Moody’s downgraded Hong Kong’s credit rating on Wednesday night, hours after it revised its assessment on China.

The ratings agency said that rising debt and slowing growth in China would have a significant impact upon the city, citing increasingly close financial and trade links.

Hong Kong’s credit rating was lowered from Aa1 to Aa2 – a smaller change than China’s rating, which was downgraded from Aa1 to Aa3.

Hong Kong and Chinese flags
Hong Kong and Chinese flags. Photo: Flickr/whampoaorg.

As with China, Hong Kong’s credit outlook was revised from stable to negative.

“The institutional features which grant Hong Kong, at present, a degree of political and economic independence – together with the SAR’s intrinsic credit strengths – allow Hong Kong’s rating to exceed that of China,” said Moody’s. “But the two ratings, like the two regions, remain closely linked.”

It also made reference to China’s Belt and Road regional development initiative.

“Through its involvement in various projects, including “One Belt One Road” investments, Hong Kong’s economy and financial system will become increasingly closely related to China’s,” it added.

Chan hits back

The Hong Kong government hit back on Thursday morning. Financial Secretary Paul Chan said in a press release that it strongly disagreed with the downgrade of the city’s credit rating.

“We are of the view that Moody’s has overlooked the sound economic fundamentals, robust financial regulatory regime, resilient banking sector and strong fiscal position that Hong Kong has.”

Elson Tong is a graduate of international relations and former investigations consultant. He has also written for Stand News.