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Fitch May Be Too Optimistic on China Debt

Fitch Ratings’ estimate of China’s local government debt is vastly more pessimistic than other analyses, but recent statements from government officials suggest that even Fitch may be too optimistic.

The agency, which downgraded the country’s sovereign credit rating this week, puts China’s overall sovereign debt at 74 percent of GDP by the end of 2012, of which 49 percent is central government and 25 percent is local.

Dealing with the systemic risk posed by local government debt is seen as one of the key priorities for the administration of China’s new president, Xi Jinping.

Fears about local debt first arose in the aftermath of Beijing’s 4 trillion yuan stimulus package unleashed at the height of the global crisis in 2008.

CNBC [1]

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