A rush for US dollars has forced money changers in Hong Kong to turn away hundreds of customers after running out of the currency amid fears the United States could end the city’s preferential trading status.
According to money exchange store owners, demand for the US currency surged this week after China’s legislature endorsed a resolution for its top legislative body to craft a tailor-made national security law for Hong Kong. The law would criminalise acts and activities of secession, subversion, terrorism and foreign interference.
Residents feared the Hong Kong dollar could be unpegged from its US counterpart, following remarks by US Secretary of State Mike Pompeo that the city was no longer suitably autonomous from mainland China in light of the proposed law. The US has yet to reveal what actions it will take.
Hong Kong Monetary Authority chief executive Eddie Yue Wai-man said earlier this week the peg would remain the bedrock of the city’s financial system, with foreign reserves of more than US$440 billion. And the city had yet to show any noticeable sign of fund outflows from the Hong Kong dollar or banking system.
Queues formed at money changers in a number of Kowloon districts including Tsim Sha Tsui and Sham Shui Po on Friday, as residents waited for shop operators to replenish their US dollar supply.
Eric Wong Wai-lam, who runs Rich Bird (HK) Currency Exchange in Sham Shui Po, unwillingly turned away 600 customers who wanted to convert their local banknotes to the US currency.
“There will be no US dollars for exchange until next Tuesday or Wednesday,” he told customers, adding that his shop could only serve those who had previously placed an order.
He said demand for the US currency had increased 10-fold this week, with more customers looking to switch large sums – hundreds of thousands or even millions of Hong Kong dollars – at a time.
“The US dollar is out of stock everywhere. We’ve offered every last bit of our supplies to our customers,” Wong said.
He said residents also sought alternatives such as the pound, Euro and Australian dollar. “People will take anything you have,” he said.
Civil servant Mike Ma had hoped to change HK$35,000 (US$4,514) into US dollars, but had to make do with £1,000 (US$1,237) and NT$20,000 (US$666) instead.
The 35-year-old British National (Overseas) passport holder said he had been keeping foreign banknotes since Hong Kong was gripped by anti-government protests last year, but had visited exchange stores more often this week because of uncertainties over the city’s economic future.
“I’m not confident about the current situation, same as many others. In case the US dollar peg is reset, buying the US dollar beforehand gives me more confidence,” Ma said.
The Hong Kong currency has been linked to the US dollar since 1983 and any change in the peg does not require approval from the US government. The Hong Kong government determines which currency the local dollar is pegged to. The currency is kept pegged in the range of HK$7.75 to HK$7.85 to the US dollar.
Kevin Chan, operator of an online shopping site, bought US$3,000 on Friday, saying he had been doing so from time to time since the social unrest broke out.
“It’s like buying insurance,” the 31-year-old said.
Chan said panic buying of the US dollar reflected how Hong Kong had found itself in the middle of a political tug of war between the world’s two superpowers.
“[China and the United States] are bluffing now. You don’t know what stakes they will raise next. Hong Kong is in a passive position. It’s just a pawn to both sides,” Chan said.
One of Hong Kong’s biggest banks, HSBC, saw a small handful of its automated teller machines run out of US dollars, but was working to replenish them.
The bank has 39 locations that offer foreign currency, but not all distribute US dollars. Customers can withdraw up to HK$80,000 per day per bank card.
“HSBC has sufficient supply of banknotes and is committed to supporting its customers and the smooth operation of the financial system in Hong Kong,” a HSBC spokeswoman said.
Additional reporting by Chad Bray
More from South China Morning Post:
- China says it blocked US, UK move for formal discussion of Hong Kong national security law at UN
- US actions against Hong Kong ‘will be as targeted as possible’, American consul says
- The Hong Kong dollar’s 36-year-old peg to the US dollar will survive current tensions between the US and China – here’s why
- Hong Kong government calls threat of US sanctions a ‘double-edged sword’, while Beijing’s foreign affairs ministry office in city blasts Washington’s ‘gangster logic’