Fitch Ratings Highlights China's Economic Resilience Amid Weak Domestic Demand

Fitch Ratings has reported that China's economy is demonstrating resilience to global energy shocks, although weak domestic demand is constraining growth prospects. The country has managed to remain relatively insulated from severe energy disruptions due to diversified supply sources and supportive government policies. However, the agency warns that persistent high energy prices could pose risks, particularly affecting trade and manufacturing sectors that are sensitive to global demand and input costs.

Despite the resilience in external factors, domestic consumption in China remains weak, with consumer confidence low. This situation limits the potential for a significant increase in household spending in the near future, indicating that the recovery is uneven. External sectors and government support are currently playing a more substantial role in driving growth than domestic demand.

On the fiscal front, Fitch anticipates that China's budget deficit will slightly decrease by 2026 but will still be high at approximately 7.3% of GDP. This elevated deficit reflects ongoing government efforts to stabilize growth while gradually normalizing fiscal policies. The combination of a strong external position and sluggish domestic demand presents challenges for policymakers as they navigate the economic landscape.

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Source: KLEA News