Hong Kong/China relations to remain “constructive”, says S&P. AAA rating holds on negative watch

HONG KONG - S&P Global Ratings has affirmed its 'AAA' long-term and 'A-1+'
short-term issuer credit ratings on Hong Kong, but says the rating outlook remains negative. Hong Kong’s rating is three notches higher than China.

S&P says it believes Hong Kong's institutions and policies support an open and free economy with a generally predictable and effective policy framework. It believes relations between China’s central government and Hong Kong will remain constructive because a stable and prosperous Hong Kong advances China's reform agenda.

“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, despite the inherent limitations of a pegged exchange rate regime in conducting independent monetary policy,”the raatings agency says.

“That said, we do not believe Hong Kong's credit standing can be completely disconnected from that of the Mainland, given financial and economic linkages, and the ultimate sovereign authority of China.

“We estimate Hong Kong's 2016 GDP per capita to be about US$44,300. We believe Hong Kong's economy is likely to grow faster than the average of high-income economies over the next three years.

“This forecast assumes resilient local demand, a gradual recovery in advanced economies, and China maintaining economic growth close to 6% annually.

“In particular, Hong Kong’s role in facilitating China's economic and financial integration with the rest of the world should continue to support Hong Kong's financial sector, an important growth engine of its economy.” www.standardandpoors.com (ATI).