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Fitch Ratings changed its outlook on China's debt rating to negative

Fitch Ratings changed its outlook on China's debt rating to negative

April 10, 2024 – 4:09 pm

Fitch Ratings lowered its outlook for China's sovereign debt risk rating from stable to negative. At the same time as the outlook was changed, the international credit rating agency affirmed the A-level investor rating on China's long-term foreign currency debt obligations at “A plus”.

According to Fitch's logic, a negative correction shows that China's public financing prospects are increasingly vulnerable in an increasingly uncertain economic environment. Adding to the uncertainty is the fact that the Chinese government has shifted economic growth dependent on the real estate sector. According to Fitch forecasts, China's general budget deficit will rise to 7.1 percent from 5.8 percent this year.

Fitch also notes that China's public finances have been running high deficits since 2020: the deficit measured over this period was almost double the annual average of 3.1% between 2015 and 2019. The company confirms that this indicates a clear deterioration process.

Last December, Moody's downgraded China's credit rating. He justified the decision by the fact that according to signs, the Chinese government is preparing to provide financial support to regional and local governments that are under financial pressure.

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