By NewsBlogger Fitch Ratings downgraded China’s sovereign debt outlook to negative due to rising risks to public finances. At the same time, the Finance Ministry maintains the deficit is at a moderate level, highlighting the challenges of balancing growth and debt sustainability.
At a glance
- Fitch Ratings downgraded China’s sovereign debt outlook to negative due to rising risks to public finances.
- China’s deficit is considered moderate and reasonable by the Finance Ministry.
- Mounting debts of local and regional governments pose a significant threat to China’s economy.
- Efforts are being made to reduce reliance on the property industry for economic growth.
- Fitch predicts China’s economy will expand at a 4.5% annual rate this year, with challenges in the property sector affecting related industries.
The details
Fitch Ratings recently downgraded China’s sovereign debt outlook negatively, citing rising risks to the country’s public finances.
The Finance Ministry, however, stated that China’s deficit is moderate and reasonable.
Despite this, the mounting debts of local and regional governments pose a significant threat.
Efforts to Reduce Reliance on Property Industry
China is actively working to reduce its heavy reliance on the property industry for economic growth.
While Fitch maintained China’s A+ rating due to its large and diversified economy, global trade role, and foreign exchange reserves, it did not consider the government’s efforts to improve spending quality and efficiency.
The resolution of China’s local government debt is progressing orderly, but Fitch forecasts the general government deficit to rise to 7.1% of GDP this year.
Tax relief measures and weaker property investments have had a negative impact on China’s tax revenue collection.
Fitch predicts that China’s economy will expand at a 4.5% annual rate this year, with higher government spending potentially offsetting weaknesses.
However, the financial troubles in China’s property sector are affecting construction companies and related industries.
Moody’s also downgraded China’s credit rating outlook in December, highlighting the rapid deterioration of China’s debt situation since the pandemic.
Policymakers are facing a dilemma in balancing the need to restore growth and confidence while maintaining debt sustainability.
It is suggested that fiscal spending should be directed towards productive areas of growth for the future.
Challenges and Importance of Financial Management
These developments underscore the challenges facing China’s economy and the importance of prudent financial management in the face of mounting debt and economic uncertainties.
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| independent.co.uk |
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| – Fitch Ratings downgraded China’s sovereign debt outlook to negative – China’s deficit is at a moderate and reasonable level, according to the Finance Ministry – Risks to China’s public finances are rising due to mounting local and regional government debts – China is working to shift away from heavy reliance on its property industry for economic growth – Fitch kept China’s A+ rating due to its large and diversified economy, global trade role, and foreign exchange reserves – China’s government spending quality and efficiency improvements were not considered by Fitch – China’s local government debt resolution work is progressing in an orderly manner – China’s general government deficit is forecasted to rise to 7.1% of GDP this year – Tax relief measures and weaker property investments have impacted China’s tax revenue collection – Fitch forecasts China’s economy to expand at a 4.5% annual rate this year – Higher government spending may help offset weaknesses in China’s economy – Financial troubles in China’s property sector are affecting construction companies and related industries – Moody’s downgraded China’s credit rating outlook in December – China’s debt situation has worsened rapidly since the pandemic – Policymakers face a dilemma in restoring growth and confidence while maintaining debt sustainability – Fiscal spending should be directed towards productive areas of growth for the future |
