Fitch cuts China’s ratings outlook on growth risks [Video]

Fitch cut its outlook on China’s sovereign credit rating to negative on Wednesday, citing risks to public finances as the economy faces increasing uncertainty in its shift to new growth models.

The outlook downgrade follows a similar move by Moody’s in December and comes as Beijing ratchets up efforts to spur a feeble post-Covid recovery in the world’s second-largest economy with fiscal and monetary support.

“Fitch’s outlook revision reflects the more challenging situation in China’s public finance regarding the double whammy of decelerating growth and more debt,” said Gary Ng, Natixis Asia-Pacific senior economist.

“This does not mean that China will default any time soon, but it is possible to see credit polarization in some LGFVs (local government financing vehicles), especially as provincial governments see weaker fiscal health.”

Fitch expects China’s explicit central and local …