DANNY.LEE@SCMP.COM
Financial Secretary John Tsang Chun-wah blasted Moody’s decision to downgrade the city’s long-term debt outlook rating on Saturday to “negative” from “stable” due to the city’s exposure to the mainland Chinese economy.
The assessment is “totally wrong” and one the government does not agree on, he said.
“We have been implementing the ‘one country, two systems’ policy with diligence,” he said.
“This has manifested into a very healthy economic situation in Hong Kong, a very healthy fiscal position in Hong Kong ... which is why we do not agree [with Moody’s assessment].”
Moreover, it is actually “time to consider an upgrade for Hong Kong”, he added.
Moody’s revised the rating on Saturday, explaining that the trends in Hong Kong’s credit profile would closely follow those in China due to the city’s ever-tightening political, economic and financial links to the mainland.
The agency forecast Hong Kong would see “muted” economic growth over the next five years.
“Increasing political linkages are likely to weigh on Hong Kong’s institutional strength. In addition, the risks to China’s economic and financial stability may also undermine Hong Kong’s own economic and financial outlook,” Moody’s said in a statement.
Tsang responded by saying that said Moody’s was mistaken in interpreting “close links with China” as a risk.
“Yes, Hong Kong has close ties with the mainland - it isn’t a ‘China risk’ but a ‘China opportunity’,” he said.
Tsang said the city’s sound economic fundamentals, robust financial regulatory regime, resilient banking sector and fiscal strength would help the local economy handle any challenges down the road.
“While Moody’s has changed the rating outlook for Hong Kong to negative from stable, it continues to recognise Hong Kong’s credit strengths and strong economic fundamentals,” he said.
“Hong Kong is in a good position to benefit from the structural rebalancing in the mainland’s 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’s,” he added.
Moody’s also said “domestic political tensions” and “evidence of interference from China in Hong Kong’s policy formulation and implementation” was consistent with a downgrade.
Tsang said not all international credit ranking agencies shared Moody’s assessment, and that the International Monetary Fund had recently written a favourable report on Hong Kong.
On whether Hong Kong would be able to persuade Moody’s to reverse its assessment, he said: “We will try.”
http://www.scmp.com/news/hong-kong/economy/article/1923583/hong-kong-hits-back-after-moodys-downgrades-long-term-debt
