MARC Ratings has affirmed the People’s Republic of China’s (China) sovereign rating at AAA with a stable outlook based on the rating agency’s national rating scale. This is an unsolicited rating based on public information. The AAA rating reflects China’s large, diversified, and internationally competitive economy, strong external position, and advanced policy execution capacity.
China remains the world’s second-largest economy, supported by a vast consumer base and a central position in global supply chains. Real gross domestic product (GDP) growth stood at 5.0% in 2025 (2024: 5.0%), above the peer median of 2.5%, supported by targeted fiscal and monetary stimulus. Continued industrial upgrading under the 15th Five-Year Plan (2026–2030) is shifting the economy towards higher value-added and innovation-driven sectors, particularly advanced electronics, electric vehicles and new-energy industries, in support of long-term development objectives.
Economic growth nonetheless faces some headwinds. Domestic demand remains relatively subdued as household spending continues to be weighed down by soft labour market conditions and low consumer confidence. Externally, although US–China trade tensions have eased from the peaks reached in 2025, strategic competition continues through export controls on semiconductors and artificial intelligence-related technologies. Concurrently, trade defence measures and sanctions from several advanced economies contribute to a gradual and managed decoupling trend.
Fiscal pressures have become more pronounced in recent years. The general government deficit widened to 7.9% of GDP in 2025, while general government debt increased to 99.2% of GDP from 59.8% in 2019. The expansion reflects continued policy support for economic growth as well as efforts to bring previously off-balance sheet local government liabilities onto official ledgers through the debt-swap programme. While reform efforts to improve fiscal transparency, strengthen budgeting practices and reduce hidden debt risks have progressed, local government financing vehicle (LGFV) debt remains a key credit challenge.
Against this backdrop, China continues to benefit from significant structural financing advantages. Deep domestic savings, a predominantly local-currency funding structure, strong state influence over the financial system and favourable domestic liquidity conditions provide substantial flexibility in managing government financing requirements. These strengths help moderate risks associated with the sovereign’s rising debt burden.
China’s external position remains a core credit strength. The current account surplus averaged 2.3% of GDP over 2021–2025, while the nation’s net international investment position strengthened further to 18.4% of GDP in 2025. Foreign exchange reserves remained the largest globally at USD3.4 trillion as of August 2026, providing substantial buffers against external shocks and supporting policy flexibility amid increasingly uncertain global conditions.
China’s centralised governance structure supports policy continuity and long-term planning. This is reflected in the country’s Government Effectiveness score of 68.8 in the 2024 World Bank Worldwide Governance Indicators (WGI), placing it in the global top quartile (77.8th percentile).
The stable outlook reflects MARC Ratings’ assessment that China’s structural financing advantages, such as a captive banking system and strong control over its local currency and funding conditions, remain highly supportive of its ability to manage the debt trajectory over the near to medium term. Downside pressure on the rating could arise from a material escalation in geoeconomic tensions that impairs external demand, a prolonged period of elevated fiscal deficits leading to unsustainable debt accumulation, or stalled progress towards establishing a durable local government revenue base.