China Dares Trump to Hit Back With Hong Kong Power Grab

Discussion in 'Politics' started by themickey, May 22, 2020.

  1. themickey

    Bloomberg News May 22, 2020, 5:08 PM GMT+8
    • ‘Xi feels threatened, the leadership feels threatened’
    • Xi’s government abandons growth target, vows stimulus

    A banner depicting Xi Jinping near the Forbidden City in Beijing, on May 21.
    Photographer: Qilai Shen/Bloomberg

    On the first day of China’s biggest political event of the year, Xi Jinping sent a clear message to Donald Trump: We’re going to do what we want in Hong Kong, and we’re not scared of the consequences.

    China confirmed on Friday that it would effectively bypass the city’s legislature to implement national security laws, which have long been resisted by residents who fear they will erode freedoms of speech, assembly and the press. The announcement, which came on the same day China refrained from setting an economic growth target for the first time in decades, triggered immediate calls for fresh protests and sent the MSCI Hong Kong index to its worst loss since 2008.

    For Xi, the move allows Beijing to reassert dominance over a piece of Chinese territory where his government was rendered impotent during sometimes-violent protests last year. Facing rising unemployment in the mainland due to the Covid-19 outbreak and the potential for a big loss in Hong Kong legislative elections set for September, the Communist Party decided it had more to gain by acting decisively to stem any potential threats.

    “Xi feels threatened, the leadership feels threatened -- this is a crisis,” said David Zweig, an emeritus professor at the Hong Kong University of Science and Technology and director of Transnational China Consulting Ltd. “This is, ‘We’re not going to give an inch, we’re going to tighten up, and Hong Kong’s national security as a potential subversive center is greater than its economic value.’”

    The move risks triggering yet another round of tit-for-tat escalation between the U.S. and China, which have seen ties spiral to their worst in decades since Covid-19 began spreading around the world. From supply chains and visas to cyberspace and Taiwan, the world’s two largest economies are poised for confrontation on a number of fronts as both Xi and Trump seek to win over domestic constituencies looking for someone to blame for a deterioration in living standards.

    The unease within the party leadership was on display at the opening of the National People’s Congress in Beijing, where Premier Li Keqiang announced China would abandon its decades-long practice of setting an annual target for economic growth due to “great uncertainty” in the world economy. While rolling out only moderate stimulus, the government nevertheless made clear that stabilizing employment had become the top priority. Defense spending this year was set to grow at the slowest pace since 1991.

    “We will strive to keep existing jobs secure, work actively to create new ones, and help unemployed people find work,” Li said.

    The shifting away from a hard target for output growth breaks with decades of Communist Party planning habits and is an admission of the deep rupture that the disease has caused. Economists surveyed by Bloomberg see an expansion of just 1.8% this year, the worst performance since the 1970s.

    China sought to avoid reviving trade tensions with Trump, who has escalated his rhetoric against Beijing as his poll numbers have fallen in the wake of the pandemic. Li noted that China will work with the U.S. to implement the “phase one” agreement they reached in January, just before the virus sent the economy -- and potentially Trump’s re-election prospects -- into a tailspin.

    “The Chinese leadership does not want to be accused of walking away or reneging on the U.S.-China trade agreement,” said James Green, a former State Department official who is now a senior adviser for geopolitical consulting firm McLarty Associates. “If it fails, in their view, the U.S. will have to be the one to pull the trigger and walk away.”

    The big question now is how Trump will respond. He has threatened for weeks to abandon from the trade deal, and on Thursday said the U.S. would react “very strongly” if China pushed ahead with the national security legislation in Hong Kong.

    Economic Sanctions
    Any concrete U.S. action will likely be announced in an assessment of Hong Kong’s autonomy: Secretary of State Michael Pompeo delayed a report earlier this month, seemingly in anticipation of China’s latest move. Under the terms of the United States-Hong Kong Policy Act of 1992, the U.S. agreed to treat the former British colony as fully autonomous for trade and economic matters even after China took control in 1997.

    A law passed last year allows the U.S. to either put sanctions on any Chinese officials deemed responsible for undermining the city’s autonomy, or to do something more sweeping like revoke its special trade status. Congress could also do something in between, such as prohibit Hong Kong from importing sensitive U.S. technology with consumer and military applications -- like carbon fiber used to make both golf clubs and missile components.

    No matter what, U.S. actions won’t have much impact on how China governs Hong Kong given the recent decisions in Beijing, according to Antony Dapiran, a lawyer based in the city and author of “City on Fire: The Fight for Hong Kong.”

    “If Hong Kong is not able to serve effectively as a safe haven insulated from the political risks of doing business in the rest of China, there is no rationale for international businesses to be here,” he said. “They can either go direct to China, or base themselves elsewhere in Asia.”

    Trump’s other options for hitting China aren’t great: The economic downturn has made it less likely that Trump will pressure Xi through tariffs, which can increase costs for American businesses and consumers. Instead the U.S. has focused on reducing financial ties with China, taking action that could lead to delisting some Chinese companies from American stock exchanges and moving to restructure supply chains for essential goods.

    China is also feeling heat from other countries: Disputes over its handling of the virus has strained ties with Australia and the European Union, while poorer countries who borrowed large sums for infrastructure under Xi’s Belt and Road Initiative are struggling to pay back the cash.

