Ministry of Finance in Beijing Photo: VCG

China’s Ministry of Finance on Wednesday said it is disappointed with Fitch’s decision to downgrade the outlook of China's sovereign credit rating, saying that the rating methodology fails to effectively reflect the positive effects of China’s fiscal policy on promoting the economic growth and further stabilizing the macro leverage ratio.

China’s deficit rate is maintained at a moderate and reasonable level and the work of resolving local government debt is progressing in an orderly manner, with the risks are under control, an official from the ministry said.

The remarks came after Fitch International Credit Rating Company released a report maintaining China's sovereign credit rating unchanged but adjusting the rating outlook from "stable" to "negative.”

In response to the Fitch’s concern about fiscal sustainability and the growing risks from fiscal deficit, local government debt, financing vehicle debt, the finance ministry official said that national fiscal deficit for 2024 is conducive to maintaining the necessary levels of expenditure, stabilizing and boosting the confidence of the market, guarding against the risk of government debt.

The national fiscal deficit arranged for 2024 is 4.06 trillion yuan, an increase of 180 billion yuan from last year, and the 2024 deficit rate target is 3 percent, the same as last year.

The official added that in recent years Chinse government departments at various levels have made risk prevention a priority, introduced a series of policies to improve the management of local governments' statutory debts, and actively resolved the risks of local government debt.

Localities are working together to resolve debt issues, with provinces taking primary responsibility. Progress has been made in reducing hidden debt and settling debts owed to enterprises.

“Overall, China's local government debt resolution work is progressing in an orderly manner, and the risk is generally controllable,” the official said.

Looking back to 2023, it is encouraging to see that China's GDP grow by 5.2 percent, contributing more than 30 percent of the global economic growth. The long-term positive trend of China's economy remains unchanged, as does the Chinese government's ability and determination to maintain good sovereign credit, the official said.

Looking ahead, the ministry will further promote the implementation of the package of debt resolution solutions, strictly supervise and investigate the problem of illegal and illegitimate debt financing, strive to build long-term mechanisms for preventing and resolving the risk of hidden debt. 

It will also accelerate the establishment of government debt management mechanisms compatible with high-quality development, and gradually resolve local government debt risks while pursuing high-quality development.

Global Times