Huzhou Moganshan High-tech Group Co., Ltd. (Surveillance Report)

Lianhe Ratings Global Limited (“Lianhe Global”) has upgraded the global scale Long-term Issuer Credit Rating of Huzhou Moganshan High-tech Group Co., Ltd. (“HMHG” or “the company”) to ‘BBB+’ from ‘BBB’; The Outlook is Stable.

The Issuer Credit Rating upgrade reflects the company’s increasing strategic importance in Deqing County, Huzhou City (“Deqing”) and Mogan Mountain of Huzhou Hi-tech Industry Development Zone (“MHZ”), as the company is undertaking more significant infrastructure projects, land development projects, and industrial park development projects under the guidance of the People’s Government of Deqing County, Huzhou City (“Deqing government”) with the expansion of its business coverage area in MHZ. With the integration of local investment and development companies (“LIDCs”) within MHZ, the company’s responsibility for urban development and land consolidation becomes more prominent. It is expected that HMHG will undertake the majority of major municipal and industrial upgrade projects within the area.

We believe there is a high possibility that the Deqing government would provide very strong support to HMHG if needed, in light of the Deqing government’s full ownership of HMHG, HMHG’s strategic importance as the key LIDC that is responsible for infrastructure construction and land development in Deqing, especially in MHZ, and the linkage between the Deqing government and HMHG, including appointment and supervision of the senior management, strategic alignment, major investment and financing plan decisions and ongoing operational and financial support. In addition, the Deqing government may face significant negative impact on its reputation and financing activities if HMHG encounters any operational and financial difficulties.

The Stable Outlook reflects our expectation that HMHG’s strategic importance would remain intact while the Deqing government will continue to ensure HMHG’s stable operation.