Amidst the ongoing pandemic, China has bypassed the Hong Kong legislature to pass on a new national security law. The new security law makes it illegal to speak up against the Chinese government, further removing the right to free speech.
Talking about how Hong Kong acts as a Connector here, for instance, we can take an example of Lego. Hong Kong acts precisely like a Lego, allowing to connect one structure to the other. Hong Kong works as a connector for two different banking systems, i.e., China and US/Europe, and enables them to coordinate seamlessly. There are two reasons why Hong Kong can maintain a significant global financial landscape:
- The Hong Kong Monetary Authority (HKMA) needs similar controls as the US and Europe, which are transparency, proper accounting, and reporting on a given time. Hong Kong assures to keep appropriate control and it will be alert towards fraud and money laundering. This provides Hong Kong with unbridled access to Western financial institutions.
- Since the year 1983, the Hong Kong Dollar is pegged to the US Dollar. Apart from that, Hong Kong has $440 billion reserved for itself, which is twice the amount of money circulated in Hong Kong. Hong Kong can seamlessly transact in US Dollars. It’s effortless for Hong Kong to create banking instruments that are denominated in US dollars. Hong Kong can also directly connect with New York’s financial sector via proprietary technology.
Ever since the new national security law is passed in Hong Kong, it has raised multiple questions regarding Hong Kong’s position as a connector between China and the US/Europe. Reports state that the US White House wants to remove Hong Kong’s particular place and impose sanctions. Such threats from the US White House were responded with similar threats by China. Since we are gradually heading towards 2021, the financial institutes should be able to assess the exposure and risks involved with a quality-driven process.
Most probably, this case will steadily fall, maybe somewhere in the middle of best-case and moderate once the time prevails and the political focus shifts elsewhere. Both HSBC and Standard Charted are standing strong to support the national security law and express hope to build a cohesive business environment. The most extreme outcome here can be when the US decides to impose sanctions creating penalties for forming business strategies with individuals and firms operating in Hong Kong. For now, one thing is undeniable; this is not the end of Hong Kong. This is not even the beginning of the end.