A decision by a leading credit rating agency to downgrade China’s sovereign debt outlook failed to foresee the “positive role” of Beijing’s fiscal policy mix in promoting economic growth and stabilising the macro-leverage ratio, the Ministry of Finance said on Wednesday.
Fitch Ratings had earlier on Wednesday cited concerns over China’s property and public finance stress, as well as “eroded fiscal buffers” as the result of wide fiscal deficits and rising government debts, as the reasons behind cutting the rating from stable to negative.
“It is a pity to see Fitch’s downgrade,” the finance ministry said.
“The long-term positive trend of China’s economy has not changed, nor has the Chinese government’s ability and determination to maintain good sovereign credit.”
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Local government debt in China rose by 14.3 per cent year on year to 41.4 trillion yuan (US$5.7 trillion) by the end of February. Photo: Xinhua
The ministry added that the local debt risk was “controllable”, and that de-risking was progressing in an orderly manner.
China had also expressed disappointment in December after fellow international rating agency Moody’s Investors Service cut its outlook from stable to negative.
But the move by Fitch comes at a delicate time for the world’s second-largest economy, with China set to release its first-quarter data on Tuesday, which is expected to show a rebound in economic activities.
The finance ministry, which had held deep and extensive discussions with Fitch before the downgrade, said that it had scientifically and rationally arranged the scale of the fiscal deficit, and kept the ratio at a reasonable level.