Fitch Ratings just did something it doesn’t do lightly. The agency downgraded China’s Long-Term Foreign-Currency Issuer Default Rating from ‘A+’ to ‘A’ on April 3, maintaining a Stable Outlook but sending a clear message: the world’s second-largest economy has a fiscal problem that official numbers don’t fully capture.
The numbers behind the downgrade
Fitch projects general government deficits will hit 8.4% of GDP in 2025. The average general government deficit since 2020 sits at 6.5% of GDP.
Government revenue as a share of GDP is expected to plunge to 21.3% in 2025. That’s down from 29.0% in 2018, a decline of nearly eight percentage points in seven years. Tax cuts and cratering local government income have driven the collapse.
General government debt is forecast to reach 68.3% of GDP in 2025 and climb to 74.2% by 2026.
