China’s Government Debt Will Remain Stable …. If There Is No Shock

As China’s government debt will edge up modestly to 37.5% of GDP in 2017 and only rise slightly next year, Moody’s analysts rate China’s fiscal strength at “Very High.” In their April 12 report titled “Fiscal Impulse Larger than Deficit Implies; Credit Impact Depends on Sustainability of Growth,” Marie Diron and colleagues said they believe the general budget alone won’t be sufficient to sustain China’s GDP growth of 6.5%.

China targets a moderate budget deficit of 3% of GDP in 2017

Providing insight into fiscal and quasi-fiscal sources of stimulus and potential credit implications for the sovereign, Diron and team highlight that...