President Trump made a statement a little while ago. He laid out a long list of issues with China in what sounded like a “China Carnage” speech. The rhetoric was very tough as he announced that the US:
is studying what to do about US-listed PRC firms;
will start restricting some PRC students from studying in the US;
is starting the process to eliminate special treatment for Hong Kong, across the board;
will take steps to sanction PRC officials who are involved in the Hong Kong situation;
is terminating the US membership in the WHO.
US stock markets shot up after his comments; it looks like investors are relieved the measures are not as bad as some were expecting. The language the President used appears to leave some wiggle room for timing and implementation. He did not mention the fate of the trade deal.
I would love to hear your thoughts about how painful these measures will be, and painful to whom, as well as what you thought about my comments yesterday. I hated writing them:
President Trump will hold a press conference Friday to discuss China. The speculation is that he will outline US actions in response to the Hong Kong law that will include changes to how the US treats Hong Kong in trade and immigration as well as “penalties” on the PRC and possibly PRC-linked entities and individuals. If President Trump still thinks the phase one trade deal is useful then expect the measures to be fairly weak. Whatever he announces, I highly doubt the actions will change the CCP’s course on Hong Kong.The US runs the risk of having made a big deal about this law and then issuing a weak response that imposes relatively little cost on Beijing. I believe that is what Xi is betting on, and certainly the utterances from other governments have been fairly milquetoast, or non-existent as in the case of most of the PRC’s neighbors.For Xi and the CCP, Hong Kong political security and the territory’s place in the Motherland trump whatever increase in US-China friction may come, and in the logic the two countries are now stuck in a harsh US response will only confirm to Xi and many in China that the US is hellbent on keeping China down, while a weak response from DC will add to the view already held by more than a few in Beijing that Trump and the US are paper tigers, as Mao liked to say, and Beijing can increasingly act with impunity. It is a toxic dynamic.
President Trump will hold a press conference Friday to discuss China. The speculation is that he will outline US actions in response to the Hong Kong law that will include changes to how the US treats Hong Kong in trade and immigration as well as “penalties” on the PRC and possibly PRC-linked entities and individuals. If President Trump still thinks the phase one trade deal is useful then expect the measures to be fairly weak. Whatever he announces, I highly doubt the actions will change the CCP’s course on Hong Kong.
The US runs the risk of having made a big deal about this law and then issuing a weak response that imposes relatively little cost on Beijing. I believe that is what Xi is betting on, and certainly the utterances from other governments have been fairly milquetoast, or non-existent as in the case of most of the PRC’s neighbors.
For Xi and the CCP, Hong Kong political security and the territory’s place in the Motherland trump whatever increase in US-China friction may come, and in the logic the two countries are now stuck in a harsh US response will only confirm to Xi and many in China that the US is hellbent on keeping China down, while a weak response from DC will add to the view already held by more than a few in Beijing that Trump and the US are paper tigers, as Mao liked to say, and Beijing can increasingly act with impunity. It is a toxic dynamic.
And how do these measures look from that lens, or is it too early to tell?
And of course anything else. Thanks
Trump has no policy on anything aside from getting reelected. He's tough on Cuba and Venezuela only because of the Florida vote. On China, like almost everything else, he simply assumed that if he yelled and screamed, they would...what? Fix the trade deficit? But China realized that Trump is a paper tiger and didn't roll over. Now he doesn't know what to do. If he "decouples," the markets tank and US economic recovery is all the more problematic. So he cuts ties with the WHO in the middle of a world pandemic as a proxy for hurting China, which is nonsense. Like many on this thread, I'm all for a reset of US-China relations, but the US, as far as I can tell, has no policy at all that looks beyond the day's news cycle
Based on my time at the NSC, State, and US Embassy Beijing, I think the Rose Garden presentation was a the logical result of Secretary Pompeo's declaration that Hong Kong no longer enjoys a "high degree of autonomy" as set forth in the 1992 Hong Kong Policy Act (and the 2019 HKHRDA).
The extradition treaty and export controls are probably the two most import areas of Hong Kong differentiation on trade/law enforcement from the Mainland. As you say, this is the beginning of the process, which is a natural follow on. Pompeo added a bit of additional "umph" by having Trump say State would issue a travel warning to executives going to the HKSAR; and decent risk officer at a large American company would already be aware of that risk, even if they have not altered their networks to reflect that recognition.
