Yangzhou Economic and Technological Development Zone Development Corp.

We believe the Yangzhou municipal government's own financial capability is weakening. This is based on our view that the city's fiscal revenues are facing headwinds from both the economic fallout of the pandemic and nationwide policies to cut taxes and fees, which--combined with the city's continued increase in infrastructure spending--will lead to a worsening budgetary position and higher debt burden. The ultimate repayment of the on-lending hinges on these projects' operating cash flows or the government's payment upon construction completion. We believe the Yangzhou government will make its best efforts to compensate YETDZ Dev. Corp in case of any credit loss. The negative outlook on YETDZ Dev. Corp. reflects our view that the Yangzhou government's fiscal position will likely continue

... Zone Development Corp. (YETDZ Dev. Corp.) has an extremely high likelihood of receiving extraordinary support from the Yangzhou municipal government. In our view, YETDZ Dev. Corp. is the dominant platform for infrastructure financing and development in Yangzhou's economic and technological development zone (ETDZ). The company's pipeline of infrastructure investments remains strong, with a near-term focus on resettlement housing and environmental improvement along the Yangtze River. The city municipal government fully controls the company and plays a decisive role in its business direction, operational oversight, and key financing decisions. Yangzhou municipal government's capability to provide extraordinary support is likely to weaken, given its deteriorating fiscal position. The city's economy is anchored by its industrial sector, with machinery, automobiles, and petrochemicals being the major industries. In recent years, the contribution...

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