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Fitch Retains China's 'A+' Rating

Fitch Ratings maintained China's sovereign ratings and 'stable' outlook on Friday, citing strong external balance sheet and the less volatile economic growth.

Fitch affirmed China's long-term foreign and local currency Issuer Default Ratings at 'A+'. The 'stable' outlook reflects Fitch's view that upside and downside risks to the rating are balanced.

The sovereign external balance sheet is China's core sovereign credit strength. China's foreign reserves rose to $3.82 trillion at end-2013. This was equal to 19.2 months of current external payments.

China's growth model faces tightening constraints from the rapidly increasing burden of leverage in the economy and from the deteriorating ability of the economy to absorb additional investment profitably.

According to Fitch, China's GDP growth would remain less volatile out to 2015 than the 'A' range median in Fitch's projections. However, the re-balancing process entails some risk of sharply higher volatility if things go less smoothly than Fitch expects.

Further, Fitch estimates the level of aggregate financing in China's economy at 217 percent of GDP at end-2013, up from 198 percent at end-2012. The authorities acted more aggressively to contain risks to financial stability since mid-2013.

However, fundamental credit weaknesses, including low average incomes and weak scores for governance, weigh on the credit profile relative to 'A' range peers.

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