The global risk recommendation agency Fitch downgraded on Thursday (3) the long term rating in foreign currency of the China From “A+” to “A”, citing the expectations of a continuous weakening of public finances and the rapid increase in debt.
The relegation occurred a day after the president of United States, Donald Trump, imposed tariffs Comprehensive about imports of business partners, with China being one of the most affected countries, although Fitch has said that this measure had not yet been incorporated into its predictions.
“Relegation reflects our expectations of continuous weakening of China’s public finances and a trajectory of rapid increase in public debt during the country’s economic transition,” the Fitch said in a statement.
“We hope that the public debt/GDP ratio will continue its sharp trend in the coming years, driven by these high deficits, continuous crystallization of contingent liabilities and moderate growth of nominal GDP.”
Fitch expects China’s government deficit to increase to 8.4% of Gross Domestic Product (GDP) by 6.5% in 2024.
China will have to maintain fiscal stimulation to support growth amid moderate internal demand, increased rates and deflationary pressures, which will maintain high fiscal gaps, according to the agency.
In April 2024, Fitch reduced the perspective of China’s sovereign credit recommendation to negative, citing the risks to public finances, as the economy faces growing uncertainty in its move to new growth models.
China’s Ministry of Finance said in a statement that Beijing laments “deeply” and does not recognize the relegation of the Fitch, adding that the decision “is biased and cannot completely and objectively reflect the real situation of China.”
