Issuer Summary: Fujian Zhanglong Group

Report date: 2026-05-22
Issuer: Fujian Zhanglong Group Co., Ltd. / 福建漳龙集团有限公司
Ticker: ZHANLO
Relevant bond issuer: Fujian Zhanglong Group Co., Ltd.
Bond structure reference: onshore MTN / CP / perpetual MTN and offshore senior unsecured USD notes

1. Business Snapshot and Recent Developments

Fujian Zhanglong Group Co., Ltd. (“ZHANLO” or “Zhanglong Group”) is a municipal state-owned investment and development company under Zhangzhou City, Fujian Province. It should not be viewed simply as a construction company, property company, water utility, or trading company. Rather, it is better understood as a Local Investment and Development Company-type issuer used by the Zhangzhou municipal government to integrate regional development, urban infrastructure, water services, area development, industrial investment, supply-chain operations, and public-asset operations. As of end-March 2025, the Zhangzhou SASAC held 90% and the Fujian Provincial Department of Finance held 10%; the effective controller is the Zhangzhou SASAC.

The primary credit question is how far the company’s policy importance and expected government support in Zhangzhou City can offset weak core-business margins, heavy debt, a high short-term debt ratio, and tied-up funds. ZHANLO is not a company whose high external credit ratings can be explained by standalone operating cash flow. In 2024, consolidated operating revenue was RMB48.312bn, total profit was RMB184mn, and EBITDA was RMB2.287bn, implying thin profitability relative to total assets of RMB112.841bn. At end-March 2025, total debt was RMB57.887bn, short-term debt was RMB32.089bn, and cash to short-term debt was only 0.24x.

At the same time, the company is an important state-owned asset operation and infrastructure construction entity in Zhangzhou City, and rating agencies incorporate a substantial likelihood of government support. ZHANLO is therefore best framed not as a “strong industrial company with ample self-generated cash flow,” but as a “quasi-sovereign-type issuer whose standalone financial profile is weak, but whose credit profile is supported by its ties to the local government, capital-market access, and a track record of government support.”

From 2024 to 2025, the company continued to expand its business scale, but profit quality and funding constraints remained clear. Operating revenue rose modestly to RMB48.312bn in 2024 from RMB46.718bn in 2023, while total profit declined to RMB184mn from RMB640mn. In 1Q2025, the company reported operating revenue of RMB12.270bn, total profit of RMB100mn, and net operating cash inflow of RMB798mn, but these are unaudited quarterly figures and do not by themselves establish an improvement in full-year underlying earnings capacity.

The company’s relationship with the international bond market is also important for initial coverage. In April 2025, the company issued USD500mn of 5.1% Sustainable Notes due 2028. Based on the public offering materials, the notes are direct, general, unsubordinated, unconditional, and unsecured obligations of the issuer, Fujian Zhanglong Group Co., Ltd., and rank at least pari passu with its other unsecured obligations, except for the negative pledge and obligations preferred by law. However, this description does not constitute a government guarantee. Offshore bond investors are largely buying into expectations of support from the Zhangzhou municipal government, but the legal claim is, in principle, against the issuer.

2. Industry Position and Government Linkage

ZHANLO’s industry position should be measured not by market share or brand strength, but by its function for the Zhangzhou municipal government. The company is positioned as Zhangzhou City’s key urban infrastructure investment, construction, service, and operation entity; a platform for equity and fund investment management and industrial capital operations; and a guiding platform for coordinated development across districts and counties. Through water services, area development, new-energy-related investment, and public-asset operations, it converts municipal policy priorities into assets and liabilities on its balance sheet.

Zhangzhou is a prefecture-level city in southern Fujian Province. It benefits from its proximity to Xiamen, the Gulei petrochemical base, and industrial foundations in ports, agriculture, food, pharmaceuticals, and new energy. According to Lianhe Global, the city’s 2024 GDP was RMB606.4bn, with growth of 6.1%. For a local investment company, regional economic expansion supports tax revenue, government fund revenue, public investment demand, and project recoveries. However, 2024 general public budget revenue was RMB27.6bn, almost flat against RMB27.9bn in 2023, while outstanding government debt increased to RMB168.8bn at end-2024. GDP scale is supportive, but looking only at flat general public budget revenue and rising government debt, it is difficult to make a strong assertion on support capacity.

