The Hong Kong government has said it disagrees with the decision of Standard & Poor’s to downgrade Hong Kong’s sovereign credit outlook from stable to negative.

The rating service company said on Thursday that Hong Kong’s close economic and financial linkage with China contributed to the negative assessment,  as economic imbalances continue to plague the mainland. Standard and Poor’s downgraded China’s outlook at the same time, citing economic imbalances that were unlikely to diminish at the pace it previously expected.

The negative outlook meant that Hong Kong’s credit ratings may be downgraded in two years.

Chan Ka-keung.
Chan Ka-keung. File Photo: Gov HK.

“[W]e disagree with their assessment and revision of Hong Kong’s outlook on grounds that amid the uncertain global economic outlook, the Mainland will continue to be a key source of growth and stability for the global economy,” Acting Financial Secretary Chan Ka-keung said in a statement.

“Besides, we continue to believe that Hong Kong is in a good position to benefit from the structural rebalancing in the Mainland economy from investment to consumption, as the increase in demand in services will create new business opportunities for a service-oriented economy like Hong Kong.”

No comment on politics

But Chan welcomed the decision of the rating company to affirm Hong Kong’s “AAA” long-term and “A-1+” short-term credit ratings.

“It continues to recognise Hong Kong’s credit strengths and sound economic fundamentals, including our sizable fiscal reserves, prudent fiscal policy, strong external position and above-average economic growth prospects,” Chan said.

Standard & Poor’s also said that it might lower Hong Kong’s rating if  “political polarization worsens to a point where it compromises policymaking and the business environment.” Chan did not comment on that statement.

John Tsang.
John Tsang. Photo: Gov HK.

Second downgrade in a month

Earlier in March, rating service company Moody’s also downgraded Hong Kong’s credit outlook from stable to negative, due to the city’s economic and political linkage to China’s risks.

Financial Secretary John Tsang then offered comments similar to Chan’s, saying that Hong Kong is in a good position to benefit from the structural rebalancing in the mainland’s economy.

A government spokesperson said that Moody’s comments on political risks were “all purely speculative and subjective statement without any ground”.

Kris Cheng

Kris Cheng

Kris Cheng is a Hong Kong journalist with an interest in local politics. His work has been featured in Washington Post, Public Radio International, Hong Kong Economic Times and others. He has a BSSc in Sociology from the Chinese University of Hong Kong. Kris is HKFP's Editorial Director.