China, Hong Kong Credit Ratings Cut

Moody’s Investors Service cut its credit rating on Hong Kong just a few hours after it did the same on China’s.

It cut Hong Kong from “Aa1” to “Aa2”, although it revised its outlook from negative to stable.

While the main reason for cutting China’s debt rating was the country’s ballooning debt and slowing economic growth, Moody’s trimmed Hong Kong’s rating seeing the growing links between the territory and the mainland.

Hong Kong banks, it said, have seen an increased China-related lending while the stock market is also connected to the bourses in Shanghai and Shenzhen by way of separate partnerships.

Like China, Hong Kong officials were quick to slam the rating agency’s decision.

Financial Secretary Paul Chan “strongly disagreed” with the move and said Moody’s has overlooked the sound economic fundaments, upbeat financial regulatory landscape, resilient banking sector, and Hong Kong’s robust fiscal position.

Moody’s Cut China Ratings

For the first time in nearly 30 years, Moody’s cut China’s credit rating amid concerns about the nation’s increasing debt and slowing growth.

Beijing, however, was quick to label the downgrade as “inappropriate.”

The downward revision comes as China embarks on a mission to weed out unregulated and risky lending practices, which are believed to have fueled the economy’s spectacular growth over the years.

READ ALSO: Chinese Insurance Firms Post 31% Growth in Premium Income

Explaining the move, Moody’s said it expects China’s financial health to somehow deteriorate in the coming years as its economy-wide debt keeps rising but potential growth retreating.

As of end of 2016, China’s outstanding credit ballooned to 260% of its gross domestic product.

Rejecting the downgrade, China’s finance minister said the ratings agency used an inappropriate method to measure the risks facing the economy.

The ministry said Moody’s overestimate the difficulties faced by the Chinese economy.

The International Monetary Fund has warned that global financial stability maybe affected by a debt crisis in the country. –