Fitch Downgrades China’s Credit Outlook: An Analysis of Finance and Economic Growth Risks
Fitch Downgrades China’s Credit Outlook: An Analysis of Finance and Economic Growth Risks
Fitch Ratings, a globally recognized credit rating agency, has recently downgraded China’s credit outlook to negative. This change in forecast has sparked discussions on economic growth risks and the potential impact on China’s public finance. This decision by Fitch mirrors a similar move by Moody’s in December, reflecting the increasing concerns about China’s shifting growth models.
According to Fitch, China’s general government deficit could rise to 7.1% of GDP in 2024, the highest since 2020, due to the ongoing transition away from property-reliant growth and the impacts of strict COVID-19 curbs. Despite the downgrade, China’s issuer default rating remains affirmed at ‘A+’, a rating also held by S&P and Moody’s. However, the predicted slower economic growth of 4.5% in 2024, while the IMF expects 4.6% growth, casts a shadow on China’s ambitious GDP growth target of around 5.0% for 2024.
The Chinese government has expressed regret over Fitch’s decision, citing it as ‘regrettable’. The Ministry of Finance plans to take steps to prevent and resolve risks stemming from local government debt. Despite the challenges and warnings from rating agencies, China’s economic data for January-February showed strong factory output and retail sales. Yet, the transition away from property-reliant growth and the issue of increasing government debt remains a concern.
In the global context, this decision by Fitch could have significant implications for the Chinese economy and its stakeholders. For instance, Bloomberg, a major business and financial information platform, has also revised its outlook for China’s sovereign rating to negative. As the world continues to face various challenges and uncertainties, such financial decisions and ratings could play a crucial role in shaping economic policies and growth models.
