Hong Kong faces a dilemma as the prospect of an unprecedented US debt default looms large - it needs to keep buying US dollar assets to maintain its sensitive currency peg, yet at the same time try to protect the value of the city's wealth.
'If the US defaults on its debt, Hong Kong would be very susceptible given its large exposure to dollar assets and the currency peg,' said Joseph Lau, senior Asia Economist at Societe Generale.
The United States government reached its statutory debt limit of US$14.3 trillion on May 16. It needs to raise the borrowing ceiling by Tuesday otherwise its cash balance will become inadequate for it to meet its commitments, potentially including the ability to service its debts.
If the US defaults on its debts, it will send shockwaves around the world and bring catastrophic disruption to trade and finance.
The Republican-controlled House of Representatives and Democratic-controlled Senate have been locked in a stalemate over rival plans to reduce debts. Most analysts still believe a US default highly unlikely. But if it does happen, the impact on Hong Kong will be direct and critical.
Firstly, since the Hong Kong dollar is pegged to the US currency, its value would fall.