Hong Kong is one of the biggest cities in the world. It has a population of more than 7 million people and a GDP of more than $341 billion. It is one of the leading financial capitals in Asia and is known for its close proximity to China. The country operates in the so-called special administrative region, in which the chief executive is the head of government. This system started in 1997 when the British handed over the city to China. To this date, the city uses a democratic system of government.
With its close proximity to the mainland, Hong Kong has flourished. This is because international investors who desire to invest in the Chinese market use it as their base. They do this to avoid the heavy-handedness of the communist party of China. This has made the Hong Kong financial sector be one of the most vibrant in the world. It is home to leading financial companies like Credit Suisse, JP Morgan, and Goldman Sachs.
This week, the city has been in the spotlight after massive protests that started on Sunday. The protestors are fighting to ensure that an extradition bill is not passed by the government. The bill would allow the city to comply with the Chinese extradition requests. Hong Kong residents, who have been wary of Beijing believe that the bill was influenced by the mainland. They fear that with the bill, many of its residents will be extradited to Beijing, a communist place that is not known for fairness in the justice system. Corporations too have rejected the bill because many executives who have sought refuge in the city could be taken to China. In its part, the government argues that the proposed law is needed to fill a legal loophole that allows Hong Kong to be potentially used as a haven for criminal fugitives.
In a televised statement, Carrie Lam, the city’s Chief Executive said that she was not selling out Hong Kong, where she was born and raised. She added that:
I have never felt guilty because of this matter because I just said that the initial intention of our work is still solid and correct.
In the United States, there was bipartisan support for the protestors. In a statement, Jim Risch, who chairs the senate foreign relations committee said that if the law passes, the US will re-evaluate the aspects of the US-Hong Kong relationship. House Speaker Nancy Pelosi said that the bill risked the lives of the 85k Americans who live in the city.
In response to the demonstrations, the Hong Kong dollar, which was previously strengthening against the USD stabilized. The USD/HKD pair moved from a low of 7.816 to a high of 7.823. On the chart below, the price is below the 21-day and 42-day moving averages. The RSI has moved from a low of 13 to above 37. The pair will likely continue moving higher, to test the important resistance level of 7.8300.