Beijing:
Ratings agency Fitch said on Wednesday it had cut China’s sovereign credit outlook to negative, citing increased risks to the country’s public finances, a move Beijing quickly called “regrettable.”
Chinese officials have been trying to boost economic growth for months as they face a host of headwinds, notably a protracted housing crisis that has raised concerns about wider contagion.
Policymakers have announced a series of targeted measures and issued billions of dollars in sovereign bonds aimed at boosting infrastructure spending and stimulating consumption, but analysts say there is still more to do.
Beijing last month set a target of 5% growth for the world’s second-largest economy by 2024, with leaders acknowledging that the ambitious target will be a challenge.
Fitch said its outlook revision “reflects growing risks to China’s public finance outlook” as the country “faces a more uncertain economic outlook.”
“From a ratings perspective, large fiscal deficits and rising government debt have eroded fiscal buffers in recent years,” the agency warned.
“Fiscal policy is increasingly likely to play an important role in supporting growth in the coming years, keeping debt on a steady upward trend,” the report said.
It also said an expected slowdown in economic growth “exacerbates the challenge of managing high leverage across the economy”.
Beijing’s Finance Ministry immediately called the decision “regrettable.”
Fitch said in a statement that the results show that the indicator system of Fitch’s sovereign credit rating methodology fails to effectively and proactively reflect the Chinese government’s efforts to promote economic growth.
Beijing has pledged to take more steps to boost employment and stabilize the property market, but an official acknowledged last month that it remained “very difficult.”
Housing and Urban-Rural Development Minister Ni Hong said at a press conference during a major political meeting that real estate companies “will go bankrupt if they should go bankrupt, and reorganize if they need to be reorganized.”
Fitch also affirmed China’s credit rating at “A+” on Wednesday.
The move reflects China’s “large and diversified economy, still solid GDP growth prospects relative to other countries, its indispensable role in global trade in goods, strong external financing, and the yuan’s reserve currency status,” the report said.
However, it added, “These advantages are balanced by high leverage in the overall economy, rising fiscal challenges, and lower per capita income and governance scores than ‘A’ peers”
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