China’s sharp investment downturn is amplifying credit risks across the economy, particularly homebuilders, real estate, banks and construction sectors, Fitch Ratings has warned, as a slowing economy crimps their growth and the ability to repay debt.
Fixed-asset investment in China, or FAI, declined 3.8% in 2025 to 48.52 trillion yuan ($6.8 trillion) — the first annual decline in decades — as a deepening property slump and tighter constraints on local governments’ borrowing have hampered one of China’s traditional growth drivers.
The drastic investment slump in the second half of 2025 has raised significant cross-sector credit risks for rated issuers in China, including that for the government, Fitch said. The rating agency downgraded China’s sovereign rating to “A” from “A+” in April on concerns over weakening finances and rising public debt.
Fitch warned that growth outlook for several sectors was “deteriorating,” citing subdued domestic demand, deep-seated deflationary pressures and property downturn.
The world’s second largest economy lost momentum in the final quarter of 2025, clocking its slowest growth in three years at 4.5%.
