HONG KONG – Moody’s put Hong Kong, Macau and swathes of China’s state-owned firms and banks on downgrade warnings on Dec 6 as it wasted little time in following up on an identical move the previous day on the Chinese government’s ratings.

Moody’s said the moves for Hong Kong and Macau reflected their tight political, institutional, economic and financial links with China under their “one country, two systems” arrangements.

Hong Kong, which is rated one notch higher than China at Aa3 versus A1, hit out at the decision, saying in a statement that its ties with Beijing were “a source of strength for long-term development”.

Moody’s added that, following the imposition of a National Security Law in 2020 and changes to Hong Kong’s electoral system, it expected the erosion of the city’s autonomy “to continue incrementally”.

China’s weakening economy would affect Hong Kong’s finance-dominated one as well, and that weaker growth could also erode the Hong Kong government’s fiscal buffers.

The ratings agency separately also lowered the outlooks of 26 local government financing vehicles and four state-owned enterprises and put all 30 of them on “review for downgrade”, which usually means a decision will be made within three months.

Eight Chinese banks had their outlooks cut to negative, but they were not put on review for a downgrade.

Those included Agricultural Development Bank of China, China Development Bank and the Export-Import Bank of China, as well as five large state-owned commercial banks: Agricultural Bank of China, Bank of China, China Construction Bank, Industrial and Commercial Bank of China and Postal Savings Bank of China. REUTERS