    But the biggest risk for Xi is still unemployment at home. With lots of young people out of work on the mainland, the last thing the Communist Party wants is a revival of violent Hong Kong protests, Zweig said.

    “They feel at threat, at risk, and therefore they’re doing it,” he said. “Maybe five or six months ago, they were feeling okay. But I think a lot of stuff’s come crashing down.”

    — With assistance by Iain Marlow, Peter Martin, Lucille Liu, and Yinan Zhao
  2. themickey


    Hong Kong Stocks Crash on New Concern Over City’s Future

    BC-Hong-Kong-Stocks-Crash-on-New-Concern-Over-City’s-Future , Richard Frost

    (Bloomberg) -- Beijing finally pulled the trigger on national security legislation for Hong Kong, sowing panic in the city’s $5 trillion stock market.

    The Hang Seng Index plunged 5.6% by the close on Friday, its biggest loss since July 2015 when a bubble was bursting in Chinese equities. Real estate companies suffered the brunt of the selling, with an industry gauge sinking the most since the global financial crisis, amid concern the city’s uncertain future will spur investors and residents to shift assets overseas.

    At stake is whether the city can continue to operate effectively as a global financial center once Hong Kong passes laws curbing acts considered against China’s interests, such as sedition and subversion. The legislation was introduced in Beijing on Friday during the annual National People’s Congress, triggering calls in Hong Kong for renewed protests to safeguard local freedoms.

    The surprise move by the Communist Party also risks exacerbating tensions with the U.S., and destabilizing global markets still reeling from economic fallout of the coronavirus pandemic. U.S. President Donald Trump, when asked about China’s moves, pledged to respond “very strongly.”

    The stock selloff was widespread in Hong Kong, with more than two-thirds of the Hang Seng index’s 50 members setting new four-week lows on Friday. The MSCI Hong Kong Index was headed for its worst slide since 2008. The gauge, which includes two U.S.-listed shares, was trading at its lowest level since 2008 relative to MSCI Inc.’s global index.

    Mainland-based investors have been on a 33-week buying spree in Hong Kong, even as the city’s stocks lagged those onshore. They purchased another net $569 million of the shares on Friday -- the most in two months -- undeterred by a 40% surge in the Hang Seng’s version of the VIX Index. Single-day volatility spikes of that magnitude had only happened five times prior in Hong Kong’s stock market.

    The Hong Kong dollar weakened for a second day after hovering near the strongest it can trade versus the greenback for two months. Signs of nervousness showed in the options market, with volume on Hong Kong dollar derivatives at one point surpassing those on the yen. The currency’s 12-month forward points were set for the highest close since 1999, reflecting increasing demand to hedge against depreciation.

    The nervousness bled into global markets, with U.S. stock-index futures dropping 0.5% as of 5:36 a.m. New York time and the MSCI Asia Pacific Index slumping 2%. Investors sought safety in the greenback and yen.

    Hong Kong had failed to pass national security legislation since the U.K. handed the city back to China in 1997. The last time the local government attempted to introduce such laws in 2003 it triggered such widespread protests the bill was shelved.

    After demonstrations last year over plans to make it easier to extradite residents to mainland China morphed into the worst unrest in decades, Party officials clearly decided the time for patience was over.

    While the timing may make sense in Beijing, it could hardly come at a worse time for Hong Kong businesses. The economy is in tatters after last year’s protests and the coronavirus squeezed spending and curbed the flow of tourists and business travelers into the city.

    What seems certain is Hong Kong will continue its transformation into a financial center for Chinese companies to raise funds and do business globally. Intensifying scrutiny from U.S. exchanges is likely to spur a flood of share sales in Hong Kong by mainland companies unworried about national security laws or unrest -- Alibaba Group Holding Ltd. sold shares in the city last November during the height of anti-government protests.

    ©2020 Bloomberg L.P.
  3. Tony Stark

    Tony Stark

    Trump is desperate to be re elected at all costs.If he thinks a war will accomplish that he will do it.
  4. C99


    Is this really linked from drudgereport?
  5. Hong Kong is China. It is China's sole authority and sole decision on how to manage Chinese internal affairs. China has decided the 2 system policy is a failure.

    The solution for U.S. trade is obvious. Phase out any special privileges for businesses in Hong Kong. Hong Kong is no longer a special trade zone. The U.S. needs to move on to the next trade issue.
  6. Cuddles


    Thank you comrade, 2 renminbi have been deposited to your account
  7. Hey . . . . . Hong Kong belongs to China ,
    but Obama let Putin take Crimea , right !!

  8. Snarkhund


    China once had a reputation as the supplier of rubber-dogshit to the world.

    My sincere hope is that China once again attains that distinction because I'm never going to buy another Chinese product for the rest of my life. Trump is just waiting for the thugs who run China to renege on the recent trade agreement after which he will tariff Chinese goods out of the American market completely. We are going China-free in the next few years.

    If China cannot adopt acceptable levels of hygiene and disease mitigation then we must limit our contact with them and shift our economy, what is left of it, away from reliance on China who has proven themselves to be utterly unreliable. China is a filthy diseased country.
    Real Money and Dr. Love like this.
  9. Cuddles


    Donnie will capitulate and you will love him for it
  10. O.K. my friend, what do you want to do about China's action? Really.. I would love to know.
    #10     May 22, 2020