Hong Kong could expose itself to bigger financial risks with growing involvement in ‘Belt and Road’ plan, Moody’s warns

Writer of report by US-based agency, which cut city’s credit ratings, says participation in China’s trade initiative could lead to further rating downgrade

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Total mainland-related lending in the city rose to HK$3.6 trillion at the end of last year. Photo: David Wong

Published: 9:19am, 25 May 2017Updated: 8:26pm, 25 May 2017

Hong Kong could face bigger financial risks and see its credit ratings drop further with its growing involvement in China’s plan to open up trade along a new Silk Route, according to the writer of a report issued by Moody’s, which downgraded the city’s rating on Wednesday.

In an interview with the Post on Thursday, Moody’s Sovereign Risk Group associate managing director Marie Diron said Hong Kong could suffer losses from President Xi Jinping’s “Belt and Road Initiative” through the provision of funds and professional services to some “risky projects” along the route.

“The ‘Belt and Road Initiative’ is an example of the [increasingly closer] linkages between Hong Kong and [the mainland]. What we observe is that there are projects in some countries where the business environment is challenging,” Diron said.

“[This] could inevitably cause bigger losses that would also affect Hong Kong as an investor and partner of these projects,” she added.

Moody’s cut Hong Kong’s credit rating from Aa1 to Aa2 on Wednesday, a move which came hot on the heels of the agency’s first downgrade to China’s rating since 1989, announced on the same day.