HONG KONG – Moody's decision to cut its credit rating for Hong Kong soon after downgrading its China rating on worries about rising debt levels drew an objection Thursday from the business hub's financial chief.
Financial Secretary Paul Chan said he strongly disagreed with the rating agency's decision to "mechanically downgrade" Hong Kong's local currency and foreign currency issuer ratings by one notch to Aa2 from Aa1 shortly after cutting China's rating on Wednesday.
The agency said the downgrade reflected its view that China's rising debt would have a "significant impact" on Hong Kong because of close ties between the two places.
Moody's said China's financial strength was likely to erode as growth slows and debt rises further.
It was the first time Moody's has cut ratings for either place since November 1989, when China's economy was reeling following the bloody crackdown on democracy protesters in Beijing's Tiananmen Square.
Moody's said any weakening of mainland China's creditworthiness "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."
Beijing took over control of Hong Kong from Britain in 1997 but the city maintains a separate financial system and its own currency.
Moody's changed its outlook for Hong Kong to stable from negative, citing the government's vast cash pile it can use to ward off financial and economic shocks. A stable outlook means less likelihood of being downgraded again in the near future.