The first ever downgrade of a Chinese local-government financing vehicle by an international ratings agency is reigniting concern over the debt-saddled entities, amid angst there could be more cuts to come, according to Bloomberg. S&P Global Ratings reduced its credit rating on Jiangsu New Headline Development Group, a construction services provider and one of the largest financing firms owned by Lianyungang City, in China’s eastern Jiangsu province, by one notch to BB Thursday. S&P attributed the cut to the local government’s high debt burden and said the LGFV’s credit profile will remain under pressure for the next two years. The downgrade threatens to further dent demand for the debt of China’s local government financing platforms, which became the poster children for the country’s ballooning debt problem over the past few years despite not seeing any defaults.
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