Participation in ‘Belt and Road’ plan and stock and bond connect projects could expose city to further downgrade risks, US-based agency warns
Moody’s cut Hong Kong’s credit rating from Aa1 to Aa2 on Wednesday, following its first downgrade to China’s rating since 1989, citing the city’s “close and tightening” linkages with the mainland. The US-based credit rating agency warned that the city’s participation in Chinese president Xi Jinping’s and its with the mainland could expose Hong Kong to further credit downgrade risks. But the company upgraded the city’s outlook from “negative” to “stable” at the same time in view of its long-time financial and institutional strengths. “The downgrade in Hong Kong’s rating reflects Moody’s view that credit trends in China will continue to have a significant impact on Hong Kong’s credit profile due to close and tightening economic, financial and political linkages with the mainland, ” Moody’s said in a report issued on Wednesday night. Credit rating agencies rate a country or region on the strength of its economy. Any change in sovereign credit rating could easily unnerve officials and businesses, as a downgrade could mean higher borrowing costs for its government and companies on the international financial market. The report said it was concerned by the increasing exposure of the city’s bank system to the mainland in the second half of last year.
