Moody’s downgrades Hong Kong’s credit outlook to negative, citing costs to bail out local governments and state firms. The downgrade reflects tight links between Hong Kong and China. Hong Kong disagrees with the decision, stating that ties with China are a source of strength. Moody’s affirms Hong Kong’s Aa3 ratings, noting its wealthy economy, fiscal and external buffers, and effective policies. Moody’s expects further erosion of Hong Kong’s autonomy due to changes in the electoral system and mainland China’s weakening trend.
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