The Hong Kong dollar is issued under the linked exchange rate system, which is linked to the US dollar. The US dollar holding the Exchange Fund has supported the stability of Hong Kong dollar banknotes. Since the exchange rate of Hong Kong dollar against the US dollar is fixed, the exchange rate will never change. However, the RMB is floating against the US dollar, and the exchange rate often changes. Therefore, the exchange rate of the Hong Kong dollar against the US dollar will never change, but with the continuous depreciation of the US dollar against the RMB, the exchange rate of the Hong Kong dollar against the RMB is also falling. Recently, the 1 month interest rate difference between the US dollar and the Hong Kong dollar has widened to about 0.9%, the largest since June 2008. Interest spreads attract arbitrage, and carry selling makes the Hong Kong dollar depreciate continuously, which directly drags down the exchange rate of the Hong Kong dollar. Hong Kong stocks have weakened recently, reaching a new record of HK$ 4.7 billion last Tuesday, reducing the demand for Hong Kong dollars.

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The significance of linking the Hong Kong dollar to the US dollar;

1. The implementation of the linked exchange rate system between the Hong Kong dollar and the US dollar means that Hong Kong has given up its independent monetary policy and is more subject to the monetary policy of the US dollar system, making it difficult to give full play to the macro-adjustment role of monetary policy in economic and social development and stability. However, considering that Hong Kong mainly develops a highly open export-oriented economy, focuses on entrepot trade and service trade, and is committed to building an international financial center, it needs to be better integrated into the international legal system and monetary and financial system.

2. Because the economy of Hong Kong is different from that of the United States, the factors affecting it are also very different. When the economic development and financial stability of the two sides are obviously deviated, and the demand of the international community for the two currencies is obviously deviated, maintaining this linked exchange rate system may face great challenges, which requires the Hong Kong Monetary Authority and the government to have strong US dollar reserve strength, credit endorsement and the ability to monitor and manage the money market and even the entire financial market.

3. In fact, the implementation of a fixed linked exchange rate system with the US dollar is conducive to enhancing the international influence of the US dollar and its sovereign countries, but it is not harmful to sovereign countries. Of course, it will be more conducive to the implementation of the linked exchange rate system if the dollar sovereign countries can support it (such as not restricting Hong Kong's international trade and financial exchanges and promising to support it in currency swap). On the contrary, if a country or region is included in the sanctions list by a dollar sovereign state and its dollar receipts and payments are controlled by that country, this linked exchange rate system fixed to the dollar may lose its foundation for survival.

4. The establishment of a stable linked exchange rate system with the US dollar as the international central currency can greatly improve the international recognition and liquidity of the Hong Kong dollar. Therefore, the linked exchange rate system has played an important role in the stability and development of Hong Kong, and this role may be even more important in a certain period before and after the return of Hong Kong.