Fitch Ratings revised the outlook on China’s long-term foreign debt to negative from stable, citing increasing risks to the country’s public finance prospects.
Rising economic uncertainties and China’s efforts to shift its growth model away from one driven by the property market “have eroded fiscal buffers from a ratings perspective,” according to a Wednesday statement by the rating agency.
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“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 said. “Contingent liability risks may also be rising, as lower nominal growth exacerbates challenges to managing high economy-wide leverage,” it added.
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The nation’s actual issuer default rating is affirmed at A , considering its “large and diversified” economy, “still solid” economic growth prospects relative to peers, strength in global goods trade, robust external finances, and reserve currency status of the Chinese currency, Fitch said in the statement.