(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 faces growing uncertainty as it shifts to new growth models.
China’s Ministry of Finance said it regrets the rating revision and said Fitch’s rating system fails to effectively reflect the positive effect of China’s fiscal policy.
QUOTES:
GARY NG, SENIOR ASIA-PACIFIC ECONOMIST, NATIXIS, HONG KONG
“Fitch’s revised outlook reflects the more difficult situation in China’s public finances regarding the twin problems of slowing growth and rising debt. This does not mean that China will default anytime soon, but it is possible to see a credit polarization in some LGFVs, especially as Provincial governments see weaker fiscal health There are still means to inject liquidity and reallocate state resources to mitigate the pressure if necessary.
ZHAOPENG XING, CHINESE SENIOR STRATEGIST, ANZ, SHANGHAI
“The downgrade decision comes ahead of the April Politburo meeting and the release of first-quarter economic data. However, the impact on macro policy is expected to be small but lasting.
“And since many companies have switched to yuan financing, this will have minimal impact on financial markets.”