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The Fitch Evaluation Agency has reduced China’s sovereign debt over concerns about the poorer public finances and the impact of higher export fees, an action that prompted charges of prejudice from Beijing.
In a statement on Thursday, Fitch said that its shortening in A+ long -term foreign currency evaluation of A+ was based on the predictions made before US President Donald Trump’s announcement Wednesday for “reciprocal” 34 percent of Chinese goods.
Fuckch said its mass reflected expectations that China would significantly increase costs in order to support economic growth and anti -deflation pressures between increased tariffs that would weigh external demand.
“This support, along with a structural erosion at the income base, is likely to keep fiscal deficits high,” the agency said, adding that it expected the government debt ratio to GDP to “continue its sharp trend over the coming years.”
China’s Ministry of Finance denounced what he said was a “one -sided” discount.
“China’s economy has a sustainable foundation, many advantages, strong and great potential,” the ministry said in a statement, adding that the “favorable long -term” and “general tendency of high quality economic development” had not changed.
China is not a heavy emitter of foreign currency debt, with most of its bonds priced in Renminbi. A $ 2 billion release in Saudi Arabia in November last year waves due to the high demand of investors and the fact that Beijing was able to borrow almost as cheaply as the SH.BA in dollars.
On Wednesday, the Ministry of Finance raised RMB6BN ($ 823 million) through the issue of its first sovereign green bonds in London, an offer that was almost seven times inscription, according to a statement from the Bank of China, one of its sponsors.
Fitch had reduced her view of China’s credit rating in the negative from Stabil in April last year, citing increasing debt concerns while Beijing tries to move to new growth models.
The agency said on Thursday that its view was now stable, despite the uncertainty about the influence of Trump’s new tariffs because it had “headroom in current rating to accommodate possible implications for economic growth and fiscal meters”.
Beijing believes it should issue more government debt as part of efforts to boost the Chinese economy.
“China will continue to implement a more proactive fiscal policy and a moderately loose monetary policy,” the Ministry of Finance said.
Moody’s investors’ service reduced its credit prospect in China to the negative December 2023, citing increased risks of continued growth of middle economic growth and overload from a crisis in the asset sector.
Allan Von Mehren, China’s economist in Danske Bank, said the China bond market was dominated by local players who are unlikely to be affected by the decrease in Fitch’s rating.
“China has a very high level of savings that a home needs and many of them go into bonds through banks and pension funds,” he said. “The People’s Bank of China is also decided to facilitate policy further and increase liquidity by reducing reserve requirements reports, so there will be abundant money to buy bonds to finance debt.”