Zhangzhou City’s support capacity needs to be assessed by combining economic scale, general public budget revenue, government fund revenue, land-related revenue, local government debt, and the room for state-owned asset restructuring. This report has not confirmed detailed 2025 data on government fund revenue or land-related revenue, so the assessment of support capacity is treated conservatively. Support for ZHANLO is more likely to appear through subsidies, asset injections, project payments, equity transfers, and maintenance of bank and bond-market access than through direct cash injections.

ZHANLO is one of Zhangzhou City’s four major municipal state-owned enterprise groups. Lianhe Ratings’ 2025 surveillance rating compares Jiulongjiang Group, ZHANLO, Chengtou Group, and Zhangzhou Jiaofa. ZHANLO’s 2024 total assets, owners’ equity, operating revenue, and net profit were RMB112.841bn, RMB36.449bn, RMB48.312bn, and RMB60mn, respectively. Its asset and revenue scale is large among municipal SOEs. However, Jiulongjiang Group generated net profit of RMB3.329bn and has stronger profitability, while ZHANLO stands out for its large scale but thin earnings.

Government linkage can be confirmed through several channels. The first is ownership. The ownership structure of 90% held by the Zhangzhou SASAC and 10% by the Fujian Provincial Department of Finance differentiates the company from privately controlled enterprises. The second is alignment in supervision, personnel, and strategy. Lianhe Global cites government involvement in the board, management appointments, and major investment and financing plans as an important basis for its support assessment. The third is asset, capital, and subsidy support. In 2022, 3.0mn shares of Pien Tze Huang and municipal- and county-level public rental housing assets with a book value of RMB4.875bn were reportedly transferred to the company free of charge. Government subsidies in 2022, 2023, and 2024 were RMB229mn, RMB260mn, and RMB388mn, respectively.

This government linkage is a major credit enhancement, but it does not eliminate financial risk. Subsidies support the income statement, and asset injections strengthen equity and collateral capacity, but they do not necessarily increase cash available for short-term debt repayment immediately. The more policy projects the company takes on, the more difficult it becomes to replace, but the more funds are likely to be locked up in public-project receivables and property inventories. Bond investors need to evaluate government linkage as a credit enhancement while separately checking the legal protection, maturity, currency, pricing, and refinancing environment of each individual debt instrument.

3. Segment Assessment

In assessing ZHANLO’s segments, revenue size and credit contribution need to be separated. Low-margin, high-turnover revenue such as supply-chain and commodity sales can make the group appear large, but does not necessarily increase debt-servicing capacity. Engineering construction and infrastructure construction enhance policy importance, but funds are easily tied up in inventories and receivables. Water services generate relatively stable public-service revenue, but are not large enough to support the group’s overall debt on their own. In property, the timing of revenue recognition and cash collection can diverge, and projects with slow sell-through can easily create liquidity constraints.

Engineering construction and infrastructure construction are the businesses that most directly demonstrate the company’s policy role. Through mainly Jiantou Group, the company conducts property engineering construction and urban infrastructure construction. According to Lianhe Ratings, as of end-March 2025, the total investment in major projects under construction was RMB24.740bn, the amount already invested was RMB21.205bn, and cumulative collections were RMB8.964bn. Projects such as the Nanjiangbin construction project, Gulei land reclamation project, Changfu Peng area shantytown redevelopment project, Zhangzhou Hospital, and the “Five Museums and One Opera House” project involve large investments but show a substantial gap between investment and collections. From a credit perspective, the fact that these projects are important to the government strengthens support expectations, but it also increases dependence on fiscal payments and refinancing.

The water business is the easiest segment through which to explain ZHANLO’s public-service role and stability. In 2024, total water production was 133.3079mn tonnes and total water sales were 98.9694mn tonnes, both up year on year. In 2024, tap-water revenue was RMB169mn with a gross margin of 38.44%, while sewage-treatment revenue was RMB270mn with a gross margin of 44.32%. Profitability is relatively high, but the revenue scale is limited in the context of the group overall and is not the main repayment source for its heavy debt burden.

Property development should be read conservatively. In 2024, contracted sales area was 51,700 sq m and contracted sales revenue was RMB451mn, showing weak growth. At end-2024, the property subsidiary had assets of RMB8.725bn, most of which consisted of inventories of RMB7.390bn. Lianhe Ratings notes that, at the current sell-through pace, it would take more than 10 years to turn over the property subsidiary’s inventories. This illustrates a common gap in local SOE property businesses between book asset size and liquidity.

