Fitch: China May Need to Increase Financial Support

According to analysts from Fitch Ratings, China's determined approach to stimulus has produced some encouraging signs, but further action is needed. The People's Bank of China has implemented a series of easing measures; however, Fitch noted that the effectiveness of interest rate cuts in reviving the real economy remains uncertain due to weak fundamental credit demand and deflationary pressures. Fitch has lowered its inflation forecasts for the next two years, projecting 1.0% by the end of 2025 and 1.3% by the end of 2026. It also stated that increasing the issuance of government bonds to alleviate the financial pressures on local governments and recapitalize banks is unlikely to significantly boost short-term economic activity. With deteriorating export expectations, it emphasized that financial support may need to be increased to prevent growth from falling below 4%.