While the world is transfixed by the fireworks unleashed by the plunge in China's yen to a record low, the real geopolitical hotspot for China remains Hong Kong, and there things are getting progressively uglier following Monday morning's press conference by Karrie Lam who once again said she will not resign, and warned that "some people" have put Hong Kong in a very dangerous situation as protesters' actions challenge the "one country, two systems" model and threaten prosperity by seeking to ruin the city by calling for "revolution" or the "liberation of Hong Kong."
Hong Kong leader Carrie Lam on why she will not resign: "I don't think at this point in time resignation of myself or some of my colleagues will provide a better solution." https://t.co/mADFNtmUa3 pic.twitter.com/C3KHxf2Aen— Bloomberg Next China (@next_china) August 5, 2019
In a press conference in which Lam was flanked by eight top officials, including chief secretary, chiefs of finance, commerce, transport, security, health and civil service as well as home affairs undersecretary, she said she is taking responsibility by staying on to serve, arguing that resignations by her or others won't help (several million protesters would beg to differ). Her solution: "Upholding the rule of law is the way out", by which she means the people conceding to Beijing's demands.
"Such extensive disruptions in the name of certain demands or uncooperative movement have seriously undermined Hong Kong’s law and order, pushing our city, the city we all love and many of us helped to build, to the verge of a very dangerous situation,” Carrie Lam says.
"The government will be resolute in maintaining law and order of Hong Kong and restoring confidence" she said, adding that "we all love Hong Kong and have made various contributions to its stability and prosperity ... it’s time to say no to chaos and violence."
The only problem is that the only ones who are eager to say "no to chaos and violence" are various Triad-linked thugs, and of course, the Chinese People's Liberation Army, which according to report is massing on the Hong Kong border, just waiting for the green light to, well, "liberate."
Additionally, Lam said that protests have already deviated from the original demand, Lam said. She didn't say much on calls for an independent inquiry into police action and recent events. The General Chamber of Commerce has joined protesters in calling for an inquiry.
In a surprising reversal from prior periods when China would sternly ignore the events in Hong Kong, today even the People's Daily tweeted account has been following every twist in the much anticipated Lam presser, quoting her verbatim as mainland China's attention is now squarely focused on how Beijing will quell the Hong Kong rebellion.
#HongKong is on the verge of a very dangerous situation; HK govt respects protestors’ rights to express opinions but they should also respect others’ rights, HK Chief Executive Carrie Lam said Mon, adding that an emergency mechanism has been put in place to deal with Mon strikes. pic.twitter.com/mZu1BmqYuf— People's Daily, China (@PDChina) August 5, 2019
Meanwhile, financial Secretary Paul Chan warned Hong Kong risks a recession on protests and outside factors like trade.
He may be on to something: on Monday, a paralysing citywide strike as part of the escalating anti-government protests forced Hong Kong airport authorities to cancel some 230 flights on Monday morning. Air traffic controllers have called in sick en masse, echoing the actions of an estimated 500,000 Hongkongers from more than 20 business sectors.
The number of flights that can take off, or land, has been affected as a result, and authorities said only one of the two runways would be in operation from midday on Monday until 6am on Tuesday. Only 34 flights would be permitted per hour during that, instead of up to the 68 per hour that normally take off from the city’s international airport, according to SCMP, with flights across Asia bearing the brunt of the cancellations.
Trains and planes are also being disrupted, with multiple subway lines suspended or delayed and hundreds of flights canceled.
Finally, as Bloomberg notes, Hong Kong Police will start holding daily press briefings from today and there will be a cross-departmental briefing by the government.
Of course, after weeks of protests and with today's crippling strike, the last thing Hong Kong stock investors needed was for the yuan to break 7 per dollar on Monday, however that's what they got, and between the trade and now currency war, and the ongoing tensions in Hong Kong, as well as the paralyzing strike, the pace of equity losses accelerated ahead of the midday break, with the MSCI Hong Kong Index tumbling 3.3% and the bottom is not yet in sight.
But all that pales in comparison to the USD-pegged HG dollar, which in sympathy with the offshore yuan has tumbled, sliding as much as 0.11% to 7.8354 Monday, its lowest since June 12. Will it plunge further and validate Kyle Bass's thesis of massive capital outflows and a banking sector crisis, it remains to be seen.