Fitch Upgrade Reflects Hong Kong's Strong Economy

by Mary Swire, Tax-News.com, Hong Kong

16 July 2007

Financial Secretary John Tsang has hailed Fitch's decision to upgrade Hong Kong's long-term foreign-currency sovereign rating to "AA" from "AA-", with a "stable" outlook. The upgrade reflects international recognition of Hong Kong's strong economic fundamentals, he said.

Fitch attributed the upgrade to Hong Kong's strong external financial position, improving public finances, high level of fiscal reserves and credible linked exchange-rate system.

Fitch also recognised that the jurisdiction's self-determined exchange rate regime was an important manifestation of Hong Kong's economic and financial-policy autonomy.

In addition, based on the established 10-year track record of political interaction between Hong Kong and the Mainland, Fitch accepted that many potential political risks identified in the early years of Chinese sovereignty over Hong Kong could be set aside.

"We will continue to capture the immense opportunities arising from the tremendous growth in the Mainland market. The expansion of the Qualified Domestic Institutional Investor scheme and CEPA initiatives is a clear demonstration of the strength of Hong Kong's financial platform for the further liberalisation of the Mainland market," Tsang stated.

"On the fiscal front, we are committed to continue to strengthen Hong Kong's public finances further with our usual prudence and discipline," he added.

Fitch last raised Hong Kong's long-term foreign-currency sovereign rating outlook to "positive" from "stable" in July last year. The long-term local-currency sovereign rating is currently at "AA+", with a "stable" outlook.

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