|By Matein Khalid| “One country, two systems”. This was the historic formula under which Margaret Thatcher agreed to hand over the British Crown Colony of Hong Kong to the People’s Republic of China, then ruled by Paramount Leader Deng Xiao Ping. The Hong Kong dollar’s spike to 7.81, on the high end of its 7.75 – 7.85 band, demonstrates the sheer scale of the speculative attack against Asia’s oldest currency peg. The chaos in Chinese financial markets has spilled over to Hong Kong due to the $500 billion plus borrowed by Mainland financial institutions in the island’s interbank market. This is the reason Bank of East Asia, a Hong Kong retail bank, has fallen 25% in the past month. Even HSBC has fallen 20% since August 2015. While the Hong Kong Monetary Authority (HKMA) has $350 billion in reserves to defend the peg, local interest rates will rise, a disaster for the most leveraged, overvalued property market in the Pacific Basin.