Are China's sovereign credit ratings underestimated?

We use a comprehensive database of sovereign credit ratings (SCRs) from Moody's, Standard and Poor's and Fitch for a cross-section of 120 countries from 1986-2009. Using panel data, we find that GDP per capita, the GDP growth rate and the degree of industrialization positively affect ratings, while the government cash flow deficit, the current account surplus, inflation, the lending minus deposit rate interest spread, the S&P global equity index, and a country's default history negatively affect the sovereign rating of a country. An ordered probit model suggests that while earlier ratings may have been underestimated, recent Chinese sovereign credit ratings are not.