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CN MOF: Fitch's Metrics Can't Reflect Positive Role of Fiscal Policy Farsightedly
Fitch Ratings affirmed China's A+ long-term foreign currency issuer default rating, but lowered the outlook from Stable to Negative. China’s Ministry of Finance (MOF) sai...
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CN MOF: Fitch's Metrics Can't Reflect Positive Role of Fiscal Policy Farsightedly
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Fitch Ratings affirmed China's A+ long-term foreign currency issuer default rating, but lowered the outlook from Stable to Negative. China’s Ministry of Finance (MOF) said that it was regrettable to see Fitch downgrade the outlook on China's sovereign credit ratings.

Although the Chinese authorities had extensive and in-depth communication with Fitch's rating team in the early stage, and its report partly reflected the views of the Chinese side, the indicator system of Fitch's sovereign credit rating methodology failed to effectively and farsightedly reflect the positive role of fiscal policy in "appropriately improving quality and efficiency" in promoting economic growth and thus stabilizing the macro-leverage ratio.

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According to the MOF, maintaining an appropriate size of deficit and utilizing valuable debt funds are conducive to expanding domestic demand in the long run, supporting economic growth, and ultimately helping to maintain good sovereign credit. The Chinese government has always insisted on coordinating the multiple objectives of supporting economic development, preventing fiscal risks and realizing fiscal sustainability.

Pursuant to the changes in the situation, the Chinese government matches needs with possibilities, scientifically and reasonably arranges the size of the deficit, and maintains the deficit rate at a reasonable level. This year's deficit rate of 3% is on the whole moderate and justifiable, which is boon to stable economic growth and better controls the government's indebtedness, thus reserving policy space to cope with possible risks and challenges ahead.

The MOF believed that this year's economic growth target of around 5% is in par with the actual conditions and development needs, and conveys the determination and confidence in high-quality development. The long-term trend of China's economy remains intact, as does the Chinese government's ability and determination to maintain good sovereign credit.

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With regard to preventing and mitigating local government debt risks, the MOF, together with relevant parties, has resolutely implemented the decisions and deployments of the Party and Central Government in recent year, placed risk prevention and promotion of sustainable financial development in a prominent position, introduced a slew of policies and measures, continued to improve and perfect the management of statutory debts of local governments.

As a next step, the MOF will adamantly implement the decisions and deployments made by the Party, strengthen the governance at source, and address both the symptoms and the root causes of the problem, and work together with the relevant parties to continuously strengthen the management of local governments' statutory debts. It will also further promote the implementation of the debt-elimination program with a basket of measures to yield the results, strictly supervise and be accountable for the problem of unlawful and irregular debt-issuing, strive to build a long-term mechanism for preventing and resolving the risk of implicit debts, and accelerate the establishment of a government debt management mechanism that is suitable for the development of a high quality and will gradually resolve local government debt risks in the context of high-quality development.

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