Fitch Downgrades China’s Sovereign Credit Outlook to Negative
BEIJING, China — Ratings agency Fitch announced on Wednesday that it had downgraded China’s sovereign credit outlook to negative. This decision was made due to increased risks to the country’s public finances.
According to a press statement from Fitch, the outlook revision reflects the growing uncertainty in China’s economic prospects, leading to risks in the public finance outlook. The agency also pointed out the wide fiscal deficits and rising government debt in recent years, which have weakened fiscal buffers from a ratings perspective.
Fitch emphasized that fiscal policy is likely to play a crucial role in supporting growth in the upcoming years, potentially leading to a continuous increase in debt levels.
Responding to Fitch’s decision, Beijing’s finance ministry expressed regret and disagreement with the downgrade. The ministry stated that Fitch’s indicator system for sovereign credit ratings failed to effectively reflect Beijing’s efforts to stimulate economic growth.
Despite the negative outlook, Fitch affirmed China’s credit rating at “A+,” citing the country’s large and diversified economy, solid GDP growth prospects, significant role in global trade, robust external finances, and the yuan’s status as a reserve currency.
Chinese officials have been facing challenges in revitalizing the economy, including a prolonged property sector crisis, rising youth unemployment, and weak global demand for Chinese exports. In response, policymakers have implemented targeted measures and issued billions of dollars in sovereign bonds to boost infrastructure spending and consumption.
Last month, Beijing set a growth target of five percent for 2024, acknowledging the difficulty of achieving this ambitious goal.
