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HKSAR Government's response to S&P's announcement of change to Hong Kong's credit rating
     In response to the announcement by S&P Global Ratings today (September 22) to lower the long-term credit rating of Hong Kong to "AA+" from "AAA", with a "stable" outlook, and to affirm the "A-1+" short-term credit rating, the Financial Secretary, Mr Paul Chan, made the following comments:
     We do not agree with S&P's decision to lower the credit rating of Hong Kong following a similar action on Mainland China's rating.
     S&P assessed that Mainland China's credit growth has increased economic and financial risks, and that Hong Kong may be affected by such risks. We are of the view that S&P's assessment could not be borne out by recent positive development, which has shown more strength than weakness in Mainland China's credit profile. Mainland China's credit growth has shown signs of moderating. The increase in the overall debt to GDP ratio has slowed down, with corporate and government debt to GDP ratios stabilising. Shadow banking activities have receded thanks to tightened supervision by regulators.
     As for Hong Kong, we have built up robust markets and strong regulations over the years to safeguard against any spillover risk from Mainland China as suggested by S&P. For example, Mainland-related lending by Hong Kong banks is subject to close supervision by the Hong Kong Monetary Authority (HKMA). The credit quality is high, as most of the borrowers are large state-owned enterprises and multinational firms, and a significant part of the lending is backed by collateral or guarantee. Hong Kong banks have all along maintained prudent underwriting standards and the HKMA has put in place enhanced measures in respect of risk management for banks on Mainland-related lending.
     I wish to point out that Hong Kong's growing ties with Mainland China should be an important strength for the long-term growth of our economy. As the second largest economy in the world, Mainland China will continue to be a key source of growth for the world. According to International Monetary Fund (IMF) data, Mainland China contributed more than one-third of global growth in 2016. The multitude of cross-boundary investment channels between Hong Kong and Mainland China would enhance our intermediary role as a two-way platform for overseas investors seeking to tap into the Mainland markets and for Mainland enterprises "going global". Hong Kong is also well positioned to take advantage of the implementation of the Belt and Road Initiative.
     Hong Kong's superior credit profile continues to be underpinned by sound and robust economic fundamentals. Our fiscal performance and external positions have long been amongst the top-rated economies. In fact, our strong economic growth prospects, sizeable fiscal reserves, strong external position and credibility in monetary policy are also acknowledged by S&P. Furthermore, our banking system remains healthy as banks in Hong Kong have a strong capital base, sound liquidity management and healthy asset quality.
     The IMF Staff Report released in January this year also complimented our prudent fiscal policy and vigorous regulation and supervision of the financial system. The IMF recognised that the ample buffers built over the years had bolstered the resilience of Hong Kong to weather a less favourable environment.
Ends/Friday, September 22, 2017
Issued at HKT 19:13
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