Beijing's campaign to put a lid on debt could also lead to a sharp slowdown in business investment, Fitch said late on Sunday, forecasting that growth in the world's second-biggest economy would slow to around 4.5 percent over the medium term.
Fitch said the implications of this scenario for the global economy would be significant but not dramatic, unlike a full-scale hard landing.
One of the most significant effects would be on commodity prices, with Fitch expecting oil and metal prices to fall 5 to 10 percent from its baseline scenario, reflecting China's large role as a commodity consumer.
In April, a Reuters poll of 72 institutions showed economists expected China's economic growth to slow to 6.5 percent this year and 6.3 percent next year as Beijing extends its crackdown on riskier lending practices. Gross domestic product in 2017 expanded 6.9 percent in real terms and 11.2 percent in nominal terms.
Beijing's financial crackdown, now in its third year, has slowly pushed up borrowing costs and is choking off alternative, murkier funding sources for companies such as shadow banking.
The ratio of Chinese corporate debt to GDP is already very high by international standards - at 168 percent in 2017 - and is expected to start rising again as nominal GDP growth declines towards 8 percent from the unusually high rate of more than 11 percent in 2017, Fitch said.
If the government aims to stabilise its corporate debt ratio by 2022, Fitch said China's nominal economic growth rate could fall by 1 percentage point a year over the medium term while business investment growth would drop 5 percentage points per year.
Net global commodity exporters would be affected through a decline in direct exports to China and weaker terms of trade, Fitch said. The rating agency's model suggests a particularly strong impact on Chile while direct exposure is lower in Latin America's other major economies that are generally less dependent on Chinese demand.
Exporters of energy products and metals, such as Zambia, could also be hurt as China's role as a source of financing sub-Saharan Africa has increased considerably in recent years.
Fitch singled out Mongolia as the most vulnerable of Asia's net commodity exporters as China accounts for all of its coal and iron ore exports.
A bigger impact on the global economy would result if the Chinese currency were to depreciate significantly in the slower growth scenario, Fitch said.
"It is hard to put a precise time frame on when China will start to see the deleveraging of the real economy, but at some point it looks inevitable," said Brian Coulton, chief economist at Fitch.
"The scenario analysis we have undertaken suggests that, when it does occur, it will be a process that will be a significant drag on growth."
(Reporting by Stella Qiu and Ryan Woo; Editing by Jacqueline Wong)
