S&P Reaffirms Hong Kong's Credit Ratings

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

09 May 2002

Standard & Poor's yesterday confirmed its existing A plus credit rating for Hong Hong's long-term sovereign foreign currency issues (four points below the top AAA rating), with an AA minus score for local currency issues, but pointed to the risks of interference from Beijing and the Government's deficit as negative factors.

"There are theoretical reasons for Hong Kong to be rated even higher," said Singapore-based S&P associate director Chew Ping. "All the various fiscal, external and economic parameters are favourable versus its peers in the same category. But the ratings are constrained by the fact that there is a risk arising from being a territory of China."

Mr Chew said HK's rating was underpinned by "strong fiscal flexibility, substantial external liquidity, and a wealthy and flexible economy, and its continuing freedom from interference by Beijing". But he said that Hong Kong's independent status could change and so the ratings were "constrained by the risk of misgovernance and interference by Beijing, which could erode the pillars of Hong Kong's creditworthiness, including the rule of law".

Mr Chew said that the risk of interference was theoretical, so far: "Right now, Hong Kong is rated higher than China because we are crediting not just its various economic, fiscal and external liquidities but also the autonomy within the Basic Law that so far has been allowed to work".

A government spokesman said: "We are glad that S&P has recognised Hong Kong's autonomy in economic and monetary policies, which are proven effective and robust in the past years."

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