Fitch Cuts China’s Growth Forecast

Fitch Ratings cut down its forecast for China’s growth, citing significant effects of the impending collapse of the property sector from real estate crackdowns and Evergrande’s debt crisis.

Ratings agency Fitch slashed its outlook for the Chinese economy from an 8.4 percent growth in 2021 to 8.1 percent, while the 5.5 percent forecast for 2022 was cut to 5.2 percent.

China has seen robust growth amid the COVID-19 pandemic, but problems in the property sector has largely contributed to a slowdown in the latter half of 2021, according to Fitch.

The Chinese property sector was weakened by a sudden tightening of regulations as part of the government’s wealth redistribution scheme, hammered by China Evergrande Group’s insolvent liabilities worth over $300 billion.

Pandemic restrictions in July and August also had much to do with the slowdown.

Residential properties sales in China declined by 20 percent in August 2021 — this sharp figure, however, was mostly caused by a high base from August 2020 when economies were first disrupted by COVID-19.

Fitch warned on Sep. 20 that credit profiles from the property sector may worsen if home prices continue to fall for the rest of the year.

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