China hits back after Fitch Ratings downgrades credit outlook, Beijing says local debt risks are controllable

Fitch Ratings changed the outlook for China’s sovereign debt from stable to negative, with the Ministry of Finance saying the downgrade was a ‘pity’

Analysts say China’s widening fiscal deficit is ‘a major worry’, with the outlook complicated by so-called hidden debts, including local government financing vehicles

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Fitch Ratings made the move due to concerns over China’s property and public finance stress. Photo: EPA-EFE

Published: 1:51pm, 10 Apr 2024Updated: 4:29pm, 10 Apr 2024

A decision by a leading credit rating agency to downgrade China’s sovereign debt outlook failed to foresee the “positive role” of Beijing’s fiscal policy mix in promoting economic growth and stabilising the macro-leverage ratio, the Ministry of Finance said on Wednesday.

Fitch Ratings had earlier on Wednesday cited concerns over China’s property and public finance stress, as well as “eroded fiscal buffers” as the result of wide fiscal deficits and rising government debts, as the reasons behind cutting the rating from stable to negative.

“It is a pity to see Fitch’s downgrade,” the finance ministry said.

“The long-term positive trend of China’s economy has not changed, nor has the Chinese government’s ability and determination to maintain good sovereign credit.”

The ministry added that the local debt risk was “controllable”, and that de-risking was progressing in an orderly manner.