Fitch affirms China at A+ on robust external finances and strong macroeconomic track record

Fitch Ratings has affirmed China's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'A+' with a 'Stable Outlook'. China's senior unsecured foreign and local currency bonds are also affirmed at 'A+'. The Country Ceiling is affirmed at 'A+'. The Short-Term Foreign and Local Currency IDRs have been affirmed at 'F1+'.

In its latest credit review report on the Chinese economy, the US-based ratings agency, said that China's robust external finances and strong macroeconomic track record continue to support sovereign rating at its current level of 'A+'.

Fitch said that China's recent economic growth trajectory has been accompanied by a build-up of imbalances and vulnerabilities which will rise over 2016-18 forecast horizon, as policy settings continue to prioritise rapid economic growth over macroeconomic stability. That said, Fitch added that China retains the administrative and financial resources to address these imbalances without a disorderly adjustment.

Fitch forecasts real GDP growth of 6.4 percent in 2017, down from a projected 6.7 percent in 2016, due to the impact of recent macro-prudential tightening measures targeting the housing market. Fitch estimates China's sovereign net foreign assets will decline to 29.1 percent of GDP at end-2016, down from 31.8 percent a year. It forecasts gross general government debt will rise to 52.4 percent of GDP at end-2016

Fitch noted that the forthcoming inclusion of the yuan in the IMF's Currency Composition of Official Foreign Exchange Reserves (COFER) effectively bestows the Chinese yuan with reserve currency status, as it permits global central banks to treat yuan-denominated assets as official reserve holdings.