On Tuesday, Fitch, a prominent ratings agency, adjusted its perspective on China's sovereign credit rating to negative, citing concerns over public finances amidst the nation's evolving economic landscape.
Fitch's projections anticipate a rise in the general government deficit to 7.1 percent of gross domestic product (GDP) in 2024, up from 5.8 percent recorded in 2023, marking the highest level since 2020's 8.6 percent during stringent COVID restrictions.
While signaling a potential downgrade in the medium term, the agency maintained China's IDR rating at 'A+'. Fitch foresees a deceleration in China's economic growth to 4.5 percent in 2024 from the previous year's 5.2 percent, contrasting with upward revisions by Citi and the International Monetary Fund.
Despite Fitch's cautionary stance, China's factory output, retail sales, and exports surpassed expectations in January-February, hinting at an early boost towards Beijing's ambitious 5 percent GDP growth target for 2024. However, Fitch highlighted escalating risks to China's public finance amid economic uncertainties linked to transitioning away from property-focused growth towards a more sustainable model.
China's finance ministry expressed regret over Fitch's decision, while Moody's had issued a similar warning in December, citing concerns over the costs associated with stabilizing local governments, state firms, and managing the property market crisis.
(Inputs from Reuters)
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