Fitch Downgrades China’s Long-Term Foreign Currency Rating Amid Rising Debt Concerns

Fitch Ratings downgraded China’s long-term foreign currency issuer default rating from ‘A+’ to ‘A’ on Thursday, citing rising public debt and weakening finances as the country faces an economic transition. The agency expressed concerns over fiscal deficits and increasing government debt in the coming years, despite continued fiscal stimulus aimed at supporting growth amidst weak domestic demand and deflationary pressures.

Fitch highlighted that China’s large, diverse economy, strong trade position, and solid growth prospects compared to other nations contribute to its stability at the new rating level. Efforts to shift from property-driven growth to manufacturing and consumption may also help stabilize government debt over time. However, Fitch warned that China’s general government deficit is forecast to rise significantly, reaching 8.4% of GDP in 2025, well above the average for ‘A-rated’ countries.

The agency noted that while the effects of recent tariff measures remain uncertain, China has some flexibility at its current rating level to absorb potential economic impacts. Since 2020, China’s fiscal deficit has averaged 6.5% of GDP, more than double its pre-2020 level.