Moody's Upgrades Hunan Xiangjiang New Area Development Group Co., Ltd's Ratings

Moody's Ratings has upgraded Hunan Xiangjiang New Area Development Group Co., Ltd's issuer rating and senior unsecured bond rating to Baa2 from Baa3, citing increased central government support to regional and local governments, which has enabled Changsha's governmental capacity to support (GCS) score to maintain at baa1. The stable rating outlook reflects Moody's assessment that the Changsha's GCS score will withstand the potential impact of the negative outlook on China's sovereign rating and the propensity to support Xiangjiang Group will remain stable.

Key Takeaways:

• The upgrade is driven by increased central government support to regional and local governments, enabling Changsha's GCS score to maintain at baa1.
• The stable rating outlook reflects Moody's assessment that the Changsha's GCS score will withstand the potential impact of the negative outlook on China's sovereign rating.
• Xiangjiang Group's access to funding has been improving over the past two years, with its shadow banking exposures reducing to a low level.
• The company has reduced its reliance on shadow banking debt, which accounted for 5% of its total reported debt by the end of 2024, down from 18% in 2020.
• The Xiangjiang New Area has become more strategically important to the economic development and upgrade of Changsha city, with its GDP increasing from 17% in 2016 to 31% in 2024.
• The New Area's GDP was around RMB479 billion in 2024, ranking sixth among China's 19 National New Areas.
• Xiangjiang Group's Baa2 issuer rating is based on the Changsha city government's GCS score of baa1 and Moody's assessment of how the company's characteristics affect the Changsha government's propensity to support.

Name and Organizational mentions:

• Hunan Xiangjiang New Area Development Group Co., Ltd (Xiangjiang Group)
• Moody's Investors Service (Moody's)
• Changsha State-owned Assets Supervision and Administration Commission
• Hunan State-Owned Investment & Operation Co., Ltd

Statistics:

• Xiangjiang Group's weighted average funding cost of outstanding debt was 3.1%, a decrease of 46 basis points compared with that as of end-2023.
• The company reduced its reliance on shadow banking debt, with an exposure of 5% of its total reported debt by the end of 2024, down from 18% in 2020.
• The Xiangjiang New Area's GDP was around RMB479 billion in 2024.
• Xiangjiang Group's assets and revenue totaled RMB128.3 billion and RMB8.9 billion respectively as of the end of 2024.

Sources:

• Moody's Ratings, "Moody's Local Government Financing Vehicles in China" (August 2024), available at https://ratings.moodys.com/rmc-documents/426429
• Moody's Ratings, "Rating Methodologies page" on https://ratings.moodys.com