Fitch has downgraded its outlook on the Chinese economy. The international rating agency cut its outlook on China’s sovereign credit rating to negative on Wednesday. The move has followed Moody’s which downgraded China’s rating from “stable” to “negative” in December last year. The international rating agency also stated that its expects China’s central and local government debt to rise to 61.3% of GDP in 2024 up from 56.1% in 2023 and a clear deterioration from 38.5% in 2019.
China’s finance ministry responded by calling Fitch’s downgrade a “pity” and that it had failed to take account of its moves to improve the quality and efficiency of its government spending.
International financial organisations have all had a negative outlook on the Chinese economy so far. The IMF in a report released on February this year predicted that China’s growth would drop to 4.6% down from 5.2% in 2023. The global financial body believes it will fall further over the next four years. The Chinese government itself has set a GDP target of around 5% growth matching last year which is the lowest growth rate the company has set itself for decades.
China’s economy has not risen since the pandemic. There are a number of factors for this. The ongoing battle with the US over technology curbs and raids on US firms since last year have hurt business friendly of the country. US Treasury Secretary Janet Yellen visited the country last year and again last week in an attempt to stabilise the business environment. Though she got a respectful hearing the divide between both the sides was apparent as Yellen herself acknowledged.
“There is much more work to do,” Yellen said at a news conference in Beijing on Monday. “And it remains unclear what this relationship will endure in the months and years ahead.”
(With inputs from Reuters)
