Fitch Ratings upgraded the outlook for six major Chinese banks from Negative to Stable on Tuesday, reflecting continued confidence in government support—even as China’s sovereign rating was downgraded.
Fitch Ratings has revised its outlook for six key Chinese banks to Stable, a shift from the previous Negative stance. The move suggests a more optimistic view of the institutions’ financial stability and continued government backing. The revision applies to five state-owned banks—Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), Bank of China (BOC), Agricultural Bank of China (ABC), and Bank of Communications (BOCOM)—as well as China Merchants Bank (CMB).
The agency emphasized that, despite last week’s downgrade of China’s sovereign credit rating from A+ to A, the banks’ ability to meet their financial obligations remains intact.
“We believe the government still retains financial flexibility to support the financial sector including towards the six banks, even amid higher deficits and rising debt. The required capital under a potential recapitalization scenario has fallen, thanks to systemwide resolution of non-performing assets and more productive credit growth,” the rating agency said.
Fitch’s downgrade of China’s sovereign rating was driven by the country’s deteriorating public finances and an accelerating debt trajectory amid a structural economic transition. The agency projected that China’s debt-to-GDP ratio would rise from 60.9% in 2024 to 68.3% in 2025 and 74.2% in 2026. Nonetheless, the Stable outlook reflects the resilience of the Chinese economy despite growing fiscal challenges.
Escalating Tariff War Adds to Uncertainty
The reassessment comes amid rising tensions between the U.S. and China. Last week, U.S. President Donald Trump announced a fresh wave of tariffs ranging from 10% to 50% on imports from key trading partners, including China. A 34% tariff was imposed specifically on Chinese goods, in addition to an earlier 20% levy.
Beijing swiftly retaliated with its own 34% tariffs on all U.S. imports, alongside export controls on rare earth minerals and targeted restrictions on certain American companies.
In response, Trump threatened further escalation:
“If China does not withdraw its 34% increase above their already long term trading abuses by tomorrow, April 8th, 2025, the United States will impose additional tariffs on China of 50%, effective April 9th,” Trump wrote on Truth Social.
China’s Commerce Ministry responded bluntly “The U.S. threat to escalate tariffs on China is a mistake on top of a mistake. Meanwhile, Beijing sought to reassure both domestic and international audiences of its preparedness. “U.S. tariffs will have an impact (on China), but ‘the sky won’t fall,’” stated a commentary in the People’s Daily.
