Fitch Ratings has affirmed China’s Long-Term Issuer Default Rating at A and kept the outlook Stable. The decision, the agency said, rests on a combination of structural economic strengths and growing public finance challenges.
Economic fundamentals underpinning the rating
Fitch highlighted China’s large and diverse economy as a central support for the A rating. The agency noted that this scale, together with the country’s transition toward advanced manufacturing and technology, augurs well for GDP growth prospects compared with similarly rated peers. China’s significant role in international trade and its strong external financial position were also cited as rating supports.
Growth and inflation outlook
Fitch expects real GDP growth to stay resilient, forecasting 4.6% in 2026 after 5% in 2025. The agency contrasted this with a 2.2% median growth rate among A-rated sovereigns. Robust export performance and ongoing strength in manufacturing activity are expected to be key drivers of the projected growth path. Fitch also sees average growth of 4.3% through 2029, supported by the government’s emphasis on industrial upgrading and investment in advanced manufacturing and technology.
On prices, Fitch finds China is emerging from roughly three years of deflation as measured by the GDP deflator. It forecasts consumer price inflation to average 1.2% in 2026, up from 0.1% in 2025. Producer price inflation turned sharply positive in April, a shift the agency attributes in part to higher energy costs.
Domestic demand and activity composition
Despite the stronger headline growth outlook, Fitch notes that domestic demand remains subdued. Household confidence is described as weak, owing to property wealth effects and a soft labor market, which together have weighed on goods consumption. Services sector activity has performed better relative to goods consumption. Investment activity rose in the first quarter of 2026, attributed to front-loading of local government infrastructure spending.
Public finances and debt trajectory
The agency balanced China’s strengths against medium-term public finance pressures. Fitch pointed to high deficits, declining revenue, rising debt and contingent liability risks linked to elevated economy-wide leverage. Despite these concerns, low financing costs help mitigate near-term risk.
On fiscal metrics, Fitch projects the consolidated general government deficit to narrow slightly to 7.3% of GDP in 2026 from 7.6% in 2025. The central government, the agency notes, continues to assume a larger fiscal role through transfers to local governments and via additional issuance - including a further 1.3 trillion yuan in ultra-long special bonds planned for 2026.
Fitch expects revenue to GDP to decline further to 20.6% in 2026, down from 29% in 2018, driven by tax cuts and reduced land-related revenues at the local level. General government debt is projected to continue rising, reaching nearly 80% of GDP by 2028, up from 68.5% in 2025 and above the 58.6% median among A-rated sovereigns.
To address local government financing vehicle liabilities, local authorities are implementing a five-year, 10 trillion yuan debt swap program. The agency also flagged elevated corporate leverage, noting non-financial corporate liabilities of 174.7% of GDP at the end of the fourth quarter of 2025.
External and geopolitical considerations
Fitch expects China’s external finances to remain a support for the rating. The agency also observed that a recent summit between President Xi Jinping and US President Donald Trump, which emphasized strategic stability, should reduce the near-term risk of a tariff re-escalation.
Bottom line
Fitch’s affirmation of an A rating with a Stable Outlook reflects a view that China’s growth potential and external buffers outweigh medium-term fiscal and leverage-related risks. The agency’s baseline assumes continued policy focus on industrial upgrading and targeted fiscal measures, while monitoring the trajectory of debt and revenue trends.
Key data and forecasts cited
- GDP growth: 5% in 2025, 4.6% in 2026; 4.3% average through 2029.
- Consumer price inflation: 0.1% in 2025; 1.2% forecast for 2026.
- Consolidated general government deficit: 7.6% of GDP in 2025; 7.3% forecast for 2026.
- Revenue to GDP: 29% in 2018; 20.6% forecast for 2026.
- General government debt: 68.5% of GDP in 2025; nearly 80% forecast by 2028.
- Non-financial corporate liabilities: 174.7% of GDP at end-Q4 2025.