HK Economy Sound: FS

Hong Kong has sound economic fundamentals. Our fiscal performance and our international investment position have long been amongst those of the top-rated economies. Besides, banks in Hong Kong are well cushioned given their strong capital base, sound liquidity management and healthy asset quality. These factors continue to support the high credit rating of Hong Kong.

Financial Secretary Paul Chan issued the statement in response to the announcement by Fitch today on downgrading Hong Kong’s credit rating to "AA" from "AA+", and its outlook to "negative" from "stable".

Mr Chan said that despite the social incidents in Hong Kong over recent months, the Government disagrees that this should lead to Fitch calling into question the effective implementation of “one country, two systems” in Hong Kong.

He also noted that since Hong Kong's return to the Motherland, the Basic Law has strongly safeguarded “one country, two systems” and the continued prosperity of the Hong Kong Special Administrative Region. 

The HKSAR Government remains committed to upholding “one country, two systems” and the Basic Law, which are the most important and solid foundation for Hong Kong's sustainable social and economic development, the statement added. 

It noted the recent social incidents have not affected Hong Kong's core competitiveness, adding that the Government respects people's freedom of speech and rights of peaceful assembly, procession and demonstration. 

The Government always appeals to members of the public to express their views in a peaceful and orderly manner with no violence and has suggested concrete actions and started dialogue with the community to find a way out for Hong Kong. 

It also questioned Fitch’s suggestion that the gradual rise in Hong Kong's economic, financial and socio-political linkages with the Mainland implies continued integration into the Mainland's governance system that may present greater institutional and regulatory challenges over time. 

Hong Kong's deeper economic and financial ties with the Mainland should not be a rating constraint, and quite to the contrary, the ties are a positive driver for Hong Kong's long-term development. 

Noting the nation continues to be the main engine of global economic growth, the statement said its economic restructuring and de-risking of the financial system are making progress, and its opening up continues to be deepened. 

There is a broad-based consensus among the business community the growing economic and financial linkages with the Mainland will bring significant economic development opportunities for Hong Kong, the statement added. 

It noted Hong Kong's financial markets and banking system have been functioning normally in the past few months, adding the Linked Exchange Rate System has been operating smoothly. 

There was no noticeable outflow of funds from the Hong Kong dollar or from the banking system while the level of Hong Kong or US dollar deposits in Hong Kong is still stable. 

The statement also made it clear that as acknowledged by Fitch, Hong Kong has the capability to defend the Linked Exchange Rate System.

Hong Kong’s strong economic fundamentals and ample financial buffers enable it to navigate through challenges in the face of the current relatively difficult environment, and to ensure macroeconomic and financial stability. 

Its fiscal reserves reached $1.14 trillion as at the end of July, equivalent to about 23 months of government expenditure or 38.3% of its gross domestic product, enabling Hong Kong to meet the expenditure needs. 

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, the statement concluded.