China criticizes Fitch's sovereign rating downgrade

Release time：2024-05-22 05:50:25 Source：World Web news portal

Rating agency Fitch's sovereign credit rating methodology and indicator system have failed to effectively take into account the positive role of China's fiscal policies, which are more proactive with better efficacy in boosting economic growth and in turn, stabilizing macro leveraging ratios, a senior official from the Ministry of Finance said on Wednesday.

According to an online statement by the ministry, the official said that in the long run, maintaining an appropriate deficit scale and properly using valuable debt funds will help expand domestic demand, support economic growth and eventually facilitate maintaining a sound sovereign credit rating situation.

The comments came after Fitch revised on Tuesday its outlook for China's sovereign credit rating to "negative" from "stable", citing increasing risks to the country's public financing outlook.

"The Chinese government always manages to achieve the multiple goals of supporting economic development, preventing fiscal risks and achieving fiscal sustainability, while scientifically and rationally planning for the deficit scale in accordance with changes in the situation, thereby maintaining the deficit rate at a reasonable level," the official said.

China set its targeted fiscal deficit-to-GDP ratio at 3 percent this year, which is moderate, reasonable and conducive to stable economic growth, and could also effectively control the government's debt ratio. It also reserves policy space for addressing possible risks and challenges in the future, the official said.

China's budget deficit for 2024 is 4.06 trillion yuan ($560 billion),180 billion yuan higher than last year. The expected deficit rate of 3 percent is the same as the target last year.

Such an arrangement is conducive to maintaining the necessary expenditure intensity to utilize countercyclical fiscal adjustments and thereby stabilize and boost market confidence. It is also conducive to balancing development and security, preventing government debt risks, and leaving room for dealing with complex and difficult situations in the future, the official said.

Overall, addressing local government debt situations is proceeding in an orderly manner in China, with risks generally kept under control.

Looking ahead, the ministry will work with relevant parties to further promote the implementation and effectiveness of the package of measures resolving local government debt risks, strictly supervise and hold accountable violations of laws and regulations on debt raising, focus on building a long-term mechanism to prevent and resolve implicit local government debt risks, accelerate the establishment of a long-term government debt management mechanism that aligns with high-quality development and gradually resolve local government debt risks in the process of high-quality development, the official said.

Foreign Ministry spokeswoman Mao Ning said at a regular news conference on Wednesday that the long-term positive economic prospects of the Chinese economy remain unchanged, and China's determination and ability to maintain its sovereign credit status will not change either.

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