Weaker exports will be a drag on growth in China even as domestic demand growth stays weak and deflationary pressures linger amid ongoing property-sector challenges, poor household confidence and high leverage, it noted.
Fitch Ratings expects the US to raise tariffs on imports from China, with a baseline assumption that the effective tariff rate will rise to 35 per cent from mid-2025 from 10 per cent.
Weaker exports will be a drag on growth in China even as domestic demand growth stays weak and deflationary pressures linger.
So Fitch expects Chinese fiscal and monetary policy to become more stimulatory in 2025.
Against this backdrop, Fitch expects Chinese fiscal and monetary policy to become more stimulatory in 2025.
The authorities’ recent shift to a ‘moderately loose’ monetary policy stance increases the potential for policy interest rate cuts beyond the 25 basis points (bps) that Fitch currently expect in 2025.
Nevertheless, the effectiveness of additional rate cuts remains unclear, as weak demand for lending largely reflects low consumer and business confidence, Fitch Ratings said in a report, titled ‘China Quarterly Credit Brief—1Q25’.
It expects fiscal support to play the key role in addressing challenges to growth in China, but such support will likely be provided incrementally and calibrated to downside risks to the economy.
Fitch projects the general US government deficit will widen further, from its already elevated forecast of 7.1 per cent of gross domestic product (GDP) in 2024, keeping government debt-to-GDP ratio on an upward path.
Fitch forecasts China’s growth to slow to 4.3 per cent this year from 4.8 per cent in 2024, but the government’s more supportive policy stance should bolster corporates’ revenue in various sectors despite weak consumer sentiment.
Fibre2Fashion News Desk (DS)
