Fitch has downgraded one of Asia’s major financial hubs after months of violence and protests, stating that Hong Kong’s rating outlook is currently negative.
The global credit rating agency issued its statement on Friday, slashing Hong Kong’s long-term foreign currency issuer default rating from ‘AA+’ to ‘AA.’ Fitch said that public discontent within the financial hub is likely to persist despite steps taken by authorities to make peace with protesters.
However, it predicts that Beijing’s “one country, two systems” framework, under which Hong Kong is currently governed, is likely to remain intact. Regarding the hub’s economy, the rating agency expects Hong Kong’s revenue to underperform the budget forecast.
Massive violent protests have been raging in the city since March with people angry at the Chinese government which they claim is eroding Hong Kong’s freedom and autonomy.
Protests initially began after Hong Kong’s leader, Carrie Lam, introduced a controversial extradition bill that would have meant people arrested in the former British colony could be sent to mainland China for trial. However, the protests have evolved into a backlash against the Beijing-backed Hong Kong government.
Lam withdrew the bill earlier this week as part of a set of measures aimed at making concessions with the people. Protesters are now demanding the release of all demonstrators arrested in rallies, and for Hongkongers to be allowed to choose their own leaders. They also want Lam to launch an independent probe into perceived police brutality against them during clashes. As shown in media-reports, police have used tear gas, rubber bullets, bean bag rounds, and water cannons to disperse crowds.
Experts claim 5 months of protests have been a blow to Hong Kong’s economy. It now faces its first recession in 10 years, with reports of some investors moving funds to other financial centers, such as Singapore.
Following news of the Fitch rating downgrade, Carrie Lam said she strongly disagreed with the agency. During her visit to mainland China on Friday, she also noted that the withdrawal of the controversial bill is a “first step” in the government’s work towards making peace with the demonstrators.
After the withdrawal of the extradition bill, Hong Kong stocks closed higher on Friday, their best week since June. Meanwhile, more protests are expected this weekend, with activists threatening to disrupt transport links to the airport. Rallies are also planned to be held across the city on Friday evening, at popular locations such as subway stations and outside government headquarters.
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