Industrial investment and fund investment link Zhangzhou City’s industrial policy with the company’s policy function. As of end-March 2025, the total committed size of the funds in which the company participates was RMB10.232bn, the company’s committed amount was RMB4.286bn, its paid-in amount was RMB661mn, and the amount already invested was RMB1.440bn. Target areas include smart manufacturing, 5G, big data, artificial intelligence, new energy, offshore wind power, ports, logistics, shipping-related businesses, and urban operations. Policy alignment is high, but the timing of realized investment returns is difficult to predict.

Taking the segments together, ZHANLO is not a company that “naturally repays debt through highly profitable commercial businesses.” Rather, it combines policy businesses, public assets, water services, supply chain, property, and fund investment, and continues regional development while using capital markets and government support. The focus should be less on the income statement and more on asset quality, receivables collection, short-term debt refinancing, timeliness of government payments, and the continuity of subsidies and asset injections.

4. Financial Profile and Analysis

ZHANLO’s financial profile combines expanding assets and revenue with low profitability and high debt. From 2022 to 2024, total assets increased to RMB112.841bn from RMB81.068bn, while operating revenue rose to RMB48.312bn from RMB35.033bn. However, total profit declined to RMB184mn in 2024 from RMB640mn in 2023, and the operating profit margin was only 2.91% in 2024. Revenue growth has not translated proportionately into profit and debt-servicing capacity.

Weak profitability is the largest constraint on the company’s standalone credit profile before government support. The 2024 operating profit margin was 2.91%, and Lianhe Global shows a gross margin of only 3.1%. Total profit of RMB184mn is very thin compared with total debt of RMB57.310bn and total assets of RMB112.841bn. Supply-chain and commodity sales and highly public-interest businesses may inflate revenue while depressing margins, so revenue scale should not be translated directly into repayment capacity.

Profit quality also needs attention. Profit in 2023 and 2024 includes the impact of investment income, equity transfers, and asset disposals. In 2024 investing activities, cash inflow from the disposal of an equity stake in Zhangzhou Transportation Development Co., Ltd. can be confirmed, while payments for equity in Zhangzhou Jiaofa Construction Group and Zhangzhou Tongyu Asset Management and Operation Co., Ltd., investment in the headquarters economy building and construction in progress, and debt investments were sources of cash outflow. As a municipal SOE, the company manages its finances while moving assets around, but this should be distinguished from recurring operating earnings.

Cash flow shows the debt-dependent structure. Operating cash flow was a net outflow in each year from 2022 to 2024. In 2024, operating cash flow was a net outflow of RMB279mn, investing cash flow was a net outflow of RMB2.746bn, and financing cash flow was a net inflow of RMB4.703bn. The company continues to fund the gap between operating and investing cash flows through external financing. The net operating cash inflow in 1Q2025 is positive, but given seasonality, collection timing, and the unaudited nature of the numbers, it is not yet evidence of structural improvement.

For asset quality, liquidity matters more than book size. At end-March 2025, inventories of RMB31.006bn, accounts receivable of RMB12.377bn, and other receivables of RMB8.826bn were backed by engineering construction, infrastructure, area development, property, and government-related transactions. Even for completed projects, if final project settlement and fiscal payment take time, assets may appear current on the financial statements but contribute little to short-term liquidity.

The debt burden is heavy. At end-2024, total debt was RMB57.310bn against EBITDA of RMB2.287bn, resulting in total debt / EBITDA of 25.06x. EBITDA interest coverage improved to 1.21x, but headroom is not ample. If higher interest rates, higher refinancing costs, lower investment income, and subsidy delays coincide, interest absorption capacity could weaken quickly. It is difficult to explain an international investment-grade profile based only on standalone financials; government support and capital-market access are central to the credit assessment.

5. Structural Considerations for Bondholders

For bondholders, the most important point is to separate support expectations from legal claims. ZHANLO is an issuer close to the Zhangzhou municipal government, and domestic and international rating agencies incorporate a substantial likelihood of government support. However, expected government support is not the same as a direct guarantee of a specific bond. Where the issuer is Fujian Zhanglong Group Co., Ltd., ordinary senior unsecured bondholders have a claim against the company. Specific guarantee agreements, collateral, payment ranking, cross-default, change of control, negative pledge, tax gross-up, and governing law need to be checked in each offering document.

