Fitch Revises China's Sovereign Credit Rating Outlook to Negative
Published On : 2024-04-10T11:12:28+0530 [ IST ] |
Author : Mayur_Tembhare
Reading Time : 1 mins
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Flitch Rating for China come out to be negative
China :
Rating agency Fitch has revised its outlook on China's sovereign credit rating to negative from stable, attributing this adjustment to growing risks in the country's public finance outlook. Fitch points to the challenges posed by China's transition away from growth fueled by the real estate sector towards a more sustainable economic model, as perceived by the Chinese government.
The outlook revision underscores the mounting uncertainties surrounding China's economic prospects and the erosion of fiscal buffers due to wide fiscal deficits and escalating government debt in recent years. Fitch anticipates that fiscal policy will likely ssume a pivotal role in bolstering growth in the foreseeable future, potentially leading to a continuous upward trajectory in debt levels.
Despite the negative outlook, Fitch has maintained China's long-term Issuer Default Rating (IDR) at 'A+', citing several factors supporting the rating. These include China's sizable and diversified economy, robust GDP growth prospects relative to peers, its crucial role in global trade, resilient external finances, and the yuan's status as a reserve currency.
The agency observes an escalation in fiscal stimulus measures by the Chinese government to counter prevailing economic headwinds. Fitch projects a rise in the general government deficit to 7.1 percent of GDP in 2024, up from 5.8 percent in 2023. This uptrend in deficits has been apparent since 2020, with figures approximately double the 2015-2019 average of 3.1 percent of GDP.
In conclusion, Fitch's adjustment of China's sovereign credit rating outlook to negative underscores the challenges ahead for the country's fiscal stability and economic transition. While fiscal measures are expected to support growth, the agency warns of the possibility of a downgrade over the medium term if these challenges persist.
Source : Flitch
Tags : sovereign credit rating , negative outlook , economic transition , fiscal policy , Fitch , China ,
Summary : Fitch Ratings has adjusted China's sovereign credit rating outlook from stable to negative, citing concerns about the country's fiscal outlook and its transition away from real estate-driven growth. Despite affirming China's long-term IDR rating at 'A+', Fitch highlights the challenges posed by widening fiscal deficits and rising government debt. The agency suggests that fiscal policy may play a crucial role in supporting growth but warns of the possibility of a downgrade over the medium term.
