Table of Contents
Is Hong Kong still important?
Hong Kong was once again ranked the freest economy in the world in the Fraser Institute’s Economic Freedom of the World 2020 Annual Report. Hong Kong does not subsidise its exports. There is no tariff on goods entering Hong Kong.
Why is the HKD pegged to USD?
The cause of this was the appreciation of the renminbi against the USD from the summer of 2005 onward, which fuelled speculation that the HKD peg might be switched to the renminbi and lead to an appreciation of the HKD against the USD.
How did HK become a financial hub?
After being ceded by China to the British under the Treaty of Nanking in 1842, the colony of Hong Kong quickly became a regional center for financial and commercial services based particularly around the Hongkong and Shanghai Bank and merchant companies such as Jardine Matheson.
Could Hong Kong be forced to abandon its US dollar peg?
Former People’s Bank of China adviser Yu Yongding says if Hong Kong’s economy were to suffer further from protests the city could be forced to abandon its peg to the US dollar. Photo: Bloomberg
Is Hong Kong’s Kond dollar collapsing?
The 36-year Hong Kond Dollar peg is coming under some strain amid worsening Sino-American relations. While the local currency seems insignificant for the world, the city-state’s function as the world’s No. 3 center for foreign exchange and its role as a conduit between the US and China make such a potential collapse monumental.
What are the risks for Hong Kong’s currency peg?
The risk for the peg is that the US would limit Hong Kong banks from accessing greenbacks, severing links, and triggering chaos. Investors have been ignoring these elevated tensions as long as both countries withhold the trade agreement.
What happens when the Hong Kong exchange rate increases?
Conversely, if money flows into the city and the exchange rate strengthens to 7.75 per dollar, the upper end of the band, the HKMA will sell Hong Kong dollars to banks, causing an increase in bank liquidity and putting downward pressure on local interest rates that discourage capital inflows.