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

Rep. John Moolenaar, chairman of the House Select Committee on the Chinese Communist Party, has urged the Federal Reserve to reconsider Hong Kong’s access to the Foreign and International Monetary Authorities Repo Facility, or FIMA. The facility allows foreign central banks to obtain U.S. dollars from the Fed using U.S. Treasury securities as collateral, providing a source of dollar liquidity during periods of financial stress without forcing institutions to sell Treasurys into the market.

The request comes as tensions between Washington and Beijing remain elevated despite recent efforts to stabilize the relationship. Moolenaar argued that Hong Kong’s closer integration with mainland China means the city’s preferential treatment under U.S. policy should be reconsidered, particularly as Beijing pushes to increase the global role of the renminbi.

Hong Kong was among the earliest central banks given access to the FIMA facility when it was created in 2020. The Hong Kong Monetary Authority drew as much as $1.4 billion from the facility in May of that year, but has not made significant use of it since. Recent Federal Reserve data show that no institutions were using the facility as of Wednesday.

The timing is significant because China has also been developing its own financial infrastructure to support the renminbi. In June, the People's Bank of China launched a facility allowing foreign central banks to access short-term liquidity using Chinese government bonds. Hong Kong became the first user of the new system, reinforcing its role as a testing ground for Beijing's efforts to build a more China-centered financial architecture.

The broader challenge to the dollar, however, remains substantial. The U.S. currency still accounts for 56.7% of global official foreign-exchange reserves, compared with just 2.1% for the renminbi, according to the IMF. The dollar also remains deeply embedded in international trade and financial markets, while U.S. Treasurys are widely viewed as one of the world's safest and most liquid assets.

Some economists therefore question whether restricting Hong Kong's access to FIMA would actually achieve Washington's strategic goals. Cornell economics professor Eswar Prasad argued that the facility can strengthen the dollar's position by making U.S. Treasurys more attractive as global safe assets and ensuring that foreign authorities can access dollar liquidity during a crisis.

The Fed has acknowledged receiving Moolenaar's letter and said it plans to respond, while the Hong Kong Monetary Authority declined to comment. Fed officials are unlikely to make a decision in isolation from the broader U.S.-China relationship, particularly given how sensitive financial channels have become in the current geopolitical environment.

For now, the debate is less about Hong Kong's actual use of the facility and more about the strategic role of dollar liquidity in a changing global financial system. With Hong Kong increasingly positioned as a bridge between China's financial ambitions and international capital markets, any decision by Washington could carry implications well beyond the relatively small amount of liquidity involved.