Fitch sees medium-term risks from China slowdown
Financial markets were probably being too pessimistic on the short-term outlook for the Chinese economy but there were medium-term risks, one of the world´s largest ratings agencies said on Wednesday.
“Market expectations for the economy´s medium-term growth potential may get revised lower and spillover effects from a more protracted China slowdown could have significant regional and global credit implications,” Fitch Ratings said in a statement.
Nevertheless, the slowdown seen in investment and exports was largely part of a deliberate attempt by the authorities in Beijing. As well, consumption and labour market indicators had remained robust, the agency added.
Indeed, thus far in 2015 monetary easing had been “relatively modest”, the 4.7% devaluation of the yuan versus the greenback since 10 August had been “modest” and fiscal policy “was most probably tightening through the first half of the year” due to restrictions on local government financing.
However, in the medium-term the rapid build-up of private debt from 2008 to 2014 could have its consequences. Spillover effects from a more protracted slowdown in China could have significant regional and global credit implications, according to Fitch.
Coupled with lacklustre growth in other key demand drivers including the US, Europe and Japan, the China slowdown could accentuate credit risks linked to the global macro environment, the agency´s analysts concluded.