New York [US], April 10 (ANI): Rating agency Fitch revised its outlook on China’s sovereign credit rating to negative from stable, citing risks to the country’s public finance outlook and amid a transition away from real estate sector-led growth.
According to the rating agency, the outlook revision reflected increasing risks to China’s public finance outlook as the country contends with more uncertain economic prospects amid a transition away from “property-reliant” growth to what the Chinese government views as a more sustainable growth model.
Wide fiscal deficits and rising government debt in recent years have eroded fiscal buffers, Fitch argued.
Fitch believes that fiscal policy is increasingly likely to play an important role in supporting growth in the coming years which could keep debt on a steady upward trend.
Further, while it lowered its outlook, which indicated a downgrade is possible over the medium term, the rating agency affirmed China’s IDR rating at ‘A+’.
“China’s ‘A+’ rating is supported by its large and diversified economy, still solid GDP growth prospects relative to peers, integral role in global goods trade, robust external finances, and reserve currency status of the yuan,” Fitch noted.
Fiscal stimulus is being stepped up in China, as the government seeks to offset economic headwinds.
Fitch forecast the general government deficit to rise to 7.1 per cent of GDP in 2024 from 5.8 per cent in 2023.
“Deficits have been high since 2020, running roughly twice the 3.1 per cent of GDP 2015-2019 average,” Fitch said. (ANI)
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