Hong Kong’s dollar tumbles on market jitters about Beijing’s plan to impose national security legislation
- The currency tumbled 0.05 per cent to 7.7539 against the US dollar on Thursday, its weakest level since May 5
- Draft resolution for Hong Kong law to proscribe secessionist and other activities in city to be presented as motion to National People’s Congress on Friday, sources say
The Hong Kong dollar dropped sharply on Thursday as the approach of China’s annual meeting of parliament fuelled market worries that policymakers would push for new legislation to restrict the city’s freedom.
Hong Kong delegates will have their first formal meetings as part of the two sessions with Xia Baolong, director of the State Council’s Hong Kong and Macau Office (HKMAO), and Zhang Qingli, vice-chairman of the Chinese People’s Political Consultative Conference, the nation’s top advisory body.
A Beijing official told the Post that the agenda for discussion would include the Basic Law, Hong Kong’s mini-constitution, and a requirement that the Hong Kong government enact its own national security law, prohibiting acts of “treason, secession, sedition, or subversion”.
Beijing to introduce national security law for Hong Kong
Beijing’s push for national security legislation comes against the backdrop of rapidly escalating tensions between the United States and China.
US Secretary of State Mike Pompeo launched a verbal salvo against China on Wednesday, attacking Beijing for its policies on health, defence, Taiwan and 5G and its “brutal” regime, as he expressed US concern over certifying Hong Kong’s autonomy.
The United States has until the end of this month to assess whether Hong Kong remains suitably autonomous from China under the Hong Kong Human Rights and Democracy Act of 2019 – a condition for extending the city’s preferential trading and investment privileges with US businesses.
In contrast to Hong Kong’s weak economic growth, its currency has shown resilience. It has been trading near the strong end of the band in the past month because funds have flowed into the city despite the deteriorating economy. The city’s linked exchange system allows the Hong Kong dollar to trade between 7.75 and 7.85 per US dollar.
The relaxation of social-distancing rules to contain the coronavirus pandemic has revived pro-democracy protests in the city that had been dormant since January.
Hong Kong’s gross domestic product is forecast to shrink by 7.2 per cent this year partly because of re-escalating social disruptions compounding a rising unemployment rate caused by the Covid-19 pandemic, according to a recent note by Standard Chartered Bank’s senior economist for Greater China, Kelvin Lau.
Lau had said the Hong Kong dollar would stay trading on the strong side of the 7.75-7.85 band for much of this year.
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