-- Hong Kong is not afraid of possible U.S. sanctions, and has prepared contingency plans to weather the challenges.
-- Hong Kong has over 440 billion U.S. dollars of foreign reserves to defend its linked exchange rate system and the HK dollar.
-- The U.S. possesses huge interests in Hong Kong and relies heavily on Hong Kong for a regular trade surplus. Whatever action the U.S. takes to harm Hong Kong will also harm its own businesses.
HONG KONG, June 3 (Xinhua) -- Amid uncertainties as to when and to what extent the United States will slap sanctions on Hong Kong, finance chief Paul Chan said Hong Kong is fearless and has already prepared various contingency plans to weather the challenges.
"We are not afraid of possible sanctions by the United States," Chan, financial secretary of the Hong Kong Special Administrative Region (HKSAR) government, told Xinhua in an interview.
The National People's Congress (NPC), China's top legislature, last week adopted a decision to make Hong Kong national security laws in a bid to plug the national security loopholes that has been exploited by foreign forces.
The move, a common practice globally, drew threats from the United States, leading to concerns about possible impacts on the global financial hub, particularly on the Hong Kong dollar, which is pegged to the U.S. dollar, as well as the region's status as a separate customs territory.
Hong Kong Special Administrative Region government Financial Secretary Paul Chan receives an exclusive interview with Xinhua in Hong Kong, south China, on June 2, 2020. (Xinhua/Wu Xiaochu)
CURRENCY STABILITY
During the interview, Chan reassured investors that Hong Kong's normal commercial activities will be left largely unaffected and the place will remain as a popular fund-raising center for global companies.
Hong Kong has enough ammunition to defend its linked exchange rate system (LERS), Chan said, citing over 440 billion U.S. dollars of foreign reserves, more than twice of Hong Kong's monetary base, to ensure the stability of its local currency.
The LERS, established in 1983 and reformed multiple times, guarantees a stable Hong Kong dollar, with its exchange rate against the greenback largely within a range of between 7.75 and 7.85.
Chan pointed out that the LERS has withstood the test of time and does not need approval from the United States.
In particular, Chan said the currency swap agreement signed between Hong Kong and China's central bank will offer the strongest support.
"We have talked to the People's Bank of China and they will be able to extend to us unreserved support in defending our currency," he added.
SPECIAL TREATMENT
Responding to the scenario that the United States revokes Hong Kong's special customs status, Chan believed the impact would also be limited, as the United States possesses huge interests here and relies heavily on Hong Kong for a regular trade surplus.
While the United States raked in nearly 300 billion U.S. dollars of surplus from its trade with Hong Kong during the past decade, Hong Kong's locally manufactured goods exports to the United States only account for 0.1 percent of its total exports.
Hong Kong is the third largest buyer of U.S. wine and the fourth largest importer of U.S. beef, and U.S. companies own considerable assets in Hong Kong's service industry, in particular finance and professional services, Chan said.
U.S. goods and services exports to Hong Kong, along with Hong Kong's direct investment in the United States, have generated more than 210,000 jobs in the United States.
The closing meeting of the 3rd session of the 13th National People's Congress is held in Beijing, China, on May 28, 2020.(Xinhua/Ding Haitao)
Whatever action the United States takes to harm Hong Kong will also harm its own businesses, Chan said.
The United States has more than 1,300 companies in Hong Kong, including nearly 300 regional headquarters and more than 400 offices. It also has non-reciprocal visa-free access to Hong Kong.
INVESTORS' INTERESTS
Chan said the NPC's decision to introduce the Hong Kong national security legislation -- the excuse for the United States to threaten sanctions -- will in fact prevent a resurgence of violence that caused mayhem in Hong Kong in 2019.
He said the legislation would ensure the safe rebuilding of a stable business environment as urged by global investors and businesses, and cement Hong Kong's status as a global financial center.
Months of violent incidents and riots last year had plunged Hong Kong into chaos, with visitors scared off, the rule of law trampled on and the economy severely depressed.
Law, order and social stability are essential to every financial center, which is exactly what the legislation will bring back to Hong Kong, Chan said.
Quite a number of global investors have recognized the legislation's importance and understood that restoring peace and stability is the most urgent matter in Hong Kong, Chan said.
Chan said the free flows of capital, information and talents will continue to be protected in Hong Kong and the interests of global businesses operating here will not be affected after the national security legislation takes effect.
Hong Kong does not adopt foreign exchange control and ensures the convertibility of the Hong Kong dollar and free flows of capital, Chan said, stressing that the policy, one of the determining factors of Hong Kong's financial center status, is enshrined in the Basic Law, Chan said.
As the national security legislation only targets very few criminals, the law-abiding businesses and residents have nothing to fear, Chan said.
Photo taken on Oct. 24, 2019 shows a view of the Hong Kong-Zhuhai-Macao Bridge from the "Ngong Ping 360" cable car in south China's Hong Kong. (Xinhua/Cheong Kam Ka)
SOLID SUPPORT FROM MAINLAND
Looking ahead, Chan said he believes Hong Kong will continue to thrive on the steady development of the Chinese mainland.
Numerous mainland businesses yearning for global financing have made Hong Kong one of the top fund-raising markets in the world over the past decades.
Amid rising uncertainties in global markets, an increasing number of overseas-listed Chinese companies plan to return to Hong Kong for a secondary listing, which will further improve Hong Kong's financial position.
The mega secondary listing of e-commerce giant Alibaba, worth over 100 billion Hong Kong dollars (about 13 billion U.S. dollars), helped Hong Kong Exchanges and Clearing Limited top the world's IPO league table for a second straight year in 2019.
"Hong Kong as a mature financial center needs the support of a strong real economy," Chan said, pointing to the enormous mainland market and the Guangdong-Hong Kong-Macao Greater Bay Area.
With a population of about 70 million and an economy of over 10 trillion yuan (1.4 trillion U.S. dollars), the Greater Bay Area significantly expands Hong Kong's room for development, allowing Hong Kong to sustain its growth in finance and innovation and offering Hong Kong's young people to perform in a broader arena, Chan said.
As the world's second largest economy, China, with its deepening reform and opening-up, will provide a solid support for the HKSAR to remain as a global financial center and continue to prosper despite external uncertainties, Chan said.■
(Video reporters: Qiu Bo, Liang Jiajun; Video editor: Luo Hui)
