Moody's downgrades ratings of 17 Chinese local govt financing vehicles

Moody's downgraded the ratings of 17 Chinese local government financing vehicles (LGFV) by one notch on Thursday and immediately put them back on another downgrade warning by setting the rating outlooks to "negative".

China's local governments, which between them are estimated to have over $9 trillion worth of debt, have seen their finances hit in recent years as the country's property market crash has slashed the amount of money they make from selling land.
 

Moody's had put the 17 LGFV ratings on review for a downgrade in early December when it put China's sovereign rating on a "negative outlook". Thursday's move saw them all cut by one notch.
 

The renewed negative outlooks reflect "a potential weakening in the governmental capacity to support (GCS) score of their respective regional and local government (RLG) owners, given the negative outlook on China's sovereign rating," Moody's said.
 

It left the ratings of nine other Chinese LGFVs unchanged but cut their outlooks to negative too due to the same pressures.
 

The International Monetary Fund has estimated 66 trillion yuan ($9.1 trillion) in total debt is held by China's LGFVs, which cities use to raise money for infrastructure projects critical to the country's development.
 

Moody's said factors that could see the LGFVs' ratings cut further included a downgrade of China's sovereign rating as well as a "material weakening" of their owner RLGs' finances, or the governments' ability to coordinate timely support.
 

Another strain would be if Beijing began prohibiting local governments from providing financial support to LGFVs, or if changes occur in the LGFVs' characteristics that could weaken local governments' propensity to support, such as diminished roles in key public projects.
 

The 17 LGFVs downgraded on Thursday were:

Changde Economic Construction Investment Grp Guangxi Communications Investment Grp Co.,Ltd Sino Trendy Investment Limited
 

Henan Railway Const. & Inv. Group Co Ltd Meixihu Investment (Changsha) Co., Ltd.
 

Lhasa City Construction Invt Mgmt Co., Ltd.
 

Yi Bright International Limited
 

Shandong Land Development Group Co., Ltd.
 

Shuifa Group Co., Ltd.
 

Weifang Urban Construction and Dev Invt Grp Yantai Chefoo Finance Holding Group Co., Ltd Yinchuan Tonglian Cap. Inv. Opn. Co., Ltd.
 

Zhengzhou Metro Group Co., Ltd.
 

Zhongyuan Sincere Investment Co. Ltd
 

Zhongyuan Yuzi Investment Hldg Grp Co., Ltd.
 

Zhongyuan Zhicheng Co., Ltd.
 

Zhuzhou City Construction Dev. Group Co Ltd.