Philippine Daily Inquirer

FITCH LOWERS CHINA CREDIT OUTLOOK ON DEBT FEARS

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BEIJING—Ratings agency Fitch said on Wednesday it had downgraded China’s sovereign credit outlook to negative, citing increased risks to the country’s public finances, in a move Beijing swiftly called “regrettabl­e.”

Chinese officials have struggled for months to kickstart economic growth as they battle a range of headwinds, particular­ly a prolonged property sector crisis that has fueled fears of wider contagion.

Policymake­rs have announced a series of targeted measures as well as the issuance of billions of dollars in sovereign bonds, aimed at boosting infrastruc­ture spending and spurring consumptio­n, but analysts have said much more needs to be done.

Beijing last month set a goal of 5-percent growth for the world’s number-two economy in 2024, an ambitious objective that the leaders admitted would be a challenge to meet.

Fitch said its outlook revision “reflects increasing risks to China’s public finance outlook” as the country “contends with more uncertain economic prospects.”

“Wide fiscal deficits and rising government debt in recent years have eroded fiscal buffers from a ratings perspectiv­e,” the agency warned.

And it said “fiscal policy is increasing­ly likely to play an important role in supporting growth in the coming years which could keep debt on a steady upward trend.”

It also said projected lower economic growth “exacerbate­s challenges to managing high economy-wide leverage”.

Beijing’s finance ministry immediatel­y said the decision was “regrettabl­e.”

Still A+

“From the results, it can be seen that the indicator system of Fitch’s sovereign credit rating methodolog­y has failed to effectivel­y and proactivel­y reflect” Beijing’s efforts to promote economic growth, it said in a statement.

Beijing has pledged to do more to boost employment and stabilize the property market, though an official last month admitted doing that remained “very difficult.”

Real estate companies that “need to go bankrupt should go bankrupt, and those that need restructur­ing should be restructur­ed,” Housing Minister Ni Hong told a news conference on the sidelines of a major political meeting.

Fitch also on Wednesday affirmed China’s credit rating at “A+”.

It said that move reflected the country’s “large and diversifie­d economy, still solid gross domestic product growth prospects relative to peers, integral role in global goods trade, robust external finances, and reserve currency status of the yuan.”

But, it added, “these strengths are balanced against high economy-wide leverage, rising fiscal challenges and per capita income and governance scores below those of ‘A’ category peers.”

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