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The Fitch rating agency has lowered China’s sovereign debt on lower public finances concerns and the impact of higher prices on exports, a decision that caused Beijing biases.
In a statement on Thursday, Fitch said that its reduction in the long -term currency rating in China from A + A was based on forecasts made before the announcement of US President Donald Trump on Wednesday of “reciprocal” 34% “reciprocal” prices on Chinese products.
Fitch said its decision reflected the expectations that China would strongly increase expenditure to support economic growth and counter deflationary pressures in the midst of increasing prices that would weigh on external demand.
“This support, as well as structural erosion in the income base, will probably maintain high budget deficits,” said the agency, adding that it expected the government’s debt ratio to GDP “continues its strong upward trend in the coming years”.
The Chinese finance ministry denounced what he said was a “biased” demotion.
“The Chinese economy has a stable base, many advantages, strong resilience and great potential,” the ministry said in a press release, adding that “long -term favorable” conditions and the “general trend in high quality economic development” had not changed.
China is not a heavy debt transmitter in foreign foreign currency, most of its obligations at the price of Renminbi. A program of $ 2 billion in Saudi Arabia in November of last year made waves due to a huge demand from investors and the fact that Beijing was able to borrow almost as much as the United States in dollars.
On Wednesday, the Ministry of Finance lifted RMB6BN ($ 823 million) thanks to the issue of its first green sovereign obligations in London, an offer that was almost seven times overwhelmed, according to a statement from Bank of China, one of its sponsors.
Fitch had reduced its prospects on the Crédit de la Crédit de la China to Stable’s negative in April of last year, citing increasing debt concerns while Beijing is trying to move on to new growth models.
The agency said Thursday that its prospects were now stable, despite the uncertainty about the impact of Trump’s new prices, because there was “a margin to the current note to adapt to the likely implications for economic growth and budgetary measures”.
Beijing believes that it must issue more government debts in the context of efforts to stimulate the Chinese economy.
“China will continue to implement a more proactive budgetary policy and a moderately loose monetary policy,” said the Ministry of Finance.
Moody’s Investors Service reduced its credit prospects in negative China in December 2023, citing increasing risks of economic growth halfway through mid-term and the crisis in the real estate sector.
Allan von Mehren, Chinese economist in Danske Bank, said the Chinese bond market was dominated by national players who were unlikely to be affected by the reduction of fitch rating.
“China has a very high level of savings which needs a house and a large part comes into bonds via banks and pension funds,” he said. “Banque Populaire de China should also relieve policies and increase liquidity by reducing reserve requirements, so there will be enough money to buy bonds to finance debt.”
