Fitch Downgrades China's Sovereign Credit Rating Amid Rising Debt Concerns

Fitch Ratings downgraded China's sovereign credit rating, citing weakening public finances and rising debt. The downgrade follows President Trump's tariffs on imports. Fitch expects continued deficits and increasing debt/GDP ratio. China's finance ministry criticized the downgrade as biased and not reflective of the true situation.

Fitch Ratings on Thursday downgraded China's sovereign credit rating, pointing to expectations of weakening public finances and a rapidly rising debt trajectory. This move comes on the heels of President Donald Trump's sweeping tariffs that have hit China particularly hard, although these have not yet been factored into Fitch's forecasts.

The ratings agency lowered China's long-term foreign currency rating by one notch from 'A+' to 'A', one year after it downgraded the outlook on China's credit. According to Fitch, the downgrade is driven by the expectation of continued weakening public finances and a significant increase in public debt as China transitions economically.

China's finance ministry has responded with deep regret, calling the downgrade biased and failing to fully and objectively reflect China's actual economic situation. Meanwhile, Fitch warns of the need for sustained fiscal stimulus to support economic growth amid subdued demand, rising tariffs, and deflationary pressures.

(With inputs from agencies.)