2021 China Sovereign Outlook Stable Amid Growth Recovery
Source: Fitch Ratings
Greater China sovereign ratings will be largely stable in 2021, amid the region's ongoing economic recovery from the coronavirus shock, which is thus far unmatched elsewhere, Fitch Ratings says in a report. The ratings on China, Hong Kong and Taiwan are on Stable Outlook, while Macao has been on Negative Outlook since late 2019.
Fitch forecasts mainland China's growth to reach 8.0% in 2021, after slowing to 2.3% in 2020. The economic recovery will be increasingly well-balanced in 2021, after successful containment of the coronavirus from mid-March 2020, and many activity indicators now at pre-pandemic levels. We expect fiscal and credit policies to gradually normalise as the authorities become increasingly confident about the sustainability of the economic recovery and amid expectations for an imminent vaccine rollout across several major economies.
Policymakers on the mainland will further emphasise the newly branded "dual circulation" policy in the forthcoming 14th Five-Year Plan, which aims to enhance China's reliance on domestic demand as a growth driver, and appears to have garnered greater impetus amid heightened geopolitical tensions and a more challenge external backdrop. US-China geopolitical frictions are likely to remain, but Fitch expects the administration of US President-elect Joseph Biden to avoid further escalations in trade tensions and pursue a more multilateral approach when disputes arise.
We also expect improved 2021 growth outlooks in Hong Kong, Macao and Taiwan, following relatively successful (albeit varied) coronavirus containment this year. Economic activity in these markets will be supported by stronger growth in mainland China, which will provide a boost to exports and, potentially, a partial recovery in tourism through travel bubbles. Rating profiles are supported by substantial fiscal buffers. In addition, we expect budget deficits to narrow in 2021, following large expansions in 2020.
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