House committee chair pushes Fed to reevaluate Hong Kong's dollar lending access

Rep. John Moolenaar, chairman of the Select Committee on the Chinese Communist Party, is urging the Federal Reserve to review Hong Kong's access to a key emergency dollar lending program. The request comes as Beijing tightens its control over the territory and actively promotes the renminbi as a rival to the U.S. dollar.

The Foreign and International Monetary Authorities Repo Facility, known as FIMA, lets central banks borrow dollars from the Fed using U.S. Treasury bonds as collateral. Lawmakers designed the program in 2020 to keep global markets stable during financial emergencies without forcing governments to dump Treasurys and trigger price crashes.

Moolenaar argued that Washington should reconsider Hong Kong's privileged status now that mainland China has dismantled the territory's legal and institutional independence. He warned that the Fed must not simply let Beijing copy its financial tools. "The Federal Reserve's own facilities should not be a passive participant in that process, nor should the Chinese Communist Party be allowed to copy and paste the U.S. system for its use," Moolenaar wrote in a letter sent last week.

Beijing has already launched its own version of the program. The People's Bank of China introduced a short-term bond lending facility in June, with Hong Kong serving as its first user. While the dollar still commands 56.7% of global central bank reserves compared to just 2.1% for the renminbi, Chinese officials view Hong Kong as a testing ground for a separate global payment network.

Financial experts warn that cutting off Hong Kong from FIMA could backfire. Eswar Prasad, an economics professor at Cornell University, said the program actually strengthens the dollar's position by giving foreign banks a reliable way to access U.S. currency and Treasuries. "So it is hard to imagine that restricting access to this facility would in any way bolster the dollar's dominance or remove any threats to it," Prasad said.

Hong Kong borrowed up to $1.4 billion from FIMA in May 2020 but has not materially used the program since. Current Federal Reserve data shows no central banks are drawing on the facility as of Wednesday. The central bank confirmed it received Moolenaar's letter and will issue a formal response.