The difficulty of this balancing act was central to Scope Ratings’ recent decision to downgrade China’s credit rating from “A+” to A/Stable Outlook in May 2023 given the continuous upward trajectory of public debt and decline in growth expectations over the coming years.
The worsening medium-term economic outlook is putting even more pressure on China’s public finances, while reform momentum has slowed. Debt levels were rising in the decade before the pandemic. Under the IMF’s narrow definition, China’s general government debt increased to 60% in 2019 from 34% of GDP in 2010. The fiscal stimulus in response to the pandemic raised debt to 77% of GDP in 2022. We now expect debt to exceed 100% of GDP by 2027.
Under the IMF’s broader definition,…
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