The Chinese economy is likely to achieve a "soft landing" despite a considerable slowdown in economic growth, Fitch Ratings said in a report late Monday.
The government's investment-led strategy backed by monetary easing may help avoid a "hard landing" in the short term, it said.
However, Fitch warned that the renewed reliance on investment to support activity may prolong the the economy's structural imbalances.
Statements by senior officials including Premier Wen Jiabao have pointed to renewed emphasis on investment to support growth in the remainder of the year. This investment-led strategy is likely to be at the cost of postponing resolution of the economy's structural imbalance towards investment, Fitch said.
"Moreover, the rise in investment as a share of GDP since 2008, which is inherently unsustainable, has coincided with deteriorating efficiency as measured by the ratio of incremental output per unit of investment," the report noted.
The risks attached to rebalancing China's growth are a structural weakness weighing on the ratings, the agency said. China's long-term foreign currency IDR is rated A+ with a 'stable' outlook and the local currency IDR at AA- with a 'negative' outlook.
by RTT Staff Writer
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