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Fitch Ratings downgraded Hong Kong's credit status on Friday after months of protests brought into question the city's "one country, two systems" framework.

Fitch lowered the city's rating to "AA" from "AA+," citing the weakening stability of Hong Kong's business environment.

The protests began several months ago over an extradition bill that has since been retracted by Hong Kong's leader, Carrie Lam.

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Protests throughout Hong Kong are damaging the city's credit status within the global financial system.

Fitch Ratings said in a statement on its website on Friday that it downgraded Hong Kong's credit rating to "AA" from "AA+," citing a negative outlook as continuing protests brought into question the city's "one country, two systems" framework.

"Ongoing events have also inflicted long-lasting damage to international perceptions of the quality and effectiveness of Hong Kong's governance system and rule of law, and have called into question the stability and dynamism of its business environment," Fitch said in a statement on its website on Friday.

Fitch expects Hong Kong's economy to contract in the second half of the year, with growth slowing to 0% in 2019 and recovering to 1.2% in 2020. The downgrade could increase borrowing costs for Hong Kong's government and businesses, but the AA rating is still the third-highest credit status on Fitch's scale.

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Protests broke out in the city several months ago over an extradition bill that has since been withdrawn by Hong Kong's leader, Carrie Lam. Chinese officials have warned that the protests could send the city into a recession, and many investors have viewed the situation as a potential catalyst for a global economic slowdown.

"A more challenging economic landscape has emerged as a result of the blow to domestic activity precipitated by continued unrest, as well as the already-existing external headwinds brought on by the US-China trade conflict," Fitch said.

Hong Kong's business community has struggled to reassure investors and companies over the past several months that its financial system is still an attractive place to invest capital. The Chinese e-commerce giant Alibaba postponed its multibillion-dollar Hong Kong initial public offering earlier this month because of the political instability in the city.

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