyndon Fernandes, Mumbai; lyndon.fernandes@spglobal.com