But the downgrade was notable for highlighting how Beijing’s increasing encroachment into Hong Kong could threaten investor confidence.

In its statement, Fitch said it had made the move because the months of conflict and violence in Hong Kong were testing the “one country, two systems” framework under which the city is governed after its handover to China from Britain in 1997. Under that model, Hong Kong is considered part of China but maintains its own political and legal systems, attributes that are attractive to foreign businesses and financiers. In mainland China, the Communist Party controls the courts and makes judges pledge loyalty to it.

Beijing’s actions in response to the protests have raised questions about how long the current arrangement can last. Fitch said Chinese officials were taking “a more public stance on Hong Kong affairs than at any time since the 1997 handover.”

“Fitch expects the ‘one country, two systems’ framework to remain intact, but the gradual rise in Hong Kong’s economic, financial and sociopolitical linkages with the mainland implies its continued integration into China’s national governance system, which will present greater institutional and regulatory challenges over time,” the credit rating firm said.