Bangkok--27 Jul--Standard & Poor's Standard & Poor's Ratings Services today affirmed its 'AA/A-1+' credit ratings on the Hong Kong Special Administrative Region (Hong Kong). The outlook was revised to positive from stable. "The positive outlook on Hong Kong reflects our expectation that the government will maintain its fiscal balance by continuing to exercise discipline in restraining expenditure growth," said Standard & Poor's credit analyst Kim Eng Tan of the Sovereign Ratings group. "Further improvements in China's credit strength, coupled with the implementation of measures to increase the stability of Hong Kong's public finances, would have a positive impact on the credit ratings on Hong Kong." Hong Kong's economic strength, the government's large net creditor position, and a large net external creditor position are the key strengths of its credit quality. Recent improvements to Hong Kong's fiscal position, particularly the discipline shown by the administration in controlling expenditure, have further reinforced this support. The government's reliance on volatile sources of revenue, however, remains a weakness in Hong Kong's credit factors. As a special administrative region of China, the ratings on Hong Kong are constrained by the ratings on China. This reflects the high degree of economic and political integration between the two. Furthermore, links between Hong Kong and the mainland, cemented by flows of food, water, people, and geographical proximity, mean that Hong Kong cannot be completely insulated from weaker mainland institutions. Nevertheless, the credit ratings on Hong Kong are higher than those on China because of the large degree of autonomy Hong Kong has over domestic policy, international economic relations, and external trade and investment affairs, all of which are enshrined in the Basic Law. China's respect for the Basic Law thus far has been reassuring, even if it does not remove all uncertainties relating to its continued commitment in times of great stress. Complete ratings information is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; select Ratings in the left navigation bar, then Credit Ratings Search. Media Contact: Marc Eiger, New York (212) 438-1280 [email protected] Analyst Contacts: KimEng Tan, Singapore (65) 6239-6350 John Chambers, CFA, New York (1) 212-438-7344 Ping Chew, Singapore (65) 6239-6345