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HKSARG's response to Moody's announcement of change to Hong Kong's rating outlook

     In response to the announcement by Moody's Investors Service (Moody's) today (March 12) that it will change the outlook on Hong Kong's rating to negative from stable, the Financial Secretary, Mr John C Tsang, made the following comments:

     Hong Kong's sound economic fundamentals, robust financial regulatory regime, resilient banking sector and strong fiscal position will continue to enable the economy to embrace the challenges ahead.

     "As the International Monetary Fund (IMF) Staff Report released in January concluded, those strengths, together with the Linked Exchange Rate system, will provide Hong Kong with strong buffers to deal with near-term challenges, while laying the foundation for steady growth and healthy job creation in the medium term.

     "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, and maintains unchanged Hong Kong's credit rating at Aa1.

     Amid the unsteady and uncertain global economic outlook, the world's economies will all face substantial headwinds, and the Mainland will continue to be a key source of growth and stability for the global economy. Based on data from the IMF, the Mainland economy still contributed 43% of world trade growth and 35% of global economic growth in 2014.

     "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.

     "Banks in Hong Kong have a strong capital base, and they have prudently managed their property-related exposures. Following the implementation of seven rounds of countercyclical and macro-prudential measures by the Hong Kong Monetary Authority (HKMA) over the past few years, the banking sector is now more resilient in weathering property market adjustments.

     "Also, the risk associated with Mainland-related lending is manageable. This is because the credit quality of the Mainland borrowers is high, given the majority of them are large state-owned enterprises and multinational companies. In addition, banks have maintained good underwriting standards and strengthened risk management on Mainland-related lending under the HKMA's close supervision.

     I wish to reiterate that the principle of 'one country, two systems' has worked well.  Both the Central People's Government and the Hong Kong Special Administrative Region Government remain firmly committed to upholding this principle," the Financial Secretary added.

     A government spokesman further added that, "Moody's comments in its press release about the interference from the Mainland in Hong Kong's policy formulation and implementation, as well as the political risk arising from political linkages with the Mainland, are all purely speculative and subjective statements without any ground.

     "Hong Kong has been exercising a high degree of autonomy and enjoying executive, legislative and independent judicial power, including that of final adjudication in accordance with the Basic Law. There has been no evidence of Mainland interference in Hong Kong affairs or Hong Kong institutions losing independence over time. In fact, the successful implementation of the 'one country, two systems' principle is widely recognised by the international community."

Ends/Saturday, March 12, 2016
Issued at HKT 07:25


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