Fitch projects a slight narrowing in China’s fiscal deficit, which is expected to remain elevated at 7.3% of GDP in 2026.

Fitch Ratings has projected a slight narrowing in China's fiscal deficit, which is anticipated to remain high at 7.3% of GDP by 2026. This outlook reflects concerns over the country's ongoing economic challenges and the potential impact on government spending and investment. The primary market transmission mechanism is the risk appetite of investors, as elevated fiscal deficits can lead to concerns about sovereign creditworthiness and economic stability. Chinese equities and bonds are particularly exposed, as sustained high deficits may influence capital flows and investor sentiment. Traders will be watching upcoming economic data releases, particularly GDP growth figures, to gauge the effectiveness of fiscal policies in stabilizing the economy.

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