Fitch Ratings Downgrades China's Credit Rating

In a significant move, Fitch Ratings has downgraded China's credit rating from "A+" to "A" this Thursday. The decision underscores growing concerns over the deterioration of China's public finances and an alarming increase in public debt amidst the nation's ongoing economic transition.

Stable Outlook Amid Fiscal Challenges

Despite the downgrade, Fitch maintains a stable outlook for China, highlighting the country's economic resilience in the face of mounting fiscal pressures. However, projections indicate a worrying rise in the debt-to-GDP ratio, expected to reach 68.3% by 2025 and escalate further to 74.2% in 2026, up from 60.9% in the previous year.

External Pressures and Fiscal Stimulus

The timing of the downgrade coincides with Beijing's intensified fiscal stimulus efforts aimed at countering sluggish domestic demand, deflationary trends, and the repercussions of newly imposed US tariffs. "The escalation in US tariffs on Chinese goods introduces additional uncertainties," Fitch noted, pointing to potential deviations from their baseline economic forecasts.