Hong Kong protests, government ‘inability’ to address concerns damaging business confidence, Fitch warns
- The global rating agency says factors underpinning the city’s AA+ rating are being tested, including governance and rule of law
- Further integration with China would also further entwine institutional and regulatory frameworks of both places
Hong Kong’s current political unrest and rising public distrust in the government run the risk of damaging business confidence and eroding the quality and effectiveness of governance, Fitch Ratings warned on Tuesday.
Protests featuring diverse groups, with widening demands underscoring the steady rise in social and political divisions in recent years, emanated mainly from the deep-seated apprehension of the erosion of autonomy under “one country, two systems”, as well as economic inequality and high living costs, the global rating agency said.
“Some of the assumptions underpinning [Hong Kong’s] rating are currently being tested, including the effectiveness of the territory’s governance and its rule of law,” Fitch said. “Hong Kong’s ongoing integration with mainland China [is viewed] as the territory’s primary rating sensitivity.”
Hong Kong’s AA+ rating, which is three notches above mainland China’s A+ rating, rested on the assumption that the territory’s governance standards, rule of law, policy framework, as well as business and regulatory environments remain distinct from those of the mainland, Fitch said.
But additional integration would inevitably entwine Hong Kong and mainland China’s institutional and regulatory frameworks further. On this basis, their respective sovereign ratings should gradually converge over time, the agency said.
