Welcome to this week’s edition of Trade War and what a week it’s been. American cities are exploding in protest while the U.S. and China’s relationship is spiraling downwards to lows not seen in decades. While Washington accuses Beijing of breaking the promises it made to guarantee a high degree of autonomy in Hong Kong, China’s officials are pointing to police brutality in the U.S. as evidence of American hypocrisy on human rights.
Lows not seen since 1989
Trump’s announcement on Friday he intends to end Hong Kong’s special trading status guaranteeing low tariffs and favorable visa policies, following the Chinese leadership’s decision to push a national security law in the territory, has plunged the bilateral relationship to its lowest point since after the Tiananmen crackdown on June 4, 1989. That was my take as reported in the Associated Press.
HK gov has tried to shrug it off..
Hong Kong officials are trying to downplay Trump’s vow “to revoke Hong Kong’s preferential treatment as a separate customs and travel territory from the rest of China”, pointing out that the territory’s “direct trade with the US is only a very small part of its economy,” reports the South China Morning Post.
Being forced to take a side
But international businesses in Hong Kong, including those in its large financial industry, who hope to stay above the fray are likely to be disappointed.
“You might have notice[d] that biz in Hong Kong is silent about China's encroaching grip. That's because they are being forced to take a side. MNCs that don't toe the line are bullied. Workers who don't show loyalty face job loss,” writes New York Times reporter Alexandra Stevenson in an illuminating tweet thread and article.
Which side of the bread is buttered
Hong Kong’s former chief executive Leung Chun-ying was quick to threaten HSBC Holdings for not voicing its support for the national security law. “HSBC should not do things that hurts “China’s sovereignty, dignity and people’s feelings”, while making money in that country,” Hong Kong’s previous leader warned in a Facebook post.
“China and Hong Kong doesn’t owe HSBC anything, the China business at HSBC can be replaced overnight by banks from China and other countries,” he wrote, reported Reuters. “We need to let the UK government, politicians, British companies like HSBC know which side of the bread is buttered.”
U.S. shoots itself in the foot?
Trump’s decision to exit the World Health Organization, an announcement made at the same time as the one to strip Hong Kong of its special status, was widely criticized as a self-goal, seen as ceding international authority to Beijing.
“This move is completely regrettable and short-sighted,” tweeted Chieh-Ting Yeh, founder of the Global Taiwan Institute. “Whether this [move] could be used as a leverage … what benefit is he asking in exchange?”
Failed on many fronts
“Trump’s speech failed on many fronts” with the decision to leave the WHO becoming “the main takeaway—the abandonment of American global leadership,” wrote one commenter, reported influential China watcher Bill Bishop.
Hard to craft sanctions that don’t also hurt US interests
“It’s hard to craft sanctions that don’t also hurt US interests,” warned former trade negotiator Wendy Cutler, adding that the U.S. decision to end the territory’s special status should be crafted “not to hurt Hong Kong citizens.” {Hong Kong is home to some 85,000 Americans and 1,300 U.S. companies.]
Mocking ‘the land of the free’
Meanwhile, Chinese people and officials alike are pointing to the murder of George Floyd and protests across the U.S. to accuse America of hypocrisy.
“In a time of China-US escalating tensions, many Chinese web users are using these developments in global news media to point out American hypocrisy regarding freedom and human rights, mocking 'the land of the free',” tweets Manye Koetse of What’s on Weibo.
“I can’t breathe.”
In response to one tweet criticizing China for its treatment of Hong Kong, China’s foreign ministry spokesperson tweeted “I can’t breathe,” in an obvious reference to the disturbing words spoken by Floyd just before his death. [The fact that Twitter is banned in China has not prevented its officials from using it as a platform.]
“Phase One” update
As remarked before, promised purchases under the "phase one” trade deal are not happening. “Trump said China would purchase $200 bn more US exports in 2020-21. Where do things stand thus far? HEADLINE: China has bought less than 50% of the prorated year-to-date target.” tweets the Peterson Institute’s Chad Bown.
Suspend soy purchases
Now China apparently has ordered two of its largest grain and oil traders to suspend soy purchases from the U.S. “The halt is the latest sign that the hard won phase-one trade deal between the world’s two biggest economies is in jeopardy,” reports Bloomberg News.
Notable/In Depth
“There’s little to fear from China’s ‘rise’,” argues Matthew Klein in an interesting piece in Barrons, citing the country’s challenging demographics as one key reason.
And me discussing China’s national security law in Hong Kong and the U.S. -China relationship on Bloomberg Businessweek Radio.
Also on Wharton Business Daily SiriusXM Business Radio.
Finally, one more podcast covering a lot ground including who gets credit for China's impressive record of ‘lifting’ Chinese people out of poverty, capital flight by nervous Chinese entrepreneurs, and China's ongoing crackdown on Hong Kong.