Hong Kong's economy sank into recession in the first quarter and those who argue for a devaluation of the Hong Kong dollar are starting to be taken more seriously. This worries outsiders, particularly the US, who believe that devaluation would cause a crisis of confidence in Hong Kong itself and would spark a fresh round of currency crises in the region. This in turn would damage the global economy.
China has managed to turn this fear to its advantage. It has persuaded the world that renminbi devaluation would lead inevitably to the collapse of the Hong Kong dollar peg and it is using that perception to influence US and Japanese policies in its favour. The speech by finance minister, Xiang Huaicheng in mid-June that China's failure to hit its 8% growth target would lead to pressure on the Chinese currency was very clever. Fears for the Hong Kong dollar had an immediate impact on confidence and so stock prices.
Later, in Tokyo the vice-governor of the People's Bank of China, Liu Mingkang, categorically denied there would be a devaluation. But China's loaded pistol was out of its holster.
And the US noticed.