2023-12-13 14:22:58
The famous credit rating agency, Fitch, said that China will continue to face headwinds with declining external demand, real estate sector challenges, and local government debt instruments, but indicated that its expectations for 2024 are neutral.
The agency forecast average growth for the mainland’s gross domestic product at 4.6 percent versus just over five percent in 2023, adding that it “expects growth to be broadly stable and at generally higher levels than its peers.”
Chinese government advisers told Archyde.com earlier that they would recommend economic growth targets for 2024 ranging between 4.5 and 5.5 percent, with most advisers preferring to target five percent growth, the same level of growth this year.
Fitch said that policy support measures, especially fiscal policy, will likely be implemented wisely to reduce risks that pose downward pressure, but “such support may keep the fiscal deficit wide and will put pressure on increasing debt ratios.”
In a rare mid-fiscal adjustment, China in October increased its 2023 budget deficit target to 3.8 percent of gross domestic product, compared to the original target of 3.8 percent.
A senior Communist Party official said during a forum on Wednesday that China should target an appropriate level of budget deficit for the fiscal year 2024, after senior officials pledged to intensify monetary policy adjustments to support economic recovery next year.
Fitch said that debt issued through local government financing vehicles, which are typically investment companies that raise funds and build infrastructure projects on behalf of local governments, may continue to gradually move to the sovereign balance sheet due to pressures resulting from the slowdown in the country’s real estate market.
Last week, Moody’s credit rating agency lowered its expectations for the Chinese government’s credit rating from stable to negative, citing a slowdown in economic growth in the medium term and the risks resulting from a decline in the country’s large real estate sector.
Fitch maintained China’s credit rating at (A+) with a “stable” outlook in August.
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