China’s Finance Ministry Defends 3% Deficit Ratio Amid Fitch Downgrade
In the wake of Fitch Ratings’ decision to downgrade China’s credit outlook from “stable” to “negative,” the Chinese Ministry of Finance on Wednesday reaffirmed its fiscal strategy, emphasizing that the 3 percent deficit ratio set for 2024 is both “moderate” and “rational.”
Responding to media inquiries on its official website, a ministry spokesperson highlighted that Fitch’s assessment overlooks the proactive and long-term benefits of China’s fiscal policy adjustments, which are geared toward achieving high-quality development.
“Maintaining a moderate deficit and strategically utilizing debt are critical for stimulating domestic demand and driving economic development,” the spokesperson stated. “This approach ultimately safeguards China’s sovereign credit reputation.”
The ministry underscored that setting the 2024 deficit ratio at 3 percent is a pragmatic decision aimed at fostering stable economic growth and effectively managing government debt. This fiscal stance, according to the official, provides sufficient policy space to address future challenges and risks.
Addressing concerns about local government debt, the ministry assured that the repayment of principal and interest on legal debts is effectively guaranteed. Efforts are underway to resolve hidden debts, thereby preventing and mitigating potential risks.
Reflecting on the nation’s economic performance, the ministry noted China’s 5.2 percent GDP growth in 2023 and the government target of around 5 percent for the current year. “China is committed to high-quality growth, reinforcing the positive momentum of our economy,” the spokesperson added. “We have the ability and unwavering commitment to maintain a solid sovereign credit standing.”
Despite maintaining China’s sovereign credit rating, Fitch shifted its outlook due to concerns over financial health. The credit agency cited factors such as economic challenges and debt levels influencing their decision.