For the USD500mn 5.1% Sustainable Notes due 2028 issued in 2025, the public offering materials state that the notes are direct, general, unsubordinated, unconditional, and unsecured obligations of the issuer, rank pari passu with each other, and rank at least pari passu with the issuer’s other present and future unsecured obligations, except for obligations preferred by law. A negative pledge is also included. However, a government guarantee, keepwell deed, or credit-enhancement agreement is not attached automatically. The credit quality of the notes depends on issuer credit and government-support expectations, but legally they are not government debt.

For offshore bonds, currency and payment mechanics are also important. USD bonds demonstrate access to the international market, but they introduce FX, hedging, and foreign-currency liquidity issues for an issuer whose revenue is primarily in RMB. The offering materials confirm that the April 2025 notes mature on 24 April 2028 and pay interest semi-annually. In addition, Lianhe Global’s June 2025 rating report lists USD500mn of 6.7% bonds due September 2026 and USD500mn of 5.1% bonds due April 2028 as the company’s USD-denominated senior unsecured bonds under rating. The report has not confirmed the FX hedge ratio, foreign-currency deposits, cross-currency swaps, or regulatory remittance and foreign-debt registration practices; therefore, the redemption and refinancing plan for the September 2026 maturity is treated as an item requiring re-confirmation.

In relation to domestic debt, the company has a mix of bank loans, domestic MTNs, short-term commercial paper, and perpetual MTNs. Lianhe Ratings’ 2025 surveillance rating shows RMB7.000bn of outstanding ordinary senior bonds, including multiple MTNs and CPs, and RMB4.000bn of perpetual bonds as of end-March 2025. The accounting or rating treatment of perpetual bonds may differ, but from an investor perspective, even if the instruments include interest deferral or maturity extension clauses, they are funding instruments that affect capital-market access, coupon burden, step-ups, and investor confidence. They should not be treated in the same way as ordinary debt, but should be monitored as debt-like capital that affects payment confidence.

The structural conclusion is that ZHANLO’s bonds are likely to be assessed as quasi-sovereign bonds incorporating support expectations, but they are not direct government debt. Support expectations at the issuer level are strong, but assessing loss risk on a specific bond requires confirming maturity, currency, terms, ranking, recovery sources, and which debts government support would reach.

6. Capital Structure, Liquidity and Funding

ZHANLO’s capital structure and liquidity are supported by access to domestic and offshore capital markets, but constrained by short-term debt and tied-up funds. At end-March 2025, cash-like assets were RMB7.800bn, up from RMB6.130bn at end-2024. However, short-term debt at the same date was RMB32.089bn, and cash to short-term debt was only 0.24x. The increase in cash is positive, but this is not a structure in which the company can naturally repay short-term debt with cash.

Lianhe Global presents the company’s total cash at RMB7.0bn, total credit facilities at RMB60.4bn, unused facilities at RMB30.4bn, and debt due within one year at RMB32.1bn as of end-March 2025. These unused bank facilities are an important liquidity backstop. However, bank facilities depend on contract terms, collateral, borrowing entity, bank credit policies, relationships with the local government, and the regulatory environment. The existence of unused facilities is supportive, but it does not mean the full amount can be drawn unconditionally under stress.

The maturity profile shows a high reliance on short-term debt. At end-March 2025, short-term debt was RMB32.089bn and long-term debt was RMB25.799bn, meaning short-term debt accounted for more than half of total debt of RMB57.887bn. If refinancing markets close, issuance regulation tightens, investor demand for local-government-related debt weakens, or banks change their credit stance, the liquidity assessment could deteriorate quickly.

A stabilising factor in the capital structure is that the debt capitalization ratio has declined slightly since 2022. Total debt capitalization was 64.30% in 2022, 61.42% in 2023, 61.12% in 2024, and 60.29% in March 2025, so it has not deteriorated sharply. This indicates that capital increases and asset injections have partly absorbed the increase in debt. However, the absolute level remains high, and debt is heavy relative to total profit and EBITDA.

