Chinese authorities swiftly responded to Fitch’s decision to downgrade China’s sovereign credit rating outlook from stable to negative, asserting the nation’s enduring long-term growth prospects and its government’s capability and resolve to maintain sound sovereign credit.
Chinese economists criticized Fitch’s move, denouncing it as biased and methodologically flawed. They argued that Fitch’s decision failed to recognize the positive developments within China’s economy and relied excessively on negative Western media narratives.
Fitch’s report cited risks to China’s public finance outlook amidst economic uncertainties during a transition away from property-centric growth. However, it affirmed China’s ‘A+’ rating, acknowledging its sizable and diversified economy, robust GDP growth prospects, global trade significance, solid external finances, and the yuan’s reserve currency status.
Despite the negative outlook, Chinese officials expressed regret over Fitch’s decision, highlighting the inadequacy of Fitch’s methodology in acknowledging China’s fiscal policies’ positive impact on economic growth and macro-leverage stability.
China’s fiscal strategy, focused on moderate spending expansion and efficient fiscal fund utilization to stimulate domestic demand and economic progress, aims to maintain a moderate deficit-to-GDP ratio of 3 percent in 2024. Officials emphasized its role in stabilizing economic growth, managing government debt, and preserving policy flexibility.
Echoing the sentiment, Chinese economists criticized Fitch’s biased assessment, noting its reliance on short-term fluctuations rather than considering China’s broader economic transition objectives. They highlighted recent positive economic indicators, including PMI expansion and export growth, as signs of China’s resilient economic recovery.
Comparing China’s fiscal deficit and economic resilience to other major economies, economists asserted China’s comparative strength. They expressed confidence in China’s economic growth trajectory, anticipating robust rebuttals to Fitch’s downgrade based on strong first-quarter data.