The authorities to go after specific PRC officials was granted in the global Magnitsky act, then reaffirmed in the HKHRDA. Those have been there and the question now is, who, if anyone, is actually targeted (Xia Baolong? Han Zheng? Li Zhanshu?). That and what financial institutions, like the Bank of China international? So I didn't see the mini speech as announcing new policies in those areas, rather reaffirming existing authorities. Of course, naming anyone in the PRC government would be explosive so I don't discount the impact, just noting that saying a process is underway does not actually change anything.
The push for greater oversight of PRC-listed companies, as you say, has been in the works for a while. Here I believe the Administration is following Congress (Sen Kenney's bill which passed by unanimous consent) and grabbing onto something that people on Wall Street see as a problem (except for the exchanges themselves which benefit from the status quo). This issue of providing working papers is solvable, although at this stage CSRC probably is not too keen to find a solution.
Finally, as the stock market reaction has indicated, by NOT mentioning the US-China trade agreement (while having Amb Lighthizer and Secretary Mnuchin as part of the flanking group). My read, having been in meetings a few times with Liu He and staffed Amb Lighthizer during visits to Beijing, is that for the moment, both sides believe the "deal" is worthwhile keeping. It is a very modest agreement -- I called it a "bamboo agreement" at one point: hollow on the inside, Chinese on the outside -- so keeping it costs little. The U.S. simply agrees not to levy new tariffs based on the Section 301 investigation. China can continue to buy U.S. exports and liberalize the financial sector -- which was offered up when President Trump paid his state visit way back in November 2017. Since the first check in for export numbers do not come up until AFTER the Nov 2020 presidential election, no other objective metrics can be used to claim China is cheating on the agreement. Now, at some stage, the political usefulness of the agreement may wane for the U.S. Administration, but my friends at MOFCOM are working hard to ensure if the agreement blows up that fingers will point to 1600 Penn.
Warmest from Bay.
As is the case whenever the T-word is mentioned a lot of the comments here are focusing on the President's thoughts, motives, and actions. To me the speech, which had minimal "improvisations", sounded again like someone with a fairly coherent and well-informed thought process wrote it, and it included all the major expected announcements.
I think from a policy perspective, having the President declare that "one country, two systems" is dead has pretty far-reaching implications, as that is one of those CCP key concepts that it uses to maintain the illusion that it can't do whatever it wants with Hong Kong. With that fantasy now dispensed with the U.S. can move forward in a more direct manner to dismantle the many loopholes that the CCP has created for their own benefit in this system, such as shady cross border land deals, fraudulent loans, money laundering, sock-puppet companies used to secure foreign capital and IP, etc.
On the Beijing side the complete lack of interest in making these moves palatable internationally is revealing. How much harder would it have been to have this bill rammed through Legco by friendly politicians? Why do this now when they are under intense scrutiny over the virus response (yes, I know, everyone is "distracted" but that doesn't seem to be keeping China off the front page everyday)?
They undid 30 years of careful cultivation of this concept of 1C2S in less than a year, and lost Taiwan in one summer. To me it's like the CCP is in a big hurry to get all this done before something happens, and damn the consequences because they won't matter soon anyway. Very dangerous place to be for a country.
Bill, how likely is it that the PRC responds with action against US students studying there as well? Very worried that myself & classmates will become pawns. In my opinion, blocking students from genuinely learning about each other's cultures and politics also blocks the chance for a future generation of policymakers with the experience and passion to untangle this diplomatic mess.
We in the elite forget how little importance to the outcome our actions and statements are.
I will tell a short story - When I was young I used to pick fruit on my great uncle's farm. His best friend Reg, a Pom (Englishman) used to often come over. I was a nerd and used to read history books after work one time I was reading a book about the origins of WW2 and when looking at the picture of Chamberlin with his "bit of paper" post-Munich 1938, Reg said "I remember that I went to the movies and the newsreel at the end had the PM doing that when we all walked out of the movies, everyone said, "we are going to war".
I looked at him and realised for all the attempts by the government to assuage the worker's worries, they just see right through them. At that moment I learned to always trust the opinion of the common person they just see the truth.
So what is the "opinion of the common person" in Australia, Canada and NZ (I've added the last two after discussions with a handful of Canucks and NZers this week, but data from Australia is much stronger). Put simply the CCP is the enemy, every word and action by the CCP overseas and in our own countries is just reinforcing this perception. This is like a seachange in public opinion, like how blatant racism was OK until all of a sudden it wasn't, that women should stop working once married and now that is not OK.
