Fitch downgrades China's credit rating to 'A,' citing rising debt

ANKARA

Fitch Ratings on Thursday downgraded China's long-term foreign currency issuer default rating from 'A+' to 'A,' with a stable outlook.

The rating agency cited concerns over China's rising public debt and weakening public finances as the country navigates an economic transition.

Fitch expects continued fiscal stimulus to support growth amid weak domestic demand, rising tariffs, and deflationary pressures. However, this could keep fiscal deficits high and drive government debt upward in the coming years, it noted.

Despite these challenges, Fitch noted that China's large and diverse economy, strong trade position, and solid growth prospects in comparison to other nations contribute to its financial stability at the new rating level.

Fitch also noted that ongoing efforts to shift away from property-driven growth toward manufacturing and consumption could help stabilize government debt in the long run.

While the impact of recent tariff measures announced on April 2 remains uncertain, Fitch stated that China has some flexibility at its current rating level to absorb potential economic effects.

Fitch forecast China's general government deficit to rise to 8.4% of GDP in 2025, up from 6.5% in 2024, significantly above the 2.7% median for "A-rated" countries. Since 2020, China's fiscal deficit has averaged 6.5% of GDP, more than double its pre-2020 level.