Under Donald Trump’s coming second administration, Hong Kong may likely play a significant role in the wider industry, security, and political conflict between the United States and China. If therefore, the Hong Kong currency’s clamp to the US franc had come under US fire.
Trump is expected to make a new policy statement regarding Hong Kong-related problems, from the city’s role in assisting Russia in obtaining dual-use Chinese goods and avoiding American restrictions to the detention of pro-democracy activists and politicians to the economic capital’s role in reported money laundering that is against US interests, according to some observers.
Before Trump emphatically won the US presidential election on November 5, the former senator vowed to free Jimmy Lai, a pro-democracy activist and media mogul, from jail. Lai, who stands accused of fomenting Hong Kong’s 2019-2020 turmoil, is obviously one of Beijing’s negotiations cards on the bargaining table between Chinese and US officials.  ,  ,  ,
Six additional abroad Hong Kong activists were detained on Christmas Eve after their arrest warrants were issued by Hong Kong’s federal security police on the charge of inciting subversion, colluding with international forces, and getting worse. The police also imposed HK$ 1 million ( US$ 128, 425 ) bounties on each of them.  ,
Tony Chung and Chloe Cheung, two young activists, social critics, Victor Ho, a former city councillor, Carmen Lau, and former comedian and performer Joseph Tay are among the six. Ho and Tay are in Canada, and Tay is in the UK.
The six, according to Hong Kong’s Security Secretary Chris Tang, have allegedly violated international law by speaking out, posting on social media, and influencing foreign governments to impose sanctions on Hong Kong authorities and courts.
As of December 25, 19 people have been arrested on suspicion of violating federal safety in Hong Kong.
The Hong Kong government’s “relentless achievement of pro-democracy protesters outside its borders is a overt excess that ignores global standards,” according to Chris Patten, the previous government of Hong Kong and a supporter of United Kingdom-based Hong Kong Watch.
He demanded that the governments of the UK, the US, and Canada “agissent quickly and collectively to protect these campaigners from international persecution, ensuring their protection, and standing strong against Beijing’s attempts to undermine the very political values we hold lovely.”
hub of financial violence
The new arrest warrants does encourage hawkish American politicians to call for more harsh methods, such as the removal of some Hong Kong-based lenders from the SWIFT financial exchange program, which, if implemented, could lead to a de-pegging of the Hong Kong dollars and US buck.  ,
In a letter to US Treasury Secretary Janet Yellen in late November, John Moolenaar, president of the US House Select Committee on the Chinese Communist Party (CCP), expressed the agency’s “deep problem” with regard to Hong Kong’s reported “increasing function as a financial hub for cash laundering, sanctions evasion, and other illegal financial activities.
According to him,” Hong Kong has shifted from a trusted global financial center to a crucial player in the deepening authoritarian axis of the People’s Republic of China ( PRC ), Iran, Russia, and North Korea,” following the National Security Law of 2020, which subjected the country to the CCP’s rule.  ,
” We must now question whether longstanding US policy towards Hong Kong, particularly towards its financial and banking sector, is appropriate”.
Moolenaar claimed that the US Treasury has taken preliminary action against businesses based in Hong Kong, where the city has since become a global leader in practices like importing and re-exporting prohibited Western technology to Russia, creating front companies to purchase prohibited Iranian oil, facilitating the trade of Russian-sourced gold, and managing “ghost ships” that engage in illegal trade with North Korea.
He stated that the committee is interested in learning how the US Treasury will combat Hong Kong’s financial system’s financing of money laundering and sanctions evasion.
Jesse Baker, assistant to the US deputy treasury secretary, met with Hong Kong financial institutions, including HSBC, StanChart and Bank of China ( Hong Kong ) in Hong Kong on December 11, warning them not to engage businesses with Russia or help Russia evade western sanctions, Nikkei reported.
In fact, Trump met with his top officials to decide the United States ‘ response after Beijing passed the Hong Kong National Security Law on June 30, 2020.  ,
At the time, Trump had considered forcing an end to Hong Kong’s peg policy, but opted against the move due to commerce and treasury officials ‘ opposition. Instead, he signed an executive order to end Hong Kong’s special status.
The Biden administration has not discussed de-pegging the Hong Kong dollar from the US greenback over the past four years.
In November 2022, markets fretted that Hong Kong’s peg policy would end as the city’s currency had repeatedly touched 7.85 per US dollar, the lower end of the allowed peg range of 7.75-7.85, amid rising US interest rates.  ,
Bill Ackman, a billionaire investor at the time, predicted that the Hong Kong dollar would decline and that its peg to the US dollar would collapse. Boaz Weinstein, a veteran trader, claimed to have a 200-to-1 payoff potential when he bet against the Hong Kong dollar.  ,
De-pegging debate
Some Hong Kong experts said they don’t believe the Taiwan Straits will soon experience a de-pegging unless a sudden war breaks out. However, they did not rule out the possibility of de-pegging in the future.
According to Vincent Lam, a financial columnist and fund manager based in Hong Kong, it’s unlikely that Trump will act to stop the country from using US dollars because this conflicteth with US interests. She noted that Trump has vowed to impose a 100 % tariff on BRIC nations that engage in de-dollarization schemes.  ,
He added, however, that if the Hong Kong government doesn’t improve its balance sheet, it runs the risk of depleting its$ HK$ 550 billion fiscal reserves and will have to abandon its peg policy in the coming years. He claimed that in order to maintain financial stability, Hong Kong can peg its dollar instead to a basket of global currencies.
Allan Zeman, the founder of Lan Kwai Fong Group, stated in a recent interview that the Hong Kong government should have a plan B for its currency peg policy.
He claimed that a peg to the US dollar would hurt Hong Kong’s competitiveness and economy if US inflation and interest rates remained high during the Trump 2.0 era. He claimed that in this situation, a de-pegging might be beneficial for Hong Kong.
In an article, Charles Gave, the founder of the Hong Kong-based Gavekal research group, predicted that Hong Kong might become the potential home for a new international financial system in the coming years.  ,
He claimed that many Asian exporters have kept their income in Hong Kong over the past few years, leading to an increase in the city’s US dollar reserves. He claimed that if these deposits were converted into Hong Kong dollars and lent to Asian nation borrowers, a new pyramid of US dollar-denominated credit would emerge that US authorities would not be able to control.  ,
Hong Kong may represent a new flashpoint in Trump’s fight with China, according to a Bloomberg commentary on December 21. Trump may look into Hong Kong’s peg policy again because he doesn’t like being told he has no say in something.
Yong Jian contributes to Asia Times. He is a Chinese journalist who specializes in Chinese technology, economy and politics.