[Cross-Strait] Experts Urge Hong Kong Government to Prepare Early Amid Fears of Soaring US Debt Impacting HKD Peg
RtiTalk 小編19d ago
Analysis suggests that the rising US debt may impact the Hong Kong dollar's peg to the US dollar, and Hong Kong authorities should prepare for this.
In an article published in Ming Pao today (2nd), Francis Cheung, former editor-in-chief of Hong Kong Economic Journal and a political and economic analyst, stated that the US Department of the Treasury announced last month that the total US federal debt has surpassed 40 trillion US dollars for the first time.
The article notes that financial markets are more concerned about the US budget deficit as a percentage of Gross Domestic Product (GDP) and the size of government debt held by the public. Currently, US debt as a percentage of GDP has reached 123%, far exceeding the internationally recognized "safety line" of 60%, indicating a structural imbalance in the US government's finances.
The article argues that the US government cannot ignore the 40 trillion dollar debt crisis. Regardless of the countermeasures the US adopts, the future outlook for the US dollar will become more uncertain and riskier. The Hong Kong dollar's peg system, linked to the US dollar, faces hidden crises under such circumstances, and the Hong Kong Monetary Authority (HKMA) should take early defensive measures.
The article emphasizes that financial stability is Hong Kong's greatest advantage as an international financial center. The linked exchange rate system could affect financial stability, and the Special Administrative Region government cannot afford to be complacent.
Following the Sino-British negotiations on Hong Kong's future in 1982, public sentiment in Hong Kong became unstable, leading to an emigration wave and the selling off of the Hong Kong dollar, causing its value to decline.
To stabilize the Hong Kong dollar and public sentiment, the then British Hong Kong government implemented the linked exchange rate system in late 1983, essentially setting the rate at 7.8 Hong Kong dollars to 1 US dollar, with fluctuations allowed only between 7.75 and 7.85. The HKMA would intervene in the market if the rate exceeded this range.
During the 1998 Asian Financial Crisis, foreign capital attacked the Hong Kong dollar, and there were concerns about the collapse of the linked exchange rate system. However, with support from Beijing, the Hong Kong dollar eventually remained stable, and the peg was unaffected.
In recent years, with global instability and rising geopolitical risks, Hong Kong's financial sector and some media have again focused on whether geopolitical factors will affect the operation of the linked exchange rate system.
Furthermore, after the US removed Russia from the SWIFT payment system following the outbreak of the Russia-Ukraine war, some in Hong Kong also worried that Hong Kong might face a similar situation if US-China relations rapidly deteriorated.
Early last year, HKMA Chief Executive Eddie Yue reiterated in an article that the Hong Kong dollar's peg to the US dollar has been effective and requires no change. He emphasized that Hong Kong continuously assesses all potential risks that could affect its financial stability and security, ensuring sufficient capacity to respond.
He stated that the linked exchange rate system, implemented in October 1983, has been in place for over 40 years. It has weathered multiple economic and interest rate cycles and has responded to numerous global and regional financial crises, becoming an integral component of Hong Kong's economic and financial system. The linked exchange rate system provides Hong Kong with a durable and stable monetary environment and has proven effective. (Editor: Chen Wen-wei)
Source Link: https://www.rti.org.tw/news?uid=3&pid=229613
How does this article make you feel?
0 people reacted