It marks the first time in 10 years that our long-term foreign currency bond standings are higher than China's International credit rating agency Moody's Investors Service raised its foreign currency debt ratings on Hong Kong by two notches yesterday and lifted its ratings on the mainland by one level. Moody's said it raised its foreign currency bond rating on Hong Kong to A1, the fifth-best investment grade, from A3, the seventh-best. It said a high level of international investment contributed to the upgrade. The upgrade was the first positive move from a ratings agency since the government hired Goldman Sachs and HSBC in July to help lobby the agencies. The agency upgraded China's foreign currency bond rating to A2, the sixth-highest level, from A3. Moody's cited the mainland's 'dynamic export performance', substantial foreign direct investment and a 'prudent level' of foreign debt as reasons for the move. 'These factors make even more remote the possibility that the central government would default on its foreign currency bonds,' it said. It is the first time in 10 years that Moody's long-term foreign currency bond ratings for Hong Kong have been higher than China's. Both new ratings have a stable outlook. Moody's said the ratings of both places should be linked but 'they do not necessarily have to be the same'. Financial Secretary Henry Tang Ying-yen welcomed the news, saying it was 'confirmation of our sound economic fundamental strength'. He said HSBC and Goldman Sachs were 'proactively' engaging the ratings agencies, adding that he had given Moody's 'extensive briefings', as had the Financial Services and Treasury Bureau and Hong Kong Monetary Authority. Moody's said on September 21 it was reviewing the ratings of Hong Kong, Macau and China for a possible upgrade. The higher a government's or company's credit rating, the cheaper it is for them to borrow money by issuing bonds. The Hong Kong government has no debt, although government-backed corporations such as the MTR Corp and the Airport Authority have sold bonds. The mainland government is planning to sell US$1 billion in dollar-denominated bonds and an additional $500 million in euro bonds, its first bond sale in two years. Moody's also raised its foreign currency ratings for Macau to A1 from A3, for much the same reasons: close links with the mainland, strong finances, large reserves and little debt. But it said Macau's ratings were held back because it was too dependent on gambling income. Market reaction was muted yesterday and Daniel Chan, an economist at DBS Bank Hong Kong, said the upgrades had not come as a surprise because the economies of Hong Kong and the mainland were both strengthening. 'The market has expected this,' Mr Chan said, adding that Moody's ratings had been relatively lower than those of Fitch Ratings or Standard & Poor's. On Monday, Fitch revised its outlook on the mainland to positive from stable. Brian Coulton, a director of Asia sovereign ratings at Fitch, said Moody's Hong Kong upgrade would have 'zero' influence on his own views. 'Hong Kong's rating doesn't only depend on China. It also depends on Hong Kong's domestic fundamentals. Those are still not looking great,' he said.