Greater China Sovereigns Outlook ‘Deteriorating’ for 2026
Greater China sovereigns outlook for 2026 looks deteriorating, according to a non-rating action commentary note released by Fitch Ratings on Monday.
Fitch Ratings’ ‘deteriorating sector outlook reflects the view that gross domestic product (GDP) growth in mainland China will slow to 4.1% in 2026 from 4.8%, as the economy contends with subdued domestic demand and deflationary pressures.
Modest consumption and deteriorating fixed investment amid ongoing property-sector declines will weigh on growth and add to the risks of deflation becoming more entrenched.
Calibrating fiscal and monetary policies to boost domestic demand and reverse deflationary pressures will be a key challenge. Fiscal policy is likely to remain loose, but we do not foresee a large fiscal stimulus.
External risks from US tariffs for the greater China region have subsided, though uncertainties persist and escalation in tensions between the US and China cannot be ruled out.
The region shook off US tariffs in 2025, with external demand a key growth driver. Recent trade deals with the US provide more clarity on trade, and ease the risks.
However, analysts anticipate a moderation of export performance in 2026 as the effects of export front-loading unwind and the pace of AI-related investments might slow.
“We expect growth to slow but remain healthy in Taiwan, Hong Kong and Macao. Taiwan is seeing considerable tailwinds from semiconductor exports that should be sustained for part of 2026 amid some weakness in domestic demand.
“We forecast Taiwan’s growth to moderate to 2.5% in 2026 from a robust 6.1% in 2025.” Fitch said a pick-up in fundraising activity in Hong Kong is driving a recovery in domestic consumption, which should support solid growth of 2.7%. Macao continues to see a normalisation in tourism flows supporting growth of 4.5%. Prices of Crude Oil Decline on Russia-Ukraine Peace Talks
