Kathmandu. Global rating agency Fitch has downgraded China’s sovereign credit rating, saying the Chinese government has rejected the assessment as biased.
Fitch Ratings has downgraded China’s sovereign credit rating, citing the continued weakness of China’s public finances and rapidly increasing debt expectations in recent times. Responding to the rating report issued by Fitch on Thursday, China’s Ministry of Finance said in a statement that the ministry “deeply” regrets and does not recognize Fitch’s downgrade. The ministry also said that the decision was “biased and cannot fully and objectively reflect the actual situation in China.”
The downgrade of Fitch Ratings’ China sovereign credit rating came a day after US President Donald Trump imposed sweeping tariffs on imports from US trading partners. China has been the most affected by the US decision. Fitch did not include the US president’s move in its outlook in the report.
Fitch has cut China’s long-term foreign currency rating by one notch to “A” from “A+”. The downgrade comes a year after the previous assessment.
Fitch said in a statement, “The downgrade reflects the continued weakness of China’s public finances and our expectation of a rapidly increasing public debt projection during the country’s economic transition.”
“We expect government debt/gross domestic product (GDP) to continue its sharp upward trend over the next few years, driven by high deficits, continued crystallization of contingent liabilities, and weak nominal GDP growth.”
Fitch expects China’s general government deficit to rise to 8.4 percent of GDP in 2025, up from 6.5 percent in 2024. China will need to maintain fiscal stimulus to support growth amid weakening domestic demand, rising tariffs and inflationary pressures.
Sovereign credit ratings indicate a country’s ability to repay its public sector debt and financial obligations over a predetermined period of time. While they provide a basis for assessing a country’s economic condition and financial strength, sovereign ratings are not completely foolproof.
