Futures on Chinese Hang Seng China Enterprises Index (CHN.cash) are rising today above 6000 points after a very strong session in China. Fitch Ratings revised outlook on China economy to negative, with affirmed 'A+' rating. Another agency, Moody’s in December slapped a downgrade warning on China’s credit rating. Moody's cited the costs to bail out local governments and state firms, while controlling a property crisis. However, Fitch doesn't expect further deflation in the country, which may be seen as quite 'bullish', despite the lowered overall outlook. China’s factory output and retail sales topped forecasts in January-February period,
- Outlook revision reflects increasing risks to China's public finance The agency believes that fiscal policy is likely to play an important role in supporting growth in coming years
- Fitch forecasts general China government deficit to rise to 7.1% of GDP in 2024. What's more 2024 deficit will be highest since 8.6% of GDP deficit in 2020
- General government debt (local and central government debt) to rise to 61.3% of GDP in 2024 (54.0% 'A' median) from 56.1% in 2023. It's deterioration from 38.5% in 2019, when Chinese debt was well below the peer median, due primarily to sustained fiscal support to counter economic pressures.
- Debt as a share of revenue is forecast to be 234% in 2024, well above the 145% 'A' median. Fitch forecasts the debt ratio to rise to 64.2% in 2025 and nearly 70% by 2028 vs < 60% in our previous review
- The degree to which fiscal support reignites underlying GDP growth is a key uncertainty for our debt path. Risks from higher government debt are mitigated by a high domestic savings rate, which supports debt affordability and financing flexibility.
- China GDP growth to moderate to 4.5% in 2024, from 5.2% in 2023. Fitch doesn't forecast a prolonged period of deflation. Inflation outlook is set at 0.7% by end-2024 and 1.3% by end-2025
- According to Fich, the 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 a more 'sustainable' growth model, supported by government.
CHN.cash (D1)
Futures on Hang Seng Index (CHN.cash) increased today above major resistance level of SMA200 (red line) near 6000 points.
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