Insolvent: Fitch Downgrades China's Debt

Ratings agency Fitch said on Wednesday (Apr 10) it had downgraded China's sovereign credit outlook to negative, citing increased risks to the country's public finances, in a move Beijing swiftly called regrettable.

Chinese officials have struggled for months to kickstart economic growth as they battle a range of headwinds, particularly a prolonged property sector crisis that has fueled fears of wider contagion. The draconian covid-19 lockdowns also contributed heavily to this economic crisis, although governments rather this not be mentioned.

Policymakers have announced a series of targeted measures as well as the issuance of billions of dollars in sovereign bonds (debt), aimed at boosting infrastructure spending and spurring consumption, but analysts have said much more needs to be done.

Fitch said its outlook revision "reflects increasing risks to China's public finance outlook" as the country "contends with more uncertain economic prospects". "Wide fiscal deficits and rising government debt in recent years have eroded fiscal buffers from a ratings perspective," the agency warned. It said "fiscal policy is increasingly likely to play an important role in supporting growth in the coming years which could keep debt on a steady upward trend". Fitch added that projected lower economic growth "exacerbates challenges to managing high economy-wide leverage".

Real estate companies that "need to go bankrupt should go bankrupt, and those that need restructuring should be restructured", Housing Minister Ni Hong told a news conference on the sidelines of a major political meeting.

Back in 2023, Fitch also downgraded the US credit rating for a similar reason, bailouts and increasing national debt: https://www.nytimes.com/2023/08/01/business/fitch-downgrade-us-credit-rating.html

https://www.channelnewsasia.com/business/fitch-downgrades-china-sovereign-credit-outlook-debt-fears-4255346