(Reuters) – Ratings agency Fitch revised its outlook on China’s sovereign credit rating to negative on Wednesday, citing risks to public finances as the economy faced increasing uncertainty in its shift to new growth models.
China’s finance ministry said it regretted seeing the ratings revision and said Fitch’s rating system fails to effectively reflect the positive effect of China’s fiscal policy.
QUOTES:
GARY NG, ASIA-PACIFIC SENIOR ECONOMIST, NATIXIS, HONG KONG
“Fitch’s outlook revision reflects the more challenging situation in China’s public finance regarding the double whammy of decelerating growth and more debt. This does not mean that China will default any time soon, but it is possible to see credit polarization in some LGFVs, especially as provincial governments see weaker fiscal health. There are still means of liquidity injection and state resources reallocation to mitigate the pressure if needed.”
ZHAOPENG XING, SENIOR CHINA STRATEGIST, ANZ, SHANGHAI
“The downgrade decision comes before the April Politburo meeting and the release of the first-quarter economic data. However, the impact on macro policy is expected to be small but lasting.
“And as many companies have shifted to yuan financing, it will have little impact on financial markets.”
