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Former HKMA chief: “Weaponisation of finance poses substantial risk to US”

Former HKMA chief Joseph Yam discusses the implications of US-China relations on Hong Kong as an international finance centre, the removal of the territory’s special status and describes the targeting of foreign individuals and entities as weaponisation of finance.

July 31, 2020 | George Salvo
  • The US dollar’s dominance as the world’s reserve currency is under threat
  • Global financial intermediation will continue despite worsening US-China relations
  • The internationalisation of RMB and financing the Greater Bay Area (GBA) are vital to remain a global financial centre

United States (US) President Donald Trump floating the possibility of imposing sanctions on Hong Kong may have dire consequences for the US, warned Joseph Yam, the former chief executive of the Hong Kong Monetary Authority (HKMA).

Yam spoke and gave a media interview at an online forum organised by the Our Hong Kong Foundation, a think tank established in 2014 by former chief executive Tung Chee Hwa.

Yam believes any penalties may hurt Hong Kong but would likely impact America more if it were to use the US dollar as a weapon.

“If you weaponise, you restrict the use of the currency, restrict investors from investing in the US, or restricting American investors from investing in China, forbid Chinese firms from conducting fundraising in Hong Kong,” Yam said.

The US being the largest economy in the world and the dominance of the US dollar in the international monetary system means it has a powerful arsenal at its disposal.

Restricting the trading of the dollar is an option the US can do to Hong Kong, a move Yam refers to as ‘nuclear option,’ considering the grave damage it could unleash on the city’s financial standing.

While this alternative may lead to another global financial crisis, Yam also explained why it is highly unlikely to happen.

US dollar under threat

Yam believes such a move would put pressure on the dollar and the US' ability to repay its liabilities and potentially result in a default on its debts.

To drive his point, Yam presented a chart on the net internat...

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Keywords:Us-china, Rmb, Financial Crisis, Niip, Hong Kong Autonomy Act, Guangdong-hong Kong- Macau Greater Bay Area


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