Jake's View | Who cares what Moody’s says? It’s missing the point on Hong Kong government debt
Credit rating agency which blessed toxic debt instruments in the US needs a new measuring stick
Hong Kong would benefit from close ties with the mainland, Vice-Commerce Minister Qian Keming said yesterday in response to a decision by Moody’s Investors Services to cut the city’s long-term debt outlook because of the links with the mainland.
SCMP, March 16
Yes, a straight case of déjà vu. It is exactly what our financial secretary, John O’Whiskers, said about this Moody’s announcement and now the entire parrot caucus (Hong Kong’s great and good) will say it.
They are all taking the wrong approach and, in doing so, they only confirm Moody’s reasoning. Yes, indeed, we have close ties to the mainland and this indeed helps our economy enormously ... when times are good in the mainland.
But when times are bad in the mainland it also means that we are taken down a few pegs along with the mainland and just now the mainland economic fortunes meter is swinging to a bad times reading. Hence it is entirely appropriate for Moody’s to warn that if things continue so it may downgrade our debt rating from Very, Very, Very Good to Very, Very Good.
Hong Kong is a big creditor. Most other governments, all the big ones at least, are big debtors. Big difference, wouldn’t you say?
Where this reasoning has it wrong, however, is in its assumption that Hong Kong, with its vast fiscal savings, should be looked at the same way as Moody’s usual customers – countries with vast sovereign debt, debt addictions in both the corporate and personal spheres and disregard for paying any of it back.