One approach would involve the U.S. undermining Hong Kong exchange funds’ ability to hold U.S. dollar-denominated assets, said Liu. The Trump administration could also undercut Hong Kong banks’ ability to obtain the greenback or strip them of their ability to conduct dollar clearing activities. Amid geopolitical tensions between the U.S. and China, Liu said the “Hong Kong dollar is China’s U.S. dollar.”Last week, Trump signed legislation to impose sanctions on China. Secretary of State Mike Pompeo has repeatedly criticized the national security law in Hong Kong, calling it "Orwellian.'' Liu said companies on the U.S. entity list would want to avoid some direct dollar risk exposure — and the Hong Kong dollar has become the best alternative.

Source: The Standard July 22, 2020 07:30 UTC