The liquidity conclusion is that ZHANLO is not a “company that naturally absorbs short-term debt through cash holdings.” Rather, it is an issuer that rolls short-term debt by combining government linkage, bank credit lines, the domestic bond market, the offshore bond market, and asset restructuring. It has maintained a degree of refinancing access under normal conditions, but this is not the same as liquidity headroom. As long as the company depends on refinancing markets, rating actions, local government finances, policy regulation, international rates, and investor demand for USD bonds can move the credit view. The September 2026 USD bond maturity, domestic MTN/CP concentration, and first-call and interest payment terms on perpetual bonds are important items for the next update.

7. Rating Agency View

The rating-agency view shows that ZHANLO’s credit profile has a two-layer structure. The first layer is standalone credit strength, comprising scale, business position, assets, earnings, cash flow, debt, and liquidity. The second layer is government support, comprising ownership, policy importance, government supervision, subsidies, asset injections, state-owned asset restructuring, local-government reputational risk, and the need to maintain capital-market access. ZHANLO’s final ratings incorporate not only the first layer, but also a significant degree of the second layer.

Lianhe Ratings’ 2025 surveillance rating explicitly shows this two-layer structure. In its assessment, the business risk is B, the financial risk is F4, the indicative rating is a, and the individual credit profile is also a. It then adds a government-support adjustment of +5 notches as external support, resulting in a final long-term issuer credit rating of AAA. The domestic AAA rating is not explained solely by the company’s standalone financial metrics; it is a support-incorporated rating.

Strengths cited by Lianhe Ratings include Zhangzhou City’s development environment, the alignment of core businesses with the direction of regional industrial development, growth in the water-services business, engineering-construction backlog, project resources for industrial investment, and ongoing external support. Constraints include ordinary profitability in core businesses, the large contribution of investment income to profit, funds tied up in projects under construction, weak asset liquidity, a heavy debt burden, and weak debt-servicing indicators.

Lianhe Global affirmed A-/Stable in June 2025 and maintained A- while revising the outlook to Positive in September 2025. Its June 2025 rating report cites a very high likelihood that the Zhangzhou municipal government would provide strong support when necessary, based mainly on 90% ownership, strategic importance, management supervision, strategic alignment, and ongoing operational and financial support. At the same time, it assesses the company’s liquidity as moderate and provides specific figures for cash, credit facilities, and short-term debt as of end-March 2025.

For Fitch, this report has not obtained the full official action report, so it is not treated as a central source. Public bond-market data, materials related to the 2025 new issue, and past published summaries include references in the BBB-/Stable range, but this report does not rely on Fitch-specific government-related entity scoring or support assessment. The rating-agency view is centred on Lianhe Ratings and Lianhe Global, which were directly reviewed in the report.

Downgrade triggers on the government-support side include a material decline in Zhangzhou municipal government ownership, reduced policy importance, weaker government support willingness, and deterioration in the credit assessment of the Zhangzhou municipal government itself. On the standalone financial side, key factors include a worsening debt burden, weaker refinancing conditions, lower asset liquidity, declining core-business profitability, and failed refinancing of short-term debt. For ZHANLO, events that change government-support expectations or close refinancing markets are more likely to move the credit view quickly than modest deterioration in standalone metrics.

8. Credit Positioning

ZHANLO should be positioned among Chinese local-government-related issuers as an urban-investment-type issuer with strong government linkage, but with standalone financials constrained by low profitability and high debt. Compared with central SOEs or provincial policy-oriented issuers, the supporting government is Zhangzhou City, and support capacity is more limited than that of the state or a provincial government. Compared with purely private operating companies or property developers, however, the company has stronger government ownership, policy mandates, subsidies, asset injections, and continuity of capital-market access.

Among Zhangzhou’s municipal SOE peers, ZHANLO is a large integrated operating company. Jiulongjiang Group has stronger profitability and a stronger position as an industrial investment and financing entity, with net profit far exceeding ZHANLO’s. Chengtou Group is the municipal infrastructure investment and construction entity for main urban-area construction and old-city renovation, while Zhangzhou Jiaofa is an infrastructure and state-owned asset operation entity for transport, ports, buses, and related assets. ZHANLO cuts across infrastructure, social housing, large venues, area development, industrial investment, water services, and supply chains. Its policy scope is broad, but earnings quality is mixed.

