A major credit rating agency's downgrading of its outlook on Hong Kong - an unprecedented move - has caused consternation in the city, with its financial secretary lambasting it as a mistake.
It also renews discussion over how Hong Kong should diversify its economy beyond hitching its fortunes to China's wagon.
Over the weekend, Mr John Tsang mounted a stout defence of the city, saying its economic fundamentals are strong.
The downgrade by Moody's Investors Service from stable to negative on Saturday was not matched by rival agencies, with Fitch Ratings' head of Asia-Pacific sovereigns Andrew Colquhoun telling The Straits Times that recent political and economic developments have not been a "game changer".
Its outlook on Hong Kong remains unchanged at stable, a status that Standard and Poor's Rating Services also retains.
Moody's affirmed the Hong Kong government's long-term debt at Aa1, the second-highest rating, but cited tightening linkages with the mainland in its revision of the city's outlook.
The weakening Chinese economy, it said, will significantly impact Hong Kong's, given its heavy dependence on the mainland and the city's banking sector was vulnerablebecause of exposure to Chinese borrowers.
The agency had earlier also downgraded China's outlook to negative.
Political risk has risen in Hong Kong, it said, and tensions could rise further, especially in the run-up to next year's chief executive race, which will "impair the effectiveness of government policies". Beyond that, there is the "risk that Hong Kong's institutions will lose some of their independence... as China's influence grows".
"This would negatively affect policy effectiveness and credibility in Hong Kong and weaken its institutional strength relative to China's," it wrote.
Moody's rating outlook on Hong Kong has previously hovered between stable and positive.
Such reports are not likely to have substantive impact on Hong Kong for now. But they telegraph to investors how the credit rating may change in the coming months which could increase the government's borrowing costs. The political factors cited by Moody's could affect companies' plans, said DBS Hong Kong economist Lily Lo, raising as an example HSBC's recent decision not to move its headquarters to the city.
Mr Tsang said he can neither understand nor agree with Moody's move. Hong Kong exercises a high degree of autonomy under Beijing's "One Country, Two Systems" policy, while reaping the benefits of a growing Chinese economy, he said.
"What Hong Kong faces is a China opportunity, not a China risk."
A government spokesman said Moody's comments were "purely speculative and subjective statements without any ground".
Since the start of the year, Hong Kong has been buffeted by political crises - the disappearance of booksellers many believe was a case of extrajudicial actions by Chinese agents, and rioting in Mongkok.
Meanwhile, China is grappling with slowing growth, capital outflow and worries about toxic debt.
But, said Fitch's Mr Colquhoun, it does not necessarily follow that Hong Kong's outlook should be downgraded. "We don't do it in a mechanical way."
He acknowledged that the city's tourist and retail figures have registered sharp declines.
"It is difficult not to join the dots to politics, but this is not a red flashing sign for us. If we have evidence that Hong Kong's economy will suffer in a lasting way, that will be reflected."
The broader picture, he said, is that Hong Kong historically has a resilience to shocks.
Ms Lo said Moody's report was a reminder to Hong Kong to rethink its economic strategy.
"If Hong Kong is to move forward in the next five to 10 years, what are the main economic drivers beyond China? We have no manufacturing industry, no innovation. I'm concerned."
