Fitch downgraded China’s credit rating forecast

International rating agency Fitch changed the forecast of China’s credit rating from “stable” to “negative”. The reason is the growing uncertainty in the economy.

The report notes a significant deficit in the country’s budget and growing government debt, as well as problems in managing financial leverage across the entire economy. Fitch forecasts a slowdown in the country’s economic growth from 5.2 percent in 2023 to 4.5 percent in 2024.

“The wide budget deficit and growing state debt in recent years have undermined fiscal reserves from the point of view of ratings,” the agency said in a statement. Analysts predict that the state budget deficit will grow to 7.1 percent of GDP in 2024 from 5.2 percent in 2023. This will be the maximum indicator since 2022.

The Ministry of Finance of the People’s Republic of China expressed its regret about the decision taken by the agency. The department’s press release states that Fitch’s rating methodology “cannot effectively and far-sightedly” reflect the positive role of the country’s fiscal policy in promoting its economic growth.

In December 2023, the international rating agency Moody’s lowered China’s credit rating forecast to a negative level. At the same time, both Fitch and Moody’s kept the current rating at the above-average level, A1 and A+. In both cases, this means low credit risks.