Editor’s Note: CNN’s Meanwhile in China newsletter which explores what you need to know about the country’s rise and how it impacts the world. Hong Kong CNN  —  Fitch downgraded its outlook on China’s credit rating on Tuesday, citing increasing risks to its finances as it faces economic challenges. Lowering its outlook from stable to negative does not automatically mean the ratings agency will downgrade China’s creditworthiness, but it increases the chances. Fitch has kept its rating on Chinese sovereign bonds at A+. The revision “reflects increasing risks to China’s public finance outlook as the country contends with more uncertain economic prospects amid a transition away from property-reliant growth to what the government views as a more sustainable growth model,” it said in a statement. Fitch believes the general government deficit will rise to 7.1% of gross domestic product in 2024 from 5.8% last year. This year’s deficit is expected to be the highest since 2020, when pandemic related controls began to weigh heavily on public coffers. China’s Finance Ministry has expressed “regret” over the revision. “We had a lot of in-depth communication with the Fitch Ratings team in the early stage, and the report partly reflected China’s views,” it said in a Wednesday statement. It added that the agency’s methodology “fails to effectively and prospectively reflect the positive role of fiscal policy in promoting economic growth.” “In the long run, maintaining a moderate deficit and making good use of precious debt funds will help expand domestic demand, support economic growth, and ultimately help maintain good sovereign credit,” it said. The fiscal budget deficit ratio for 2024 is set at 3%, according to the statement, which describes it as “overall moderate” and “conducive to stable economic growth.” The ministry has targeted 5% for economic growth for this year, which it says is “in line with realistic conditions.” “The long-term positive trend of China’s economy has not changed, nor has the Chinese government’s ability and determination to maintain good sovereign credit,” it said. In December, rival ratings agency Moody’s downgraded its outlook on China’s credit rating from stable to negative, citing risks related to “structurally and persistently lower medium-term economic growth” and ongoing troubles in its property sector.