Moody’s Ratings has affirmed China’s long-term ratings at A1 for both domestic and foreign currency obligations, as well as for senior unsecured debt. The outlook has been revised from negative to stable.

The agency noted that the stabilization of the outlook reflects expectations that China will maintain economic and fiscal resilience, despite ongoing domestic, trade, and geopolitical challenges.

Economic Growth Forecast

Moody’s forecasts China’s real GDP growth at 4.5% in 2026 and 4.2% in 2027. The agency points out that the competitiveness of Chinese exports and their resilience to changes in global trade support expectations of a gradual slowdown in GDP growth over the medium term, even as export growth moderates.

Government Policy Factors

According to the agency, prioritizing investment in high-productivity sectors and simultaneously managing structural imbalances should improve the efficiency of capital use. Authorities are expected to manage the process of resolving regional and local government debt, despite the overall increase in public debt.

Economic Structure and Debt Burden

The rating affirmation takes into account the scale and diversification of China’s economy, as well as its innovation potential, which is evident in the growing competitiveness of high value-added sectors. These factors partially offset the pressures associated with an aging population.

Moody’s notes that fiscal pressures will persist, and the government’s debt burden will continue to rise. Public debt is projected to increase from 68.5% in 2025 to 82.4% in 2027, and to exceed 90% by the end of the decade. This is attributed to ongoing fiscal support for the economy and the potential inclusion of local government debt in debt swap programs to stabilize liquidity risks at the regional and local levels.

Financial System and Debt Servicing

The agency highlights that low interest rates, supported by substantial domestic savings, help limit debt servicing costs. China’s closed and predominantly state-controlled financial system ensures strong, guaranteed demand for government debt.

Rating Ceilings

The country ceilings for China’s ratings on obligations in both domestic and foreign currencies remain unchanged at Aaa and Aa1, respectively.