19.07.201900:13:00UTC+00China's Rising Household Debt Likely To Weigh On Growth: Fitch

Chinese households' rising debt servicing costs could weigh on the medium-term economic growth, Fitch Ratings said in a report released Friday.

The rating agency noted that household debt had increased rapidly, to 85 percent of disposable income by the end of 2018. Although debt servicing costs do not pose near-term risks to financial stability, it will weigh on growth prospects in the medium-term.

Fitch estimated that household debt rose to around 53 percent of GDP last year, driven by mortgage borrowing.

China's household debt-to-disposable income ratio was lower than most developed markets. But the Fitch observed that the gap will narrow rapidly, with the ratio rising to close to 100 percent at the end of this decade if growth rates remain unchecked.

Earlier the Fitch had raised China's growth outlook to 6.2 percent this year as policy easing appeared to have gained traction. However, the projection for 2020 was lowered to 6 percent.

A sharp correction in property prices is a downside risk, given households' significant exposure to housing loans, Fitch said.