Consequences - China finds itself in the horns of a dilemma it is in a situation like Germany pre WW1 and acting like Germany pre ww2. The damage to China is immeasurable. Speaking from lived family experience Germans on my wife's side and my Grandmother. It is literally only in my lifetime that it was OK to be German again. My wife's great grandfather was murdered post-WW1 and her mum who was German used to say when asked about her accent that she was "Welsh" (hilarious, I know). I hope this won't revert to racism, as it appears people have great sympathy for HK and Taiwanese people and discern that is the CCP.
To quote 300 "this is madness" who picks fights with the speartip of the WW1 & WW2 allies, binding them to the US, and apparently dragging the UK with them. China like Germany pre WW1 is an exporting powerhouse but with no planet-spanning navy who has to import food, fuel, and resources. An infantry officer friend of my said "4-1 odds, we can work with that". See my quote above.
I reread Thucydides in the lockdown, I reminded everyone I know. It wasn't the up and coming power that won.
Long time China hand. I speak Chinese about as well as Bill, but I also speak Japanese, Cantonese, Taiwanese and Thai with similar proficiency. I am happy to see that the U.S. now is seeing that China is a very bad actor and will never be a responsible stake holder in the international system. I lived in China many years and promoted products used by virtually every coal-fired power station in the U.S. in China for several years. I had some successes up to about 2011 but things went South from there. It wasn't that the technology I promoted was stolen it was that it was too complicated and expensive. The China's preferred indigenous technology that wasn't effective but was cheap and provided some very basic benefits. Of course the simple indigenous technology wasn't much help in reducing NOx pollution but this didn't really matter because the power plants produced fake data and China's version of the EPA basically pretended that not only wasn't there much of a pollution problem, but also that China is doing a better job than the West. Atmospheric NOx data from Greenpeace show otherwise. So after many years trying to build a business to help save a large portion of the more than 300,000 Chinese people that die every year from the consequence of NOx pollution, I gave up and turned to trying to do business with countries more friendly to the U.S. namely Taiwan, Japan and Thailand.
So essentially I think the U.S. is right to de-couple from China. Xi has played the biggest role in the de-coupling, but Trump with bi-partisan support has broken the pattern of pretending that China can be a responsible stake holder in the international system. I think de-coupling portends disaster for China. The factors that propelled China's rise literacy/basic education, investment and demographics are now depleted, what China now needs is innovation and that will not be happening now that China is de-coupling from the world. The U.S., Europe and Japan have the large part of the know-how that could help to improve China's economy, but all are now very wary of China and China will no longer be able to buy or steal the technology it needs to even maintain it's economy. Having worked in the power industry and some other industry I know first-hand that despite China's attempt to convince foreigners otherwise China develops very little technology on it's own and with less access to foreign connections will develop less still.
In the short term Chinese may blame foreigners for their diminished prospects , but at the end of the day they are likely to see that it is their own government that is largely to blame. Many surveys of Chinese people have shown that the Chinese are optimistic but not because they are that satisfied with where they are today but more where they think they are going. When those people wake up to the prospects that their future is actually not bright the impact on regime stability could be great.
From the American perspective we have to hope for regime change also. Nothing good for the U.S. is going to come from the current regime. Certainly I personally will not be able to help China with their NOx pollution problem without major changes in China's governance.
While I welcome stronger action to impose costs for the CCP, it is hard to see how restricting our ability to brain-drain the CCP through access to our open, free society is helpful. If we have concerns about espionage, and I have no doubt that some of these concerns are valid, let's let the FBI do their jobs.
Additionally, I fail to see how withdrawal from the WHO does much to address concerns of excessive Chinese influence within the organization. Oh, well. I'm appreciative to Trump for shifting the window on China and increasingly pushing both DC and the public to acknowledge the very real threat posed by the CCP, but assuming the Democrats are prepared to pick up the flag and run with it, I think it's time for him to go.
Well, Bill I was looking to see where Liu He was seated at the Two Sessions of the NPC last weekend. He was seated four away from Xi on the left which means in the main seven members of the Politburo he was/is outside the inner circle of Xi power advisors (he seven were divided three on left and three on the right of Xi). No loss of position as Vice Premier of China and still a member of the Politburo but there is distance.
