Hong Kong's government on Tuesday described as "unfair" rating firm Moody's downgrading of the restive territory's credit rating from "Aa2" to "Aa3" due to the government's alleged lack of effective plan to handle months of social unrest.

Chief Secretary for Administration Matthew Cheung said the previous day's move by Moody's Investors Service "was unfair because it focused purely on governance but neglected our structural strength."

"Our welcoming approach, our free economy, etc., are strengths that make Hong Kong one of the best places to do business in the world," Cheung said. "It is not right to (assess the rating) from purely the perspective of politics."

"Although there has been unrest in Hong Kong in the past seven months, we have safeguarded 'one country, two systems.' We have tackled the issues of land supply and income disparity as mentioned in the report. Moody's criticisms targeting Hong Kong are therefore inappropriate and regretful," he said.

Moody's downgraded the government's long-term issuer and senior unsecured ratings by citing Hong Kong's "lower than previously estimated" institutional capacity and governance strength as there appear to be no tangible plans to address people's concerns toward the monthslong social unrest.

"The absence of effective response and lack of clarity on how the government is planning to address either the political or social and economic concerns may partly reflect weaker inherent institutional capacity than Moody's had previously assessed. It may also point to more significant constraints on the autonomy of Hong Kong," the firm said.

But it has raised Hong Kong's outlook from "negative" to "stable," after lowering it in September, pointing to its strong fiscal strength and resilience to a period of negative growth.

Moody's said further downgrading of the rating is likely if Hong Kong's economic strength or quality of its institutions were to weaken more.

"In particular, still closer institutional integration between Hong Kong and China would likely constrain the autonomy of Hong Kong's legislative, judiciary and/or executive still further, contributing to a downgrade," it said.

Hong Kong has entered a technical recession following economic contractions in two consecutive quarters. The government forecast of economic growth for 2019 was revised to negative 1.3 percent.

The ongoing political unrest was adding to pressure on the weakening economy with the retail and travel sectors being hardest hit as consumers and travelers were put off by the frequent demonstrations.

Cheung said the government has unveiled social welfare benefits as well as economy boosting measures in face of the unrest, while an independent review committee will soon begin taking a comprehensive look at the deep-rooted conflicts.

Protests sparked by the government's attempt in June to pass a bill that would allow extraditions to mainland China have been ongoing despite the government's withdrawal of the controversial legislation in October.

Protesters' demands have expanded to probing police use of force, amnesties for those arrested and greater democracy, all of which have been rejected by the government that has instead demanded an end to violent protests and restoration of public order.

==Kyodo

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