Fitch cuts China credit rating on debt risks amid trade tensions

Reuters

Thu, Apr 3, 2025, 6:50 AM 1 min read

BEIJING (Reuters) - Global ratings bureau Fitch connected Thursday downgraded China's sovereign recognition rating, citing expectations of a continued weakening of nationalist finances and rapidly rising debt.

The downgrade came a time aft President Donald Trump imposed sweeping tariffs connected imports from U.S. trading partners, with China among the hardest-hit, though Fitch said his determination had not yet been incorporated into its forecasts.

Fitch chopped China's semipermanent overseas currency standing by 1 notch to "A" from "A+", 1 twelvemonth aft it downgraded its outlook connected China's recognition rating.

"The downgrade reflects our expectations of a continued weakening of China's nationalist finances and a rapidly rising nationalist indebtedness trajectory during the country's economical transition," Fitch said successful a statement.

"We expect the authorities debt/GDP to proceed its crisp upward inclination implicit the adjacent fewer years, driven by these precocious deficits, ongoing crystallisation of contingent liabilities and subdued nominal GDP growth."

Fitch expects China's wide authorities shortage to emergence to 8.4% of GDP successful 2025, from 6.5% successful 2024.

China volition person to prolong fiscal stimulus to enactment maturation amid subdued home demand, rising tariffs and deflationary pressures, which volition support fiscal gaps high, it said.

In April 2024, Fitch chopped its outlook connected China's sovereign recognition standing to negative, citing risks to nationalist finances arsenic the system faces expanding uncertainty successful its displacement to caller maturation models.

China's concern ministry said successful a connection that Beijing "deeply" regrets and does not recognise Fitch downgrading, adding that the determination "is biased and cannot afloat and objectively bespeak the existent concern successful China".

(Reporting by Beijing Newsroom and Kevin Yao; editing by Alison Williams and Mark Heinrich)