Cutting corporate debt will drag China’s economic growth down to 4.5 per cent, says Fitch
The global ratings agency said measures taken by the government to bring down borrowing levels will inevitably dent business investment
Beijing’s campaign to tackle the scourge of corporate debt will reduce China’s economic growth by more than one percentage point annually in the medium term, according to Fitch Ratings.
The global ratings agency said measures taken by the government to bring down borrowing levels will inevitably dent business investment and take annual GDP growth down to about 4.5 per cent, well below the official target of 6.5 per cent.
“China’s corporate debt challenges remain a key downside risk to medium-term growth...investment needs to slow sharply to reduce corporate borrowing,” said Brian Coulton, chief economist at Fitch, in a report published on Sunday.
“Such an adjustment would take a big toll on GDP growth, given that business investment is equal to a quarter of GDP.
“The scenario analysis we have undertaken suggests that, when it (deleveraging of the real economy) does occur, it will be a process that will be a significant drag on growth.”
