A Chinese industry association has highlighted shortcomings in the country's credit rating agencies in a new report, including insufficient disclosure and weak inspection mechanisms that affect the quality of ratings.

The quarterly report by the Securities Association of China (SAC), dated March 3 and posted on its website on Wednesday, comes as Chinese corporate issuers face a wall of maturing debt this month and expectations of tighter policy lift rates.

The SAC said internal control mechanisms in rating agencies were lacking in 2020, leading to issues like missing records and loose archival management, unclear standards for follow-up ratings and a mismatch between rating models and risks highlighted in rating reports.

China's interbank bond market regulator flagged similar risks late last year and warned of inflated credit ratings, after a string of high-profile defaults by highly rated state-owned enterprises shook the corporate bond market and undermined faith in ratings.

The SAC report noted that 14 of the 23 new defaulting issuers in 2020 did not receive negative adjustments to their ratings or placement on watchlists in the six months prior to their defaults. Nine issuers received no downward rating adjustments in the month before their defaults, the SAC said.

But the SAC said China's agencies have made progress in improving industry standards and that the overall level of analyst expertise had improved.

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