With the extradition bill being proposed by Hong Kong's leaders, comes the potential risk of undermining Hong Kong's special status in the international markets. A change in the market view can lead to outflux of capital from the autonomous region, which can lead to a stock market plunge.
With the fear of losing wealth, residents might convert their HKD to safer currencies like the USD or Euros. These were the exact incidents that occurred in the backdrop of the Asian financial crisis 20 years ago. The government’s recent attempt to implement an unpopular extradition bill could lay the foundation for the next currency crisis. Apart the from the citizens, the move has also been widely criticized by Western nations for jeopardizing the one country, two systems framework guaranteed to Hong Kong residents at the time of handover to China.
The US-Hong Kong Policy Act of 1992 stipulates that Hong Kong’s special status can be revoked by the US administration under the condition that it is not sufficiently autonomous to justify different treatment from mainland China. With the tensions between the U.S. and China escalating, the chances of the special status being revoked is high. This will lead to the loss of favorable tariffs and other trade benefits acquired as part of bilateral treaties.
All these factors might cause the Hong Kong Dollar's value to plummet at the international level. So let us wait and watch what happens amidst the global tensions.
-- Cited from the South China Morning Post
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