China's sovereign credit rating was cut to negative by Fitch on Wednesday, noting risks to public finances on increasing economic uncertainty.

The downgrade mirrors Moody's action from December and occurs as Beijing intensifies its endeavours to boost a weak post-COVID economic revival in the world's second-largest economy through fiscal and monetary measures, Reuters reports.

"Fitch's outlook revision reflects the more challenging situation in China's public finance regarding the double whammy of decelerating growth and more debt," stated Gary Ng, Natixis Asia-Pacific senior economist.

"This does not mean that China will default any time soon, but it is possible to see credit polarization in some LGFVs (local government financing vehicles), especially as provincial governments see weaker fiscal health."

Fitch forecasts China's general government deficit, which includes infrastructure and other official fiscal activities beyond the headline budget, to increase to 7.1% of GDP this year from 5.8% in 2023, the highest level since 8.6% in 2020.

Although it lowered its ratings outlook to negative from stable, signalling a potential downgrade in the medium term, Fitch said China's issuer default rating stands at 'A+'.

Fitch predicts that China's economic growth will decelerate to 4.5% in 2024 from the previous year's 5.2%. Meanwhile, the International Monetary Fund anticipates China's GDP to expand by 4.6% this year.

"The outlook revision reflects increasing risks to China's public finance outlook as the country contends with more uncertain economic prospects amid a transition away from property-reliant growth to what the government views as a more sustainable growth model," Fitch stated.

"Wide fiscal deficits and rising government debt in recent years have eroded fiscal buffers from a ratings perspective. Contingent liability risks may also be rising, as lower nominal growth exacerbates challenges to managing high economy-wide leverage," the rating agency added.