Fitch Ratings has affirmed China's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'A+' with a Stable Outlook. The Short-Term Foreign- and Local-Currency IDRs have been affirmed at 'F1+'. The issue ratings on China's senior unsecured bonds are also affirmed at 'A+' and 'F1+'. The Country Ceiling is affirmed at 'A+'.

The affirmation of the ratings and Outlook reflects the following key rating drivers:

China's ratings are underpinned by the strength of its external finances and macroeconomic track record. The country's near-term growth prospects remain favourable, and economic policies have been effective in responding to a variety of domestic and external pressures over the past year. However, a further increase in the economy's overall leverage in the context of continued adherence to ambitious GDP growth targets raises the potential for economic and financial shocks and, in Fitch's view, will constrain growth prospects over the medium-term.

Large and rising debt levels across China's non-financial sector, combined with the low stand-alone credit quality of Fitch-rated banks in its financial system (as indicated by their average viability rating of 'bb') remain the most significant risk factor for the sovereign rating. The agency expects official aggregate financing (excluding equity) will rise to 208% of GDP in 2017, from 201% in 2016 and 114% in 2008. Fitch's Financial Institutions team estimates that a broader credit measure, which incorporates activity not directly captured in the official series, will rise to around 270% at end-2017. Household debt remains moderate despite its rapid growth in recent years, but China's corporate sector has become the most highly indebted among major economies globally, based on figures from the Bank for International Settlements.