Moody's has adjusted the outlook for Chinese sovereign bonds to negative, signaling concerns over the economic impact of the government's high fiscal spending. The rating agency downgraded the outlook from stable while maintaining a long-term rating of A1. The move reflects the risks associated with increased borrowing by the Chinese government to support local governments and state-owned enterprises amid economic challenges.

China's fiscal deficit has reached a record high, standing at 3.8% of GDP for the current year, up from 3% in previous years. President Xi Jinping emphasized the government's commitment to preventing a sharp economic slowdown and addressing deflationary risks, leading to a substantial increase in the headline deficit. The government's strategy involves issuing more bonds to fund economic stimulus, with an additional 1 trillion yuan of sovereign bonds planned for the year, mainly for disaster relief and construction support.