The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

China's clever game

Hong Kong's economy sank into recession in the first quarter and those who argue for a devaluation of the Hong Kong dollar are starting to be taken more seriously. This worries outsiders, particularly the US, who believe that devaluation would cause a crisis of confidence in Hong Kong itself and would spark a fresh round of currency crises in the region. This in turn would damage the global economy.

China has managed to turn this fear to its advantage. It has persuaded the world that renminbi devaluation would lead inevitably to the collapse of the Hong Kong dollar peg and it is using that perception to influence US and Japanese policies in its favour. The speech by finance minister, Xiang Huaicheng in mid-June that China's failure to hit its 8% growth target would lead to pressure on the Chinese currency was very clever. Fears for the Hong Kong dollar had an immediate impact on confidence and so stock prices.

Later, in Tokyo the vice-governor of the People's Bank of China, Liu Mingkang, categorically denied there would be a devaluation. But China's loaded pistol was out of its holster.

And the US noticed. The Fed's recent $2 billion intervention in support of the yen baffled some market watchers.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree