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 several credit strengths, including the nation’s competitiveness in the global supply chain, robust external position, and high degree of government control which enhances policy continuity.
China remains one of the world’s largest economies, supported by a vast consumer base and deep integration into global supply chains. In 2024, the nation’s economic growth remained resilient at 5.0%, supported by sustained momentum in manufacturing and services amid the central government’s expansionary fiscal policies. China is pursuing a structural shift towards higher productivity and complexity through industrial upgrading. The “Made in China 2025” strategy continues to emphasise innovation-driven growth, particularly in electronics, electric vehicles and green energy, reinforcing the country’s move into higher value–added sectors.
However, despite the large consumer base, China’s domestic demand remains subdued. Soft labour market conditions and weak consumer sentiment have weighed on household spending, while externally, rising protectionism and geopolitical tensions, especially with the US, pose risks to trade, technology access, and investment. While these headwinds could constrain China’s export-oriented growth model and medium-term competitiveness, the deepening of regional ties in Asia may provide some counterbalance.
China’s central government has taken a more expansionary fiscal stance in response to the persistent property sector stress and soft external demand. While this has helped stabilise near-term growth, it has contributed to a rising general government debt burden, estimated at 88.3% of GDP in 2024 (2019: 59.4%). Local government financing vehicles (LGFVs) remain a key contingent liability, though the central government’s debt-swap programme has slightly eased fiscal pressures in the local governments. Reforms aimed at improving fiscal transparency and reducing off–balance sheet borrowings are ongoing, but effective progress will hinge on stronger growth and a more diversified local revenue base.
China’s external position remains a core credit strength, anchored by persistent current account surpluses and a solid net creditor profile. In 2024, the country’s current account surplus was 2.3%, above its five-year (2020-2024) average of 2.0%, supported by its sizeable goods trade surplus, while its net international investment position also reached 16.1% of GDP (2023: 14.2%). China possesses the largest international reserves globally at above USD3 trillion, and its reserve-to-import ratio remains high at 11.2 months. These ample reserves, together with a low external debt burden averaging 12.5% of GDP over 2020-2024, provide strong buffers against external shocks.
China’s centralised governance structure ensures policy continuity and supports long-term planning, underpinning its relatively strong government effectiveness ranking (74th percentile) in the World Bank’s Worldwide Governance Indicators (WGI). However, a consequence of high government control is a relative reduction in political pluralism.
The stable outlook reflects China’s pragmatic policy approach and its capacity to manage economic and financial pressures. Continued progress in containing general and local government debt, together with effective structural reforms, would further strengthen the sovereign’s credit profile. Downside risks, however, could arise from stalled reforms due to escalating geoeconomic tensions, a prolonged period of elevated fiscal deficits leading to unsustainable debt accumulation, or a deeper deterioration in the property sector.