China's economic growth to slow, demand remains strong: Fitch Ratings

China's demand growth is poised to remain robust, especially when compared to other large global economies. Additionally, Taiwan is anticipated to see a resurgence in its critical semiconductor sector, bouncing back from a sharp downturn experienced in 2023, Fitch ratings said in its report titled ‘Greater China Cross-Sector Outlook 2024’.

The scale, composition and effectiveness of policy support in mainland China—including the pace of migration of local government financing vehicle (LGFV) debt onto the government’s balance sheet—and the degree to which they affect fiscal metrics and system leverage will be among the key areas to watch.

Fitch Ratings expect the efficacy and mix of policy support to be instrumental in curbing downside risks to economic growth, which is forecast to slow to 4.6 per cent in 2024 after a temporary boost from the reopening in 2023. Slower growth than expected could have ripple effects for the performance of various sectors, both in China and beyond.

Contagion from risk resolutions at high-risk financial institutions and faster-than-expected non-performing loan recognitions at banks could weigh on financial institutions’ credit profiles. However, the ratings agency expects the government’s greater focus on preventing systemic risks to help contain the risks. Meanwhile, LGFVs will get a temporary relief from increased government efforts to resolve debt repayment problems in a more timely manner, although risks in the sector remain prominent.

ALCHEMPro News Desk (KD)