Fitch: China's Financial Imbalances Reach Historical Highs

(MENAFN) International credit rating agency Fitch Ratings warned Monday that structural financial imbalances within China's economy have reached historically elevated levels, fueled by persistently high household savings, subdued consumer spending, and a recent pullback in capital investment.

In a report released Monday, Fitch cautioned that these deepening imbalances have left the world's second-largest economy increasingly dependent on fiscal intervention and net trade to sustain growth — a precarious foundation that shows little sign of shifting.

The widening gulf between robust private savings and mounting public borrowing is expected to persist, Fitch said, leaving Beijing with limited options beyond expanded government deficits and external demand to keep its economy on track.

At the corporate level, Fitch noted that businesses remain net borrowers, with investments outstripping internal savings. However, that position is more than offset by the household sector, which holds a commanding net lending position — a reflection of deeply entrenched saving habits and a steep decline in real estate investment in recent years.

China's household savings rate held firm at 34.9% in both 2023 and 2024, before edging higher to 35.3% in 2025, as income growth continued to outpace consumer spending, according to the report.

As overall investment contracts, the corporate sector's net borrowing position has likely narrowed, Fitch added — a shift that further inflates the private sector's aggregate net credit balance and compounds the economy's structural demand problem.

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