What that means to me is that Xi didn't like the trade deal. As much as Xi is an ideologue, he is still a pragmatist, and agreed to the Phase One US Trade deal to keep the peace with the US, except it hasn't worked.
The stability of trade relations Xi had hoped for after agreeing to the deal which favored the US in the main got even rockier with Trump spouting anti=Chinese invective at every opportunity. Xi didn't bank on COVUD-19 upsetting the delicate balance or Trump's double-dealing two-faced maniacal claims to make China the scapegoat for the disease. On several occasions, Trump threatening to curtail/sever all economic ties with China altogether. While typical for Trump, the Chinese leadership were at first dismayed and are now infuriated.
So with the passing of the Hong Kong security law in essence telling Trump and SecStat Pompeo to go eff themselves and with standing applause in the Great Hall of the People it was clear to me that Xi is going fight the US. The subsequent retaliatory threats brought on by Trump on Friday May 29 was a fool's errand and now gives Xi the excuse he wants to kill the trade deal, which I believe is the game here.
The way this happens for the PRC is that China slows all trade covered under the agreement to a trickle while not cancelling exactly, but slows the movement of US trade imports to where US farmers have to plow over their grain crops or to ditch the crops stored in silos around the country. Of course. this will exacerbate tensions by about September or October at the latest with Trump finally ending the trade deal and increasing tariff on Chinese imports into the US.
With US farmers facing financial ruin and Trump having to probably bail them out again with grain subsidies or lump sum payments, yet again, Trump faces the last weeks of the campaign blaming China for everything that ails him.
If you missed the Chinese announcement that local pork production was back to normal and increasing, and that grain imports from Brazil and other grain growing countries — except Australia — had increased from previous years to all time highs, you missed Chinese confidence in what is going to happen in coming weeks and months.
As most China watchers in the west don't watch CCTV or CGTN they will have missed all commentary at the Two Sessions which was about China expanding/developing its domestic market — the largest market in the world —as the primary goal while foreign trade is of secondary importance.
Looking forward to further Trump conniption fits. So it goes. The old adage that "China needs us more than we need them" is going to get a work out on US news channels in coming weeks and months but for me the above scenario is already in play. Cheers.
Trump is setting the tone for the election. He wants to use China to distract from his domestic failures. He's pinning Biden in this. If Biden doesn't mention China, Trump will calim Biden's weak on China. It will become a race between who can manage China better and not about good goverance for the United States. Either way, US-China relations will sour.
I don't believe China is too worried about this. By imposing the HK law, the government signaled that they are ready for whatever consequences may approach. The Chinese view on this is long term. They know that US policies can change over presidencies. Furthermore, I don't believe that this is the death of one country two systems as others believe. The law is China emphasizing that HK is, well, part of China. It's a reminder to HK and the world.
To me, it seems this is just the opening rhetoric of the beginning of what will be the darkest phase in US-China relations since the 1970s. The US and China will pursue their own course in what will start a process of decoupling in economic terms - while it won't be a complete decoupling, it will certainly spur a rethink on both sides on how to insulate themselves from the other in part.
I actually don't think Beijing cares what the USG response is, as they know the hardliners are in charge in DC, in both parties, and probably will be as far as the eye can see: the constant decoupling talk, the apparent determination to crush Huawei, the rumblings about restricting Chinese students intent on pursuing STEM studies and so on all make this completely clear. I think Beijing has always known that a day of reckoning was in the offing, the whole "韜光養晦" notion（"biding our time," for lack of a more nuanced translation), so bruited about in China over the last two decades, was a tacit acknowledgement of that. Beijing well knows it is playing the weaker hand, and that this condition will be the case for some time to come, so they have been trying to put off the ultimate declaration of outright enmity for as long as they could; but US policy is making that increasing difficult. With the timing of their new policy, Beijing is simply taking advantage of two current weaknesses: 1) Trump's incapacity for follow-through and 2) Covid-19 paralysis, to deal with what is to their mind and open-sore of a problem, that is Hong Kong verging on anarchy for the second half of last year and the real prospect that it might continue. HK's advantages to China are far less now than what they once were, and most of the place's "irreplaceable" functions can go either to Shenzhen, Shanghai, or Singapore, to little disadvantage to anyway save HK. To my mind, the HK opposition is not sufficiently aware of their Achilles heel.