Within the broader Chinese LIDC universe, ZHANLO has some scarcity value as a local SOE with an international investment-grade-equivalent rating. Its historical USD bond issuance, USD500mn Sustainable Notes issuance in 2025, and Lianhe Global A- rating distinguish it from LGFVs confined entirely to the domestic market. However, because the supporting government is municipal and the standalone financial profile is weak, even with an investment-grade-equivalent external rating, the credit should in substance be priced as a highly support-dependent credit. Fitch is only a supplementary reference here because the full official report has not been obtained.

Market data has not been confirmed in this report. Current spreads, yields, OAS, and pricing differences versus same-tenor Chinese LIDC bonds and Fujian-related issuers are unconfirmed. Accordingly, this report does not make a buy/sell pricing judgment. Actual investment decisions would require spread comparisons among the 2026 maturity, the 2028 bonds, Chinese LIDC bonds with similar country, rating, and support characteristics, and bonds of other Fujian Province and Zhangzhou-related issuers.

The credit-positioning conclusion is that ZHANLO is not a “high-margin, low-leverage strong operating company,” but rather a “municipal LIDC with confirmed external ratings equivalent to investment grade, but in substance a highly support-dependent credit.” The risks investors take are a combination of support expectations from the Zhangzhou municipal government, local public finances, the company’s refinancing capacity, asset liquidity, and the terms of individual bonds.

9. Key Credit Strengths and Constraints

The greatest credit strength is the strong link with the Zhangzhou municipal government. The 90% ownership by the municipal SASAC, 10% ownership by the Fujian Provincial Department of Finance, alignment with policy businesses, government supervision, asset injections, subsidies, and asset restructuring among SOEs clearly differentiate ZHANLO from an ordinary private company. As long as the company undertakes Zhangzhou’s infrastructure, area development, water services, industrial investment, and public-asset operations, the government has a strong incentive to maintain its market access and stable operations.

The second strength is the public-service nature of the businesses and the company’s scale within the region. ZHANLO is one of Zhangzhou’s four major municipal SOEs and is large in terms of total assets, operating revenue, and capital. Water services, public projects, area development, fund investment, and assets related to public rental housing are tied to policy objectives rather than purely commercial profit. For local-government-related issuers, public-service nature and difficulty of substitution are important bases for the likelihood of support.

The third strength is capital-market access. Domestically, the company issues MTNs, CPs, and perpetual MTNs under a AAA rating, and it also has a history of USD bond issuance offshore. Its ability to issue USD500mn of Sustainable Notes in April 2025 indicates that the international market is not fully closed to the company. Bank credit facilities are also large, with unused facilities of RMB30.4bn confirmed as of end-March 2025.

The main constraints are low profitability, heavy short-term debt, weak asset liquidity, constraints on the public finances of Zhangzhou City as the supporting government, and the gap between legal guarantees and support expectations. The 2024 operating profit margin was 2.91%, and total profit was RMB184mn, thin relative to total assets and debt. At end-March 2025, total debt was RMB57.887bn, short-term debt was RMB32.089bn, and cash to short-term debt was 0.24x, meaning the company cannot repay short-term debt using only cash and operating cash flow.

On the asset side, inventories, accounts receivable, other receivables, and long-term equity investments are large, with funds tied up in public projects, property, fund investment, and government-related transactions. Zhangzhou’s GDP is growing, but general public budget revenue was flat to slightly down in 2024, and outstanding government debt increased. This does not negate government-support expectations, but it suggests that support may be more likely to take the form of asset injections, subsidies, restructuring, and refinancing support than direct cash injections. For offshore bond investment, investors also need to confirm the absence of a direct government guarantee, foreign-currency payment, governing law, capital controls, and the practical route for foreign-debt registration.

10. Downside Scenarios and Monitoring Triggers

ZHANLO’s downside scenarios should be assessed not only through gradual standalone financial deterioration, but also through events that affect government-support expectations or refinancing markets. The most important risk is doubt over the Zhangzhou municipal government’s support capacity or willingness. If municipal fiscal revenue worsens, government fund revenue or land-related revenue weakens, local government debt rises, and the refinancing burden of municipal SOEs as a whole becomes heavier, uncertainty could emerge over the timing and form of support for ZHANLO.

