Advertisement
Hong Kong dollar peg: could democracy act spell the end of the city’s US dollar peg?
- Hong Kong Human Rights and Democracy Act could potentially threaten the city’s exchange rate peg and its reputation for stability, analysts say
- But use of the act to suspend Hong Kong’s special trade status would be ‘nuclear option’ for the city and global financial markets
Reading Time:4 minutes
Why you can trust SCMP
This is the second article in a three-part series looking at the outlook for Hong Kong’s dollar peg system under the city’s current political turmoil. You can read the first story in the series here and the third story in the series here.
US legislation that paves the way for diplomatic action and sanctions against Hong Kong could potentially threaten the city’s exchange rate peg and long-term status as a financial centre, analysts said.
The Hong Kong Human Rights and Democracy Act, which was signed into law last month by US President Donald Trump, increases scrutiny of Hong Kong’s economic and political systems, and its passage comes during a time of unprecedented unrest in the city.
Advertisement
Among other mandates, it allows the US State Department to suspend Hong Kong’s special trading status based on whether the city retains a sufficient level of autonomy under the “one country, two systems” principle.
The USA is building up its geopolitical arsenal in its cold war with China. Hong Kong is one of several elements in this cold war arsenal, so Hong Kong could be collateral damage in this regard
The United States has treated Hong Kong as a separate entity from mainland China since 1992, granting it special economic privileges, such as the free exchange of the US dollar with the Hong Kong dollar, and access to sensitive technologies. Exports from Hong Kong are also exempt from trade war tariffs that have been applied to the mainland by Washington.
Advertisement
Advertisement
Select Voice
Choose your listening speed
Get through articles 2x faster
1.25x
250 WPM
Slow
Average
Fast
1.25x