Fitch lowers China’s sovereign debt for costs and tariffs

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Fitch rating agency downgraded the sovereign debt in China over the concerns of weaker public finances and the influence of higher export tariffs, which caused bias in Beijing.

In his statement on Thursday, Fitch said his long -term foreign currency rating was based on the projections made before the US President Donald Trump’s announcement on Wednesday additional “mutual” tariffs of 34 percent on Chinese goods.

Fitch said his step reflected the expectations that China It would dramatically increase costs to support economic growth and counteract deflation against the background of growth of tariffs that would weigh for external demand.

“This support, as well as structural erosion in the revenue database, is likely to support a budget deficit,” the agency said, adding that the public debt ratio is expected to “continue its trend down over the next few years”.

China’s Finance Ministry has announced what was said to be a “prejudiced” decrease.

“China’s economy has a stable foundation, much advantages, strong stability and great potential,” the ministry said, adding that “long-term favorable” conditions and “general trend of quality economic development” have not changed.

China is not a difficult foreign currency debt issuer, most of its bonds at Renminbi. A Issue $ 2 billion in Saudi Arabia Last November, the waves of the huge demand for investors and the fact that Beijing was able to borrow almost as cheap as the US in dollars.

On Wednesday, the Ministry of Finance raised RMB6BN ($ 823 million) thanks to the release of the first green sovereign bonds in London, the proposal that has been almost seven times signed, according to a Chinese Bank’s statement.

Fitch had Cut your look at China’s credit rating To the negative of the stable in April last year, referring to the growth of debt because Beijing tries to move on new growth models.

On Thursday, the agency stated that its prospect is now stable, despite uncertainty about the influence of Trump’s new tariffs, since the current rating was “the main stock to meet the probable consequences for economic growth and financial indicators.”

Beijing believes that he needs to issue more public debt as part of the efforts to enhance the Chinese economy.

“China will still pursue a more active fiscal policy and moderately free monetary policy,” the Ministry of Finance said.

Moody’s investor service cut your credit forecast in China to negative In December 2023, citing an increasing risk of permanently less intermediate economic growth and over -the -property crisis.

Alan von Meren, Chinese economist at Danske Bank, said the bond market in China is dominated by home players who are unlikely to rating Fitch.

“China is a very high level of savings that requires home, and most of it goes into bonds through banks and pension funds,” he said. “The People’s Bank of China is also ready to facilitate the policy and increase liquidity by reducing reserve requirements, so there will be a lot of money for the purchase of bonds to finance debt.”