Fitch cuts China's foreign currency rating on rising debt, weakening finances

(Reuters) - Global ratings agency Fitch on Thursday downgraded China's long-term foreign currency credit rating to 'A' from 'A+', on expectations of weak public finances and rapidly rising debt.

The latest U.S. reciprocal tariffs have not been incorporated in the forecast, Fitch said, adding that there is uncertainty about their impact.

The government's debt-to-GDP ratio is expected to rise further over the next few years due to trade tensions with the U.S., subdued domestic demand and deflationary pressure, the rating agency said.

It expects China to be affected by a broader tariff-induced global slowdown, despite the country appearing more resilient to direct U.S. tariffs compared to President Donald Trump's first term.

China's yuan dropped to its lowest level in seven weeks and stock markets slumped on Thursday after Trump unveiled a sweeping set of reciprocal tariffs that were particularly heavy on China and its main trading partners.

(Reporting by Aatrayee Chatterjee in Bengaluru; Editing by Leroy Leo)