Fitch recently said it’s worried about China’s financial situation, which might make it harder for the country to repay its debts. This concern comes as China’s economy is changing, facing challenges as it tries to grow in new ways.
Fitch thinks China’s government debt will increase compared to the size of its economy. This means China will owe more money, which could be a problem if its economy doesn’t grow quickly enough.
One reason for this is that many local governments in China borrowed a lot of money, especially for property development. But now, because the property market is struggling, these governments are having trouble paying back what they owe.
Fitch also thinks China’s government spending will be higher than what it earns through taxes and other income. This gap between what it spends and what it earns is called a deficit. Fitch expects this deficit to be quite large compared to the size of China’s economy.
Despite these concerns, Fitch hasn’t actually lowered China’s credit rating yet. It just says the outlook for China’s credit rating is now “negative”, which means there’s a possibility they might downgrade it in the future.
China’s government says it’s planning to spend a lot of money to help the economy grow, even if it means borrowing more. This includes issuing special bonds that aren’t included in its usual budget. But this might add to China’s overall debt, which is already quite high.
Fitch’s worries highlight the challenges China faces in managing its finances and driving economic growth in the long term.