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Fitch cuts outlook for China’s state-owned banks from stable to negative citing Beijing’s limited capacity to support them
- Move comes a week after Fitch cut its projection for the country’s sovereign credit rating, reflecting pessimism in the world’s second largest economy
- ‘The large size of the banking sector … constrains the government’s ability to support the sector,’ the credit ratings agency says
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Yuke Xiein Beijing
Fitch Ratings has lowered its outlook for China’s state-owned banks from stable to negative a week after it cut its projection for the country’s sovereign credit rating, reflecting pessimism in the world’s second largest economy and concerns over Beijing’s capacity to support its biggest lenders.
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The downgrade in the ratings outlook of China’s “big six” state-owned banks, including the Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), and Bank of China (BOC), “mirrored the same outlook revision on China,” Fitch wrote in a report published on April 16.
The report noted that the recent revision on China’s sovereign outlook was because of worries about the country’s public finance and economic prospects as it sought to transition from a property-driven growth model to one that the government deemed more sustainable.
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Regarding the adjustment for the banks’ outlook, Fitch said on Tuesday that the current size of China’s banking system is an important factor limiting the amount of support the central government could give to its biggest lenders.
“The Chinese banking system has grown rapidly since 2008, with total assets of 417 trillion yuan (US$57.6 trillion) at the end of 2023, equivalent to around 330 per cent of 2023 gross domestic product,” it said.
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