Fitch Ratings agency forecasts negative outlook for Chinese economy

Fitch Ratings, a major credit rating agency, has reeled in its outlook for China. The analysis comes at a time when pessimism surrounds the world's second-largest economy. In its recent review, Fitch adjusted the outlook on China's Long-Term Foreign Currency Rating (IDR) from stable to negative.

In that sense, the firm explained that "wide fiscal deficits and rising government debt in recent years have eroded fiscal buffers from a ratings perspective. Fitch believes that fiscal policy is increasingly likely to play an important role in supporting growth in the coming years which could keep debt on a steady upward trend. Contingent liability risks may also be rising, as lower nominal growth exacerbates challenges to managing high economy-wide leverage."

Fitch Ratings' projection comes after a similar one made by Moody's was published in December. "The revision of Fitch's outlook reflects the more difficult situation in China's public finances, due to the double whammy of slowing growth and rising debt," explained Gary Ng, senior economist at Natixis Asia-Pacific.

The negative outlook issued by Fitch reflects a series of risks affecting China's public finances. The agency's analysis highlights increased risks associated with the economic outlook of the country.

"The outlook revision reflects increasing risks to China’s public finance outlook as the country contends with more uncertain economic prospects amid a transition away from property-reliant growth to what the government views as a more sustainable growth model," the firm said in a statement published on its official website.