前有穆迪，後有惠譽，中國主權信用評級展望再次被下調！中國失敗的財政政策是主因！｜米國路邊社 [20240410#547]

Summary

The video discusses Fitch's recent downgrade of China's sovereign credit outlook to negative, citing economic slowdown due to the real estate crisis and rising government debt. This follows Moody's similar action four months ago. The video explores the potential severe impact on China's economy, including capital outflows, stock market declines, and increased borrowing costs. It highlights the Chinese government's differing responses to these downgrades and the broader implications for China's fiscal policies and international financial standing.

Takeaways

• 📉 Fitch and Moody's have downgraded China's sovereign credit rating outlook to negative, with S&P expected to follow suit.
• 🏢 The downgrades are attributed to China's economic growth being dragged down by the real estate crisis and the government's heavy financial burden.
• 🗣️ China's official response to Moody's downgrade was strong and critical, but the reaction to Fitch's downgrade was more conciliatory, indicating the importance of the rating.
• 💡 The potential downgrade could lead to significant negative impacts, including capital outflows from China's stock market and a drop in bond market prices.
• 🏦 A negative outlook from all three rating agencies could jeopardize China's current A+ rating, affecting international credit limits and borrowing costs.
• 📊 Fitch's report highlighted concerns over China's fiscal deficit, which is expected to rise from 5.8% to 7.1% of GDP, exceeding the A-rated country median.
• 💼 Fitch criticized China's fiscal policy for lacking clarity and foresight, with decreasing fiscal revenue and no clear avenues for increasing it.
• 📈 Fitch predicts China's government debt will continue to rise, with the ratio of general government debt to GDP increasing from 56.1% to 61.3% by 2024.
• 🏗️ The handling of urban investment bonds (urban bonds) by the Chinese government could increase the debt burden on local governments and potentially destabilize local banks.
• ⏳ Fitch has revised down its forecast for China's 2024 GDP growth from 5.2% to 4.5%, citing a weak real estate market and low consumer spending as reasons.
• 🌐 The World Bank has also released a similar GDP growth forecast for China, echoing concerns about debt crisis, real estate issues, aging population, and trade frictions.

Q & A

What event prompted the discussion in the video?

The discussion was prompted by Fitch's downgrade of China's sovereign credit rating outlook to negative.

What reasons did Fitch provide for downgrading China's credit rating outlook?

Fitch cited the real estate crisis dragging down economic growth and the heavy financial burden of the Chinese government with increasing debt.

How did China react when Moody's downgraded its credit rating outlook four months ago?

China reacted strongly and critically, with official news bulletins condemning Moody's and the general public accusing Moody's of being a tool of American imperialism.

What was the reaction of the Chinese Ministry of Finance to Fitch's downgrade?

The Ministry of Finance expressed a softer attitude, mentioning that they had extensive communications with Fitch's rating team but failed to convince them.

What immediate impacts did Fitch's downgrade have on the Chinese financial markets?

There was a significant outflow of northbound funds from the A-shares market, a sharp decline in the bond market, and a drop in real estate stocks.

How might a downgraded sovereign credit rating affect China's international financial dealings?

A lower credit rating could reduce China's borrowing capacity from institutions like the World Bank and the International Monetary Fund, and increase borrowing costs from international financial institutions.

What are the potential consequences for Chinese companies if the sovereign credit rating is downgraded?

Chinese companies, especially in the real estate sector, could face higher financing costs and greater difficulty in securing international loans.

What are the key fiscal issues highlighted by Fitch in its report on China's downgrade?

Fitch highlighted the rising fiscal deficit, concerns over unclear fiscal policies, and the increasing government debt ratio relative to GDP.

What long-term forecast did Fitch provide regarding China's government debt?

Fitch forecasted that China's government debt would continue to rise, reaching 61.3% of GDP in 2024 and potentially approaching 70% by 2028.

What impact could China's downgraded credit rating have on its GDP growth forecast according to Fitch and the World Bank?

Both Fitch and the World Bank reduced their GDP growth forecasts for China in 2024 to 4.5%, citing ongoing issues in the real estate market and weak consumer spending.

How does the video suggest China should address its fiscal and economic challenges?

The video suggests that China needs to implement clear and specific fiscal reforms, similar to the detailed budget plans of the United States, to address revenue and expenditure issues effectively.

What analogy does the video use to describe China's economic situation under its current leadership?

The video compares China's economic situation to a person hesitating to jump from a second floor, who now finds themselves on the tenth floor, increasingly trapped and facing greater risks.