Date
18 October 2017
Hong Kong's revised outlook to negative from stable reflects economic and financial risks in the central government, according to S&P. Photo: Reuters
Hong Kong's revised outlook to negative from stable reflects economic and financial risks in the central government, according to S&P. Photo: Reuters

S&P cuts outlook on China, Hong Kong to negative from stable

Standard & Poor’s Ratings Services has lowered its outlook for the Chinese government’s credit rating, the second time in the past month that China’s creditworthiness has come in unfavorably.

S&P kept its double-A minus rating on China’s sovereign debt but lowered the outlook to negative from stable.

That is the same level the country’s debt is rated by Moody’s Investors Service, which this month cut its outlook on China’s debt to negative.

At the same time, S&P lowered its outlook on Hong Kong to negative from stable but affirmed its topnotch long-term credit rating.

It said the negative rating reflects the outlook on the central government in China. 

“The ratings on Hong Kong also reflect above-average economic growth prospects  for a high-income economy, healthy fiscal performance, sizable fiscal reserves, a strong external position, and the credibility of monetary policy, notwithstanding the inherent limitations of a pegged exchange rate regime in carrying out independent monetary policy,” S&P said.  

The moves come as China opens up its massive bond market wider to foreign investors.

S&P said the government’s attempts to overhaul the world’s second largest economy toward domestic-led economic growth is proceeding “more slowly than we had expected”.

“Economic and financial risks to the Chinese government’s creditworthiness are gradually increasing,”  S&P said, citing expectations for government and corporate debt metrics to worsen and its fears the country will rely too heavily on credit growth to jump-start a sluggish economy.

”These expected trends could weaken the Chinese economy’s resilience to shocks,” S&P said.

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