In the past six years or so, the rate has gone from 110 yuan for 100 Hong Kong dollars, down to about 78 yuan currently. dollar as its economy has grown, Hong Kong has kept its peg unchanged. While China has re-pegged the yuan higher against the U.S. This is effectively what has happened in Hong Kong as it has accelerated the integration of people and infrastructure with its giant neighbor, while retaining a three decades-old currency peg to the greenback. New York residents would likely be none-too-pleased if they felt they were subsidizing those bargains to non-tax-paying day-trippers. In these circumstances, you might expect half of America to descend on the Big Apple for a shopping bonanza. To replicate the Hong Kong situation, New York would have both significantly lower taxes and a currency pegged at a discount of 25% to the U.S. To get a sense of the situation Hong Kong finds itself in, imagine if New York were to have a separate currency and tax regime from the rest of the United States. Furthermore, it’s pretty clear the majority of these visitors are not here to see Hong Kong’s undersized Disneyland but are really traders seeking bargains, courtesy of an outdated exchange-rate regime.
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