Fitch cuts China’s ratings outlook on growth risks, debt fears – Times of India

Fitch cuts China's ratings outlook on growth risks, debt fears - Times of India

Fitch Ratings The agency cut China’s sovereign credit on Wednesday. point of view On the negative side, it points to growing risks around the country’s public finances. The decision, which Beijing immediately described as “regrettable”, underscores growing concerns over China’s economic stability, particularly amid an ongoing crisis in the property sector that threatens wider financial repercussions.
Economic conditions and policy responses
Chinese authorities are dealing with economic stimulus. Development Going through various challenges, including the downturn in the real estate sector. Despite deploying targeted measures and issuing billions in sovereign bonds to boost infrastructure and consumer spending, experts say significant additional efforts are needed.
In the most recent economic target setting, Beijing has set a 5 percent growth target for 2024, acknowledging the difficulty of achieving this ambitious goal. Fitch’s outlook revision reflects these concerns, highlighting “rising risks to China’s public fiscal outlook” amid uncertain economic momentum.
Why did Fitch cut the rating?
Fitch’s announcement reflects concerns about China’s fiscal health, emphasizing the increased reliance on fiscal policy to support growth, which is likely to lead to continued growth in China’s fiscal health. Debt The expected slowdown in economic growth further complicates the country’s management of substantial leverage. Fitch noted
“Wide fiscal deficits and rising public debt in recent years have eroded fiscal buffers from a rating perspective,” the agency warned. And it said that “fiscal policy is increasingly likely to play an important role in supporting growth in the coming years that could keep debt on a steady upward trajectory”.
Reacting to the shortfall, Beijing’s finance ministry expressed frustration, criticizing Fitch’s methodology for not accurately capturing the effectiveness of China’s efforts to boost growth. The ministry emphasized the importance of long-term fiscal strategies to support domestic demand and economic expansion, thereby maintaining sovereign debt.
Adjusting the outlook to negative, Fitch affirmed China’s “A+” credit rating, recognizing the country’s diversified economy, growth potential, and important role in global trade. However, he also pointed to challenges such as high leverage and financial pressures that anger the powers that be.
Analyst insights and economic forecasts
Analysts interpret Fitch’s decision as a warning sign, stressing that China must maintain this delicate balance to manage slowing growth and rising debt. Gary Ng from Natixis highlighted the potential credit polarization among local government financing vehicles, stressing the importance of addressing weak fiscal health at the provincial level.
Fitch expects China’s general government deficit to widen, indicating a continuation of fiscal expansion since the effects of the peak of the COVID-19 pandemic. This comes despite early signs of economic stabilization, with recent data on factory output and retail sales beating expectations.
In response to the shortfall, China’s Ministry of Finance vowed to address risks associated with local government debt, reiterating its commitment to economic growth and stability. The ministry’s statement reflects its determination to leverage fiscal measures responsibly to bolster the economy, despite challenges highlighted by Fitch and other rating agencies.
(with input from agencies)

Classification,point of view,Development,Fitch,Debt

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