The second downside scenario is deterioration in refinancing markets. For a company with short-term debt above RMB32bn and cash to short-term debt of only 0.24x, continued access to bank loans and bond markets is the lifeline. If domestic bond issuance becomes difficult, CP/MTN rollovers become blocked, banks reduce credit facilities, investor demand for perpetual bonds weakens, or offshore demand for Chinese LIDCs falls sharply, liquidity headroom could shrink quickly. In particular, for the USD500mn 6.7% senior unsecured bonds due September 2026 confirmed in Lianhe Global’s June 2025 rating report, the refinancing plan, FX hedging, and redemption funds need to be confirmed early.

The third downside scenario is delayed collections from public projects and slow property sell-through. For Jiantou Group’s major projects under construction, the gap between amounts already invested and cumulative collections is large; in property, inventories are large and the sell-through cycle is long. If these issues are prolonged simultaneously, the structure becomes one in which assets increase but cash does not come in, while debt alone continues to rise. The fourth downside scenario is a deterioration in profit quality. 2024 total profit is already thin, and investment income and equity disposal gains are important contributors. Losses or valuation losses of even several hundred million RMB could have a meaningful impact on financial metrics.

The combination that would clearly worsen the credit view would be simultaneous evidence of deteriorating Zhangzhou public finances, less transparent government support, rising short-term debt, lower cash to short-term debt, difficulty issuing domestic bonds, difficulty refinancing USD bonds, large net operating cash outflows, and delayed collections from property and public projects. Conversely, if full-year 2025 financials show improved operating cash flow, maintained cash, a lower short-term debt ratio, confirmed Zhangzhou government support through subsidies, asset injections, and faster collections, and a clear redemption or refinancing plan for the 2026 USD bonds, the stability of the support-incorporated credit profile would likely improve.

11. Credit View and Monitoring Focus

The credit view in this report is a preliminary assessment based on public indicators for full-year 2024 and end-March 2025. As of public web searches conducted on 22 May 2026, the full-year 2025 audited annual report of Fujian Zhanglong Group itself had not been confirmed, so incorporating the latest full-year financials is the top priority for the next update. Based on confirmed international ratings and support assessments, the company is rated at an investment-grade-equivalent level, but this report’s credit view is that it should be monitored as a highly government-support-dependent quasi-sovereign-type issuer. Based on public indicators for full-year 2024 and end-March 2025, standalone earnings capacity and short-term liquidity remain fragile, and a closure of refinancing markets, lower support expectations for Zhangzhou City, or problems refinancing USD bonds could move the credit assessment faster than changes in the financial statements.

The first element supporting this view is government linkage. The 90% ownership by the Zhangzhou SASAC, 10% ownership by the Fujian Provincial Department of Finance, position as an important state-owned asset operation and infrastructure construction entity, and track record of subsidies, asset injections, and equity transfers increase the likelihood of support for ZHANLO. The second element is capital-market access. Cash alone cannot cover short-term debt, but the company has funded itself through a combination of domestic bonds, bank credit, perpetual MTNs, and USD bonds. The third element is asset scale and its role within the region. Total assets reached RMB115.410bn at end-March 2025, and water services, infrastructure, area development, public assets, and industrial funds are close to government policy.

At the same time, the constraints are clear. In 2024, total profit was RMB184mn, the operating profit margin was 2.91%, and operating cash flow was a net outflow of RMB279mn; the core business is not generating a thick repayment source. Short-term debt was RMB32.089bn at end-March 2025, and cash to short-term debt was only 0.24x. Total debt / EBITDA was 25.06x in 2024, and EBITDA interest coverage was only 1.21x. If government support and refinancing stop, the standalone financial profile would look pressured quickly.

Investors should most carefully examine the gap between support expectations and the legal protection of individual bonds. ZHANLO is close to the government, but the ordinary senior unsecured bonds reviewed are not directly guaranteed by the government. The 2025 USD notes are direct, unsubordinated, unsecured obligations of the issuer, not government debt. Support-incorporated credit strength and the extent to which investors are legally protected under individual bonds are separate questions.

At this stage, without reference to pricing, the practical investment view is: “The confirmed external ratings are equivalent to investment grade, but standalone financials and short-term debt should be assessed conservatively, and the credit should remain under preliminary monitoring until full-year 2025 financials are confirmed.” For existing holdings, as long as Zhangzhou support and refinancing access are maintained, the immediate factors that would significantly worsen the credit view are limited. However, for new investment, investors need to confirm whether the spread adequately compensates for government-support dependence, short-term debt, offshore bond refinancing risk, and the absence of a legal guarantee.

