2024-04-10 04:04:59
China’s economy
Credit rating agency Fitch revised its outlook on China to negative, citing increasing risks to the country’s overall financial outlook.
Despite this, Fitch affirmed China’s credit rating at A+, given its “large and diversified” economy, its relatively “solid” economic growth prospects compared to other countries, its strength in global goods trade, the strength of its external finances, and the status of its currency (the yuan) as a foreign currency. backup.
Fitch expected the general government deficit to rise to 7.1 percent of GDP in 2024 from 5.8 percent in 2023.
According to a statement issued by credit rating agency Fitch on Wednesday, “increasing economic uncertainty and China’s efforts to shift its growth model away from dependence on the real estate market have weakened its ability to absorb financial shocks, in the agency’s view.”
“Fiscal policy is increasingly likely to play an important role in supporting growth in the coming years, which could lead to public debt continuing to rise steadily,” the statement added.
Fitch also warned that contingent liability risks may also rise, as lower nominal growth exacerbates challenges in managing high economy-wide leverage.”
China describes the decision as “unfortunate”
For its part, the Chinese Ministry of Finance said on Wednesday that it was unfortunate to see Fitch Ratings moving to lower the outlook for the country’s sovereign credit rating.
The ministry said in a statement that Fitch’s rating system failed to effectively present the positive effects of Chinese financial policies on promoting economic growth and stabilizing the overall leverage ratio in a forward-looking manner, according to Xinhua.
It is worth noting that the difference between a rating downgrade and an outlook adjustment is that a rating downgrade means that the actual rating has decreased (for example from A to BBB), while an outlook adjustment means that there is a possibility of a downgrade in the future.
Last December, Moody’s lowered its credit outlook for China to negative due to high debt, noting a slowdown in economic growth in the medium term and a continued contraction in the real estate sector.
Moody’s then affirmed China’s long-term ratings of local and foreign currency issues at A1, and said it expected the country’s annual GDP growth to reach 4.0 percent in 2024 and 2025.
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