[credit provider=”Jakob Montrasio on flickr” url=”http://www.flickr.com/photos/yakobusan/273595866/”]
This happened earlier this week, and got virtually no mention anywhere (our fault), but we didn’t want it to totally go without passing.Fitch actually sent out a credit warning on China.
Rating agency Fitch on Tuesday downgraded the outlook on China’s currency debt rating to “negative” from “stable,” and sustained the current rating at “AA-.”
“The negative outlook reflects concern over the scale of sovereign contingent liabilities and risk to macro-financial stability arising from the very rapid pace of bank lending in recent years, especially against the backdrop of rising real estate valuations and inflation,” Andrew Colquhoun, head of Fitch’s Asia-Pacific sovereigns group, said in a statement.
That China just has boatloads of cash, and can’t possibly get into debt problems is widely assumed, even in light of the well-known worries about the banking system. Fitch here is just making the obvious conclusion that you can’t separate the state’s finances and that of the banking system.
Also, it’s important to remember the work of professor Victor Shih, who has observed that local debts in China are enormous, and also highly dependent on the real estate boom for financing, yet another macro concern.