China LGFVs see credit ratings cut

Reuters SHANGHAI (Reuters) — Two major global rating agencies downgraded issuers linked to Chinese regional and local governments on Wednesday, drawing attention to credit risks as Beijing continues its lengthy crackdown on systemic financial risks.

S&P Global Ratings said it had cut by one notch the long-term issuer credit ratings of seven Chinese local government financing vehicles (LGFVs) from Chongqing and Tianjin municipalities, and Jiangsu and Hunan provinces, that had issued bonds offshore.

Also on Wednesday, Moody’s Investors Service said it had downgraded five Chinese nonfinancial corporate and infrastructure issuers owned by regional and local governments in Jiangsu, Tianjin, Hunan and Hubei provinces.

“We believe the likelihood of local Chinese governments providing their highest level of extraordinary support to LGFVs could weaken over time, in response to central government oversight,” S&P said in a statement, referring to the multi-year campaign to reduce financial risks and a mountain of debt.

The company said the downgrades “reflect the gradual weakening of the [financing vehicles’] roles and links with their local-government parents.”Speech

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