Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor rejected Fitch Ratings’ downgrading of the city’s sovereign rating on Friday, as the “one country, two systems” principle and the city’s rule of law remain strong despite recent unrest.
The US credit rating agency downgraded Hong Kong’s long-term foreign currency issuer default rating on Friday from “AA+” to “AA” with a negative outlook. It is the first time Fitch has downgraded Hong Kong’s rating since 1995, according to Bloomberg.
The Fitch report stressed that months of persistent conflict and violence are testing the perimeters and pliability of the “one country, two systems” framework that governs Hong Kong’s relationship with the mainland. Moreover, ongoing events have also inflicted damage to international perceptions of the quality of the city’s governance system and rule of law, and called into question the stability and dynamism of its business environment, it said.
Speaking on the sidelines of a regional cooperation meeting in Nanning, capital city of the Guangxi Zhuang autonomous region, Lam said she disagrees with the rating decision as the city’s social unrest over the past three months has neither undermined “one country, two systems” nor the rule of law.
The government will strive to stop violence and quell unrest firmly under the “one country, two systems” principle and with the rule of law, she said.
The persistent violence and chaos across the city has inevitably affected the perception of the international community of Hong Kong and the soundness of its business environment, Lam said. The chief executive urged all Hong Kong citizens to work together to end the violence.
Financial Secretary Paul Chan Mo-po also refuted Fitch’s statement that Hong Kong is facing “greater institutional and regulatory challenges” as growing links with the mainland imply its continued integration into the national governance system.
Such remarks are “purely speculative and groundless”, Chan said in a statement on Friday.
“Hong Kong’s deeper economic and financial ties with the Chinese mainland should not be a rating constraint. On the contrary, this is a positive driver for Hong Kong’s long-term development,” Chan said.
China continues to be the main engine of global economic growth, he said, with its economic restructuring and derisking of the financial system making progress, and its opening-up continuing to broaden.
“There is a broad-based consensus among the business community that the growing economic and financial links with the mainland will bring significant economic development opportunities for Hong Kong.”
Chan added that the government is able to weather the current challenges and ensure macroeconomic and financial stability, given that the city has sound economic fundamentals and ample financial buffers.
“The government will remain vigilant in assessing the economic impacts of the internal and external environment, and introduce measures to support Hong Kong’s economic development when necessary,” he said.
Fitch forecast the city will record zero growth this year, but grow by 1.2 percent in 2020.
The downgrading announcement had little effect on Hong Kong’s stock market, with the Hang Seng benchmark index rising 175.23 points, or 0.66 percent, to close at 26690.76 on Friday.
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