U.S. Lawmaker Urges Fed to Review Hong Kong's Dollar Liquidity Access

The chairman of the U.S. House Select Committee on the Chinese Communist Party is urging the Federal Reserve to reconsider Hong Kong's access to a key dollar liquidity facility. Representative John Moolenaar, a Michigan Republican, argues that Beijing's growing influence over Hong Kong and its efforts to promote the renminbi as a global currency warrant a review of the Hong Kong Monetary Authority's eligibility for the Foreign and International Monetary Authorities (FIMA) Repo Facility.

The FIMA facility, established in 2020, allows foreign central banks to borrow dollars using U.S. Treasuries as collateral. Hong Kong was among the first to use the facility, drawing a maximum of $1.4 billion in May 2020 but has not made substantive use of it since. Moolenaar contends that Hong Kong's erosion of legal and institutional autonomy, along with China's push to internationalize the renminbi, justifies a review of its access to the facility.

The pressure campaign comes amid delicate U.S.-China relations, following a recent meeting between President Donald Trump and Chinese President Xi Jinping. Analysts suggest that while the Fed may not act immediately, the move highlights Congress's growing role in shaping China policy. U.S. officials continue to see strategic value in the FIMA facility, with Treasury Secretary Scott Bessent recently urging Japan to use it to support the yen.

Critics, such as Cornell University economics professor Eswar Prasad, argue that restricting Hong Kong's access to dollar liquidity could backfire. Prasad notes that the FIMA facility reinforces the dollar's global dominance and the role of U.S. Treasuries as a safe asset. The Fed has acknowledged receiving Moolenaar's letter and plans to respond, while the Hong Kong Monetary Authority has not commented.