China’s sovereign debt rating downgraded

Fitch downgraded China’s sovereign debt rating, warning of huge debt and worsening public finances.

The lowering of Beijing’s foreign currency rating from A+ to A was based on forecasts made before US President Donald Trump’s “Liberation Day” tariffs, but Fitch noted that China was vulnerable to a broader global slowdown as a result of increased protectionism.

Though some economists are growing more optimistic about the country’s growth prospects — Nomura recently upgraded its forecast for 2025 — others are not: Rhodium Group analysts forecast Beijing will see tax revenues decline this year even if it meets its full-year growth targets, meaning “China’s fiscal resources are exhausted,” and “the era of difficult trade-offs is here.”