Fitch Ratings downgraded China’s sovereign rating on concerns over weakening finances and rising public debt, just one day after the US imposed higher tariffs on the country.
The cut takes China’s long-term foreign currency default rating to “A” from “A+” with a stable outlook, Fitch said in a statement on Thursday.
China’s Ministry of Finance responded with a strong rebuke, describing the decision as biased and not reflective of reality.
The cost of insuring Chinese sovereign debt against default using credit default swaps extended a gain that had begun earlier on Thursday, jumping to the highest level in more than two months.
The downgrade, which is based on forecasts made before US President Donald Trump announced new tariffs on Wednesday, reflects expectations that China’s public finances will continue to weaken and public debt levels will continue to rise, Fitch said.
Analysts at the ratings agency added that “there is headroom at the current rating to accommodate the likely implications for economic growth and fiscal metrics” from the tariffs, which pushed US taxes on many Chinese goods well above 50 per cent.
