Source: Finance Association
Recently, relevant responsible comrades from the Ministry of Finance were interviewed by reporters on issues related to the downgrading of our sovereign credit rating by Fitch Ratings.
According to the Ministry of Finance's website, recently, relevant responsible comrades from the Ministry of Finance were interviewed by reporters on issues related to Fitch Credit Rating's downgrading of our sovereign credit rating.
The reporter asked: On April 10, Fitch Ratings released a report keeping China's sovereign credit rating unchanged, but adjusted the rating outlook from “stable” to “negative.” What is the Ministry of Finance's opinion on this?
A: I'm sorry to see Fitch downgrade the outlook for China's sovereign credit rating. Earlier, we had extensive in-depth communication with the Fitch Ratings team, and the report also partly reflected the views of the Chinese side. However, judging from the results, the index system of Fitch's sovereign credit rating methodology fails to effectively and prospectively reflect the positive effects of fiscal policy “moderately strengthening, improving quality and efficiency” in promoting economic growth and thereby stabilizing macroeconomic leverage ratios.
In the long run, maintaining a moderate deficit size and making good use of valuable debt funds will help expand domestic demand, support economic growth, and ultimately help maintain good sovereign credit. The Chinese Government has always insisted on taking into account the multiple goals of supporting economic development, preventing financial risks, and achieving fiscal sustainability. According to changes in the situation, the Chinese Government coordinates the needs and possibilities, scientifically and rationally arranges the size of the deficit, and maintains the deficit rate at a reasonable level. The 2024 deficit rate is set at 3%. Overall, it is moderate and reasonable. It is conducive to steady economic growth. It can also better control the government debt ratio and reserve policy space to deal with possible future risks and challenges.
Looking back at 2023, China's GDP grew by 5.2%, contributing more than 30% to the world economy, which is exciting. This year, we set an expected target of around 5%, which meets actual conditions and development needs, and conveys determination and confidence for high-quality development. The long-term positive trend of China's economy has not changed, and the Chinese government's ability and determination to maintain good sovereignty and credit have not changed.
Reporter asked: Fitch pays close attention to fiscal sustainability issues and raised concerns about rising risk from the perspective of fiscal deficits, local government debt, and financing platform debt. Please tell us about the work and considerations in this regard.
A: I just mentioned that an appropriate fiscal deficit is conducive to giving full play to the positive role of government debt financing and maintaining the necessary support for high-quality economic and social development. In 2024, the national fiscal deficit was set at 4.06 trillion yuan, an increase of 180 billion yuan over the budget at the beginning of the previous year. The estimated deficit rate is 3%, which is the same as the budget at the beginning of the previous year. This arrangement is conducive to maintaining the necessary expenditure intensity, giving full play to the countercyclical fiscal adjustment role, stabilizing and boosting market confidence. It is also conducive to coordinating development and security, preventing government debt risks, and leaving room for dealing with complex and difficult situations in the future.
In terms of preventing and mitigating local government debt risks, in recent years, the Ministry of Finance, together with relevant parties, has resolutely implemented the decisions and arrangements of the Party Central Committee, placed risk prevention and promotion of sustainable fiscal development in a prominent position, introduced a series of policies and measures, continuously improved and perfected local government statutory debt management, and actively and steadily resolved hidden local government debt risks. All relevant departments, local party committees and governments at all levels have further stepped up their efforts and taken more practical measures, which have achieved positive results.
The Ministry of Finance arranges refinancing of government bonds of a certain scale within the local government debt limit space to support localities, especially high-risk regions, to resolve hidden debts on financing platforms and clear up government arrears to enterprises, etc., to ease the pressure of centralized repayment of maturing debts and reduce the burden of interest expenses. According to the principle of “the province bears overall responsibility, cities and counties do their best to reduce debt”, each region coordinates various resources based on its own efforts, formulates debt conversion plans, and clarifies specific measures item by item. Through the concerted efforts of all parties, the overall risk of local debt has been mitigated. Local government legal debt principal and interest payments are effectively guaranteed, and the size of hidden debt has gradually declined; positive progress has been made in the settlement of government arrears to enterprises, and the number of local financing platforms has decreased. Overall, at present, China's local government debt resolution work is progressing in an orderly manner, and the risks are generally manageable.
In the next step, the Ministry of Finance will resolutely implement the decisions and arrangements of the Party Central Committee, strengthen management at the source, integrate the near and far, address both symptoms and root causes, work with relevant parties to continuously strengthen local government legal debt management, further promote the implementation and effectiveness of debt packages, strictly supervise and account illegal borrowing issues, focus on building a long-term mechanism to prevent and mitigate hidden debt risks, and accelerate the establishment of a government debt management mechanism compatible with high-quality development to gradually resolve local government debt risks in high-quality development.
editor/tolk