U.S. Congressman Urges Fed to Review Hong Kong's Access to Dollar Liquidity Facility
Rep. John Moolenaar, chair of the House Select Committee on the Chinese Communist Party, has urged the Federal Reserve to reconsider Hong Kong’s access to the FIMA repo facility—a tool that provides short-term dollar liquidity during market stress. The request aligns with broader U.S.-China tensions and efforts by China to promote the renminbi as an alternative global currency. While Hong Kong's use of the Fed facility has been minimal since 2020, any restriction could signal a shift in how Washington handles financial ties with Chinese territories. The FIMA program allows central banks to borrow dollars using U.S. Treasurys as collateral without selling them during crises. Economists caution that limiting Hong Kong’s access might reduce incentives for global demand of the dollar and Treasury securities, though immediate market impacts are likely limited given low usage levels. The Fed has acknowledged Moolenaar's letter but is unlikely to act decisively amid a fragile U.S.-China détente following recent diplomatic engagements between President Donald Trump and Chinese leader Xi Jinping. Despite China’s efforts to elevate the renminbi, it remains far behind the dollar in global reserve holdings (2.1% vs 56.7%). The move highlights growing congressional influence over financial policy related to China but is unlikely to trigger immediate market disruptions.
