OREANDA-NEWS. The Chinese interbank market regulator's suspension of Ruihua Certified Public Accounts (Ruihua) has minimal impact on Fitch-rated corporates' access to the domestic debt market in 2016 as financial statements audited by Ruihua for 2015 and previous years will still stand, Fitch Ratings says. Corporates should have sufficient time to switch auditors to complete their 2016 annual audits for interbank issuance in 2017.

On 16 June 2016, the National Association of Financial Market Institutional Investors (NAFMII), the regulator of China's interbank bond market, said Ruihua would be barred from providing services to the interbank market for one year. This was the penalty for Ruihua's failure to provide working documents for Shanghai Yunfeng (Group) Co., Ltd (Yunfeng) as part of its annual audit for Green Land Holding Group Company Limited (Greenland, BB+/Negative). Yunfeng is a 20.5%-owned associate of Greenland. Both Greenland and Yunfeng have bonds outstanding in the interbank market.

Based on communication with industry participants, it is our understanding that corporates can still use annual financial statements audited by Ruihua for 2015 and earlier to issue bonds in the interbank market until 30 April 2017, the deadline for publishing Chinese corporates' annual financial statements for 2016. Ruihua needs to issue a written statement confirming that the historical audited statements reflect the issuer's true financial positon. The underwriter, legal counsel, and domestic rating agency involved in the bond issuance also need to issue similar written statements.

However, issuers will need to present 2016 annual financial statements audited by a different auditor when they issue interbank bonds after 30 April 2017. We believe corporates have sufficient time to switch auditors to complete the audit.

In addition, NAFMII's suspension does not affect corporates' access to the exchange corporate bond market, which is regulated by the China Securities Regulatory Commission (CSRC). Over 90% China's domestic bond issuance comes from interbank bond market, with the rest from the exchange bond market.

Ruihua is a Chinese auditor for the following Fitch-rated corporates:

- Greenland Holding Group Company Limited (BB+/Negative)

- China Southern Power Grid Co., Ltd (A+/Stable)

- Anhui Transportation Holding Group Company Limited (BBB+/Stable)

- Beijing Energy Investment Holding Co., Ltd (A+/Stable)