Ultimately, ZHANLO is a “credit that buys Zhangzhou municipal government linkage” and, at the same time, a “credit that requires constant monitoring of short-term debt and low profitability.” Initial coverage should recognise the stability provided by support, while retaining standalone financial weakness and the absence of a legal guarantee as clear constraints.

Short Summary & Conclusion

Fujian Zhanglong Group is a municipal state-owned investment and development company 90% owned by the Zhangzhou SASAC, and a local-government-related issuer engaged in infrastructure construction, water services, area development, industrial investment, and supply-chain operations. It has confirmed international ratings equivalent to investment grade, but its low 2024 profitability, heavy short-term debt, and low cash to short-term debt mean that its credit strength is difficult to explain on standalone financials alone. This report is preliminary initial coverage that does not yet incorporate full-year 2025 financials. Investors should monitor in parallel the continuity of support from the Zhangzhou municipal government, access to domestic and offshore refinancing, handling of the 2026 USD bonds, and the structural constraint that individual bonds do not carry a government guarantee.

Sources

• Lianhe Ratings, 福建漳龙集团有限公司2025年跟踪评级报告, 2025-06-19. https://www.lhratings.com/reports/B0362-P76610-2024-GZ2025.pdf
• Lianhe Ratings, 福建漳龙集团有限公司2024年度第一期短期融资券跟踪评级报告, 2025-03-27. https://www.lhratings.com/reports/B0362-P76607-2024-GZ2025.pdf
• Lianhe Global, Rating Report: Fujian Zhanglong Group Co., Ltd., 2025-06-16. https://lhratingsglobal.com/wp-content/uploads/bsk-pdf-manager/2025/06/Rating-Report_Zhanglong-Group-20250616.pdf
• Lianhe Global, Issuer Rating Outlook Revised to Positive, 2025-09-03. https://lhratingsglobal.com/lianhe-global-has-affirmed-a-global-scale-long-term-issuer-and-issuance-credit-rating-of-fujian-zhanglong-group-co-ltd-issuer-rating-outlook-revised-to-positive/
• Shanghai Clearing House, 福建漳龙集团有限公司2024年年度报告, 2025-04-30. https://www.shclearing.com.cn/xxpl/cwbg/nb/202505/t20250501_1585781.html
• Macau central securities depository disclosure, Fujian Zhanglong Group 5.1% Sustainable Notes due 2028 offering circular, 2025-04-23. https://atta.cmox.mo/disclosure/20250423/1914875861991526401/96818898.pdf
• HKEX, publication of offering circular for Fujian Zhanglong Group 4.80% notes due 2025, 2022-07-21. https://www1.hkexnews.hk/listedco/listconews/sehk/2022/0721/2022072100233.pdf
• Lianhe Green, Sustainable Finance Framework SPO press release, 2025-04-10. https://www.lianhegreen.com/en/article/26/204.html
• JunHe, transaction summary for Fujian Zhanglong Group USD green bonds, 2022-07-21. https://www.junhe.com/deals/591?locale=en

Unverified / Pending

• As of preparation of this report on 2026-05-22, the full-year 2025 audited annual report of Fujian Zhanglong Group itself had not been incorporated into the analysis. The existence of the official annual report should be re-checked on Shanghai Clearing House, ChinaMoney, and other official platforms, and the next update should clarify whether it was unpublished or not obtained.
• Fitch’s full official action report from 2025 onward has not been obtained. This report is limited to references in the BBB-/Stable range based on public transaction and bond-market information, and does not make definitive statements on Fitch-specific scoring or support assessment.
• Live bond prices, yields, OAS, and spread comparisons with same-tenor Chinese LIDC bonds have not been confirmed. This report does not include a pricing judgment.
• Full covenants, cross-default provisions, FX hedging, bank-by-bank credit facilities, and detailed maturity ladders for individual bonds have not been confirmed. These need to be reviewed in the offering materials and latest financials before investing in any specific bond.
• For each series of perpetual bonds, interest deferral, step-up, first-call, and accounting and rating equity-credit treatment need to be confirmed from the specific terms.