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The U.S. dollar threat is becoming very real for China

Section: Daily Dispatches

By Stephen Bartholomeusz
Sydney Morning Herald
Monday, August 17, 2020

When the Trump administration imposed sanctions on 11 senior Hong Kong officials, including chief executive Carrie Lam, just over a week ago, the responses of the individuals targeted ranged from the dismissive to derision. Banks and mainland China’s financial authorities aren’t as complacent.

The sanctions were imposed on those individuals the US deemed had materially contributed to the undermining of Hong Kong’s autonomy through the imposition of the broad national security laws the city-state enacted after last year's violent anti-government protests.

... Dispatch continues below ...


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The sanctions freeze any property or other assets owned, directly or indirectly, by the 11 individuals that are in the US or controlled by Americans or American institutions. More significantly, they also bar -- and would penalise -- any financial institution that knowingly does business with those sanctioned. ...

China is acutely aware that the Hong Kong sanctions have opened a new and far more serious front in the tensions with the US. It would be relatively easy for the U.S. to extend the sanctions from the individuals to others, including banks, it decides have been complicit in China's actions in Hong Kong.

In the front line are the banks, and not just western banks with a presence in Hong Kong.

While HSBC and Standard Chartered would appear most vulnerable because of their large exposures to Hong Kong and mainland China, for historical reasons, most international banks with any international presence have some level of exposure to Hong Kong, one of the world's major financial centres and the financial gateway to mainland China.

It's not only banks. Investment banks, brokers, insurers, hedge funds, private equity firms, and fund managers more generally will be checking to see whether they have any exposures, direct or indirect, to the sanctioned individuals and war-gaming their options for responding to more broadly-based actions by the U.S. ...

... For the remainder of the report:

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