Submitted by Taps Coogan on the 8th of June 2019 to The Sounding Line.

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Kyle Bass, founder of Hayman Capital Management, recently spoke with Real Vision about his belief that capital flight from Hong Kong is accelerating as the semi-autonomous island drifts further into China’s orbit and financial risks build.

Some excerpts from Kyle Bass:

“I have friends that are some of the biggest art dealers in the world and they do these Art Basel shows, and there’s an Art Basel in Miami and there’s an Art Basel in Hong Kong and so in the last couple of years, this year in particular, …not one Chinese buyer. Not one. Three years ago, they were selling them like hotcakes to the Chinese. They can’t get their money out and they’re policing that very very very rigidly…”

“Imagine that you’re a Hong Kong family that’s been there for generations and let’s say you’ve built wealth over time… In a freely convertible market you’d have to be foolish to leave it in Hong Kong Dollars, given the macro-economic instability of Hong Kong and what happens in a peg where, 36 years and there’s no volatility: no volatility begets no volatility until it doesn’t…”

“The moment that China starting… floating a proposal to extra-judicially grab someone off the streets in Hong Kong and take them to China without any court proceeding, that’s scaring not only the Hong Kong elite but the 85,000 Americans that live there… My friends that are very well off are leaving…”

“…The 1992 US Hong Kong Policy Act is re-ratified annually. The State Department submits a report to the President and it’s up to the President to take the State Department’s recommendations or to do whatever he wants to do. If he determines that they are no longer sufficiently autonomous, we can treat Hong Kong as China. Well, that changes the entire complexion of Hong Kong’s economy, meaning all of a sudden, all the tariffs, all the restrictions, all the rules of trade that we engage with China on, we start treating Hong Kong that way. Today, Hong Kong is treated as its own sovereign. There are no tariffs. It’s free trade… As long as they maintain that autonomy, we honor that agreement. If this law (on extradition to China) goes through, it is a clear violation of our policy act and it’s a clear violation of the Brit’s agreement with Hong Kong…”

“You remember in 1995 during the Tequila Crisis? What happened? What precipitated the Mexican decline? What precipitated Thailand in 1997? It’s always one thing. It’s always the wealthy lose faith or fear the government and they start moving their assets out… If the wealthy in Hong Kong either convert to dollars or start leaving, which I think both will happen, then Hong Kong is finished…”

“You’re talking about the most levered developed economy in the world, with the most levered consumers in the world, with the most expensive real-estate in the world, all of a sudden having a problem.”

There is more to the interview, so enjoy it above.

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