[Asia Economy Beijing=Special Correspondent Park Sun-mi] As the Chinese and Hong Kong governments expressed confidence that Hong Kong's status can be sufficiently guaranteed despite US sanctions, the yuan exchange rate and the Hong Kong stock market are showing signs of stabilization for now.
On the 1st, the People's Bank of China announced the yuan's official exchange rate at 7.1315 yuan per dollar, slightly down from the previous trading day's 7.1316 yuan. The weakening trend of the yuan has temporarily halted. In China's foreign exchange market, the yuan moves within a 2% range above or below the official reference rate set by the People's Bank of China.
Following the enforcement of China's Hong Kong Security Law on the 29th of last month, the possibility of the US revoking Hong Kong's special status increased, pushing the People's Bank of China's official exchange rate to a high of 7.1316 yuan, the highest since February 2008. In the offshore foreign exchange market on the same day, the yuan exchange rate remained around 7.14 yuan per dollar, showing little change compared to the previous trading day.
The Hong Kong stock market also showed a slight rise that day. In the morning, the Hang Seng Index was trading at 23,751.57, up 3.4% from the previous trading day.
Hong Kong's Financial Secretary, Chan Mo-po, stated in a statement released over the past weekend, "While US sanctions caused minor disturbances in the financial market, the actual impact on Hong Kong is limited," adding, "Hong Kong has been prepared to respond to challenges. The status of Hong Kong as a financial center will not change."
The Hong Kong Monetary Authority also posted on its official Facebook account, "The free flow of capital and the free convertibility of the Hong Kong dollar in Hong Kong will continue to be protected under Article 112 of the Basic Law," and emphasized, "Hong Kong has the capability, resources, and determination to safeguard monetary and financial stability. Hong Kong's financial system is strong and resilient."
Amid growing concerns that if the US proceeds with revoking Hong Kong's special status, a massive capital outflow from Hong Kong could occur, leading to liquidity shortages and a collapse of the financial market, the government has stepped in directly to alleviate anxieties. The Chinese government is also emphasizing the legitimacy of the Hong Kong Security Law and the assurance of Hong Kong's safety and status through state media and diplomats. Cui Tiankai, China's ambassador to the US, stressed the day before that the Hong Kong Security Law is intended to maintain "One Country, Two Systems" and ensure Hong Kong's stability and development.
However, despite the efforts by the Hong Kong and Chinese governments to calm the market, concerns remain that financial market instability will continue for the time being due to ongoing US-China conflicts surrounding Hong Kong.
According to Bloomberg News, Goldman Sachs stated on the same day, "Amid uncertainties in US policy toward China, the yuan's value is expected to fall to its lowest level since 2008 within the next three months," and diagnosed, "Sustained capital outflow pressure will also weigh on the exchange rate, making it highly likely that the yuan exchange rate will rise further."
Goldman Sachs projected the yuan exchange rate for the next three months at around 7.25 yuan per dollar, indicating a further decline in the yuan's value, with a six-month target of 7.15 yuan and a one-year target of 7 yuan. These are all upward revisions from the initially presented targets of 7.15 yuan, 7.05 yuan, and 6.90 yuan for three months, six months, and one year, respectively.
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