Since the Chinese Communist Party (CCP) announced a draft resolution of the new national security law imposed on Hong Kong, residents of Hong Kong rushed to exchange Hong Kong dollars to US dollars with long lines forming outside money changers. Some money changers even sold millions of US dollars in less than an hour while other foreign currencies also experienced surging demand.
In an interview with The Epoch Times (Hong Kong) on May 29, Eric, the owner of the Rich Bird (HK) Currency Exchange Co. in the Sham Shui Po area said that his shop exchanged USD$4 million just on May 29. According to him, all of the money changers in Sham Shui Po had run out of US dollar stock by the end of the day.
After the announcement of the new national security law, the amount of dollars exchanged in Eric’s store was as high as 10 times as that of normal days. “My sales amounts are usually USD$100,000 to USD$300,000. Now , I exchanged $1-3 million US dollars just in the first few days (after news on the National Security Law was out).”
“Everyone no longer believes in the Hong Kong dollar. Because of concerns about the prospects of (Hong Kong), everyone keeps US dollar bills in their homes,” said Eric.
Surging Demand for Safe-Haven Currencies
According to Radio Free Asia, on May 28 and 29, Hong Kong residents in Tsim Sha Tsui, Mong Kok and Sham Shui Po have queued up to exchange foreign currencies. Most people exchanged US dollars, while the British pound and Japanese yen were sold out as well.
A woman who came to exchange US dollars said she was worried about possible devaluation of the Hong Kong dollar due to the new national security law which prompted her to exchange even more of her Hong Kong dollars to US dollars, despite having already exchanged some previously.
According to a Guangzhou businessman, after some Hong Kong people exchanged Hong Kong dollars for US dollars, they withdrew the US dollars from the Chinese banks and deposited them to foreign banks, due to their concerns over future uncertainties. There were also some Hongkongers who said that they would just keep the US dollars they had purchased at home.
— 秦鹏 (@shijianxingzou) May 29, 2020
On the first day after the National People’s Congress passed the National Security Law, the exchange rate of the Hong Kong dollar fell, Hong Kong people lined up to exchange dollars, and many citizens kept the dollar bills at home.
International investment bank Credit Suisse issued a report on Friday, saying that Hong Kong real estate will suffer the biggest losses and its status of an international financial center may also be weakened.
Hong Kong’s Apple Daily reported that money exchange shops in popular areas such as Wanchai, Tsim Sha Tsui and Central had run out of stock of US dollars by the evening of May 29. Some money exchange shops even exchanged millions of dollars in just 45 minutes. While safe-haven currencies such as pounds sterling, yen and Swiss francs were popular, other currencies with more volatile rates, such as Australian dollars and New Zealand dollars, also saw an increase in demand.
The CCP’s National Security Law Push Triggers a Tide of Migration Among Hongkongers
On May 21, the day when the law was introduced, the US dollar to HK dollar one year forward rate increased to above 7.83 for the first time of the year.
The market is even more pessimistic about the offshore renminbi, which fell to its lowest level since September 2019 to ¥7.1965 on May 27, approaching the ¥7.2 mark.
JPMorgan ’s research report predicts that some foreigners living in Hong Kong will leave. It is estimated that 478.5 billion Hong Kong dollars will leave Hong Kong, which will reduce Hong Kong ’s foreign exchange reserves by 14%. According to the analysis, once Hong Kong’s foreign exchange reserves are lost, the stability of the Hong Kong dollar and its exchange rate will be affected.
Many Hong Kong locals are also planning for emigration. According to Apple Daily’s interviews with executives of large banks, many of their customers have inquired about the US dollar fixed deposit promotion, and some customers with monthly salaries of more than $200,000 are considering emigration recently.
Some extrapolated what mainlanders had experienced following the CCP’s seizure of power decades ago to what people might be facing in Hong Kong at present. After the communist party started ruling in mainland China after 1949, through waves of movements, private properties and assets including land became nationalized with many people thrown into poverty.
A Twitter user commented that “It is foreseeable that the CCP will one day seize all your assets and belongings, looting Hong Kong people’s money, leaving Hong Kong in a destitute state. There is nothing new under the broad daylight. Let the dictators do whatever they want. This is the world ’s largest cult country system. One should leave early to avoid the catastrophe.”
Despite facing difficult times, many Hongkongers still showed support for each other and stood united. Zhang Junjie, the owner of the famous Lung Mun Cafe in Hong Kong who has been a firm supporter of Hong Kong’s young protesters announced on May 28 that the cafe will start accepting US dollars at the Causeway Bay store next week, with a maximum limit of USD$20 per order as an act to protest against the national security law