On Sunday, Hong Kong’s High Court once again rejected an application from pan-democratic lawmakers for an interim injunction against the government’s new anti-mask law.
Yet, the court also said that it will hold a hearing by the end of this month as to whether to allow a judicial review on the government’s invocation of the Emergency Regulations Ordinance.
The pan-dems urged the administration to exercise great restraint when enforcing the mask ban before the High Court delivers its ruling over the emergency law.
It remains to be seen whether the anti-mask law is a prelude to the introduction of more extensive or even authoritarian government powers.
Meanwhile, Financial Secretary Paul Chan Mo-po reiterated on his official blog on Sunday that, despite the emergency law, Hong Kong will never implement foreign exchange controls, noting that free flow of capital in and out of the city is guaranteed under the Basic Law.
Chan’s repeated reassurances on this matter, we believe, suggest that authorities understand the importance of maintaining the stability of the city’s financial system.
We should bear in mind that retaining the confidence of local and foreign investors is important for Hong Kong amid the current unrest, with the task just as crucial as restoring order to society as soon as possible.
Last week, when attending a conference in the Netherlands, prominent Wall Street hedge fund manager Kyle Bass warned that the escalating protests in Hong Kong and the city’s accelerating economic slowdown could trigger a massive capital flight over the next 12 to 18 months.
Massive capital outflows could push up interest rates, and could eventually force Hong Kong to break its currency peg to the US dollar which has remained in force for the past 36 years, it was suggested.
Bass’s warning was quickly dismissed by the Hong Kong Monetary Authority (HKMA), which has repeatedly stressed in recent days that Hong Kong’s US$4.3-trillion foreign exchange reserves and sufficient liquidity of the local banking system will enable the territory to weather the storm.
The HKMA does not have any intention whatsoever to change the “well-established Linked Exchange Rate System”, the de facto central bank said.
Bass’s fear-mongering rhetoric about Hong Kong’s economic and financial outlook has come as no surprise to us, but we strongly believe the HKMA is fully capable of defending the monetary and financial stability of Hong Kong.
Nonetheless, what is worrying is that the city is now in the midst of an unprecedented political crisis that is fundamentally different in nature from the various kinds of social turbulences we have seen before, with the vicious circle of “either friend or foe” standoff between the government and the public getting increasingly intense.
If the deep-rooted conflicts in society cannot be managed and resolved, it is likely that global speculators like Bass may fish in troubled waters and make a killing on our financial market in the coming days.
While Bass may have overstated Hong Kong’s economic woes, numbers do present a worrying picture. For example, retail sales were down a staggering 23 percent in value terms in August compared to the same month last year, indicating that the economy is indeed in a very dark spot.
If the anti-mask law does succeed in ending violence as the government seems to be hoping, the next thing the administration must do is to open up dialogue with various sectors of society.
There is simply no room for the authorities to shy away any longer from getting to the root of the fundamental social issues.
Only by doing so can we truly stop the bleeding, both socially and economically, and allow Hong Kong to get out of the woods and move on.
This article appeared in the Hong Kong Economic Journal on Oct 7
Translation by Alan Lee
[Chinese version 中文版]
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