China Rebalancing, Yuan Volatility Key Risks For APAC, Says Fitch Ratings

By Samantha Tan Chiew Ting BEIJING, May 10 (Bernama) -- China's macroeconomic rebalancing and its associated risks remain the main source of uncertainty for the global economy, especially the Asia-Pacific (APAC), according to Fitch Ratings. The rating agency in its Risk Radar Asia-Pacific report said the easing policies implemented by the Chinese authorities in recent quarters reduce the risk of a hard landing this year, but long-term macroeconomic imbalances remain. Chinese policy-makers also have to decide the pace at which they introduce structural reforms, while managing the pace of the growth slowdown, Fitch said in the report. A sharper devaluation of the Chinese yuan could trigger significant financial volatility, both in APAC and globally, according to an alternative scenario to Fitch's base case. It said a weakening Chinese economy, uncertainties over economic strategy and a loss of investor confidence could lead to higher-than-expected net capital outflows from China. The report said the resultant downward pressure on the Chinese yuan has the potential to trigger further market instability beyond the Chinese border. The above development is unlikely, though investor sentiment can turn very quickly, it added. -- BERNAMA