Classic Trump speech and policy. Mostly garbage bluster that will result in nothing of note. The only substantive actions he will take will harm the innocent and do nothing to advance the interests of the US. Add in some US isolationism and self-pity and that checks all the boxes for a Trump policy speech.
Threw a big fit about China making him look bad and blaming the WHO first, then said he would look into things about market and basically gave HK over to China. Nothing in defense of HK, it’s people or anything else. He gave in to markets and Xi. Tough on China president is Not tough on China
The scale of China’s production of goods and trade with the rest of the world dwarfs that of any other nation. Disengaging from China is rhetoric, for now, as no one else has the industrial capacity or skills to replace it. Any other country will also need to bear the pollution, upgrade its education system, and mobilize massive capital inflows to do so. Long haul.
Trump's speech failed on many fronts. As you noted Bill, it will not deter the Chinese to change course - they had conducted considerable scenario planning ahead of time before moving on Hong Kong. But what is even worse is that this speech will also fail to unite more countries from the Western world behind the US - especially the withdrawal from the WHO. Let me offer an illustrative example. Earlier today, when the foreign ministers from all member states of the EU met, Sweden was the ONLY country that made reference to the question of sanctions against China because of the move on Hong Kong. Yet less than an hour after Trump's speech ended, the Swedish foreign minister Mrs. Ann Linde has already issued a statement expressing how regrettable she and the Swedish government views the US:s action to leave WHO. That became the main takeaway - the abandonment of American global leadership - rather than focusing on productive countermeasures towards CCP:s action on HK. 适得其反。Sensible Americans, like yourself Bill, ought to reflect on that for a minute. It is not China's rise that now looks staggering, but rather the fall of American civility and rejection of global leadership. This is profoundly regrettable. As a European who has always admired America, it is deeply troubling to see turmoil you are in at the moment.
Ignoring Trump's bluffing words, one can only conclude this is NOT a strong response; a "proportional" one at best.
Trade is a separate issue, but so far it appears China is only purchasing half of what they are supposed to purchase. At some point in the near future, this will need to be addressed, but now I have realized that other than tariffs, there seems little Trump can do to cause real damage to China in this arena, because the CCP almost always deviates from "agreements" whenever there is a chance to cheat (so do NOT assume there is a strong "social contract" between the CCP and the Chinese people either, because it would be much easier to just trick them into believing "it is all the US' fault" should the Chinese economy tank).
I believe a next sensible move would be to put those tariffs back as soon as possible, but the myopic stock market would not like it, and as people know, when it comes to the stock market, Trump's hands are tied (at least for as long as his re-election campaign is going on).
Regarding Beijing's "heads I win, tails you lose" mindset in terms of the intensity of the USG's response, I think it is just a rhetoric device that justifies China's one-sided, unconstrained actions. I don't think it is a valuable point of discussion because what could ultimately restrict Beijing's behaviors would be counteracting economic and military forces in a realpolitik sense, not mere rhetorics.
What advice would Sun Tzu offer..
"Smile broadly while your enemy walks off a cliff backwards"??
I don't know who wrote the passage on Hong Kong but I thought it was very good. Especially the part on how hopes were high that China would open up and develop to be more like Hong Kong rather than HK getting freedoms closed down to the mainland level.
I also agree with the points about now having one-country-one-system and about the moves from Beijing being 27 years premature and the breaking of the Sino-British Treaty. It is a shame he has said some of these things before the British government given it is our treaty, but perhaps we will be willing to speak out now standing safely in the shadow of the US response.
The markets seemed to be fearing something worse, but perhaps the onshoring of key supply chains and the expectation that Chinese firms' market shares may be up for grabs soon is a bigger factor? If the US could successfully decouple from China and not depend on them economically then there would be no reason for the market to fall even if these restrictions do bite on China.
China has pursued multiple policies with the effect of making other countries reliant on it so they can wield power in abusive relationships. From buying huge amounts of FX to making a lot of key items very cheaply and flooding the markets with them. Also belt and road policies involve building unnecessary infrastructure and then loading huge debts on places that cannot repay it. They always threaten neighbours with turning off the tourist taps that put a lot into their economies, its a constant modus operandi and the only way to avoid it is to be self sufficient or at least not be reliant on Chinese supply chains.
While Trump's language may have been strong, his actions are weak. His entire America First would by it's very nature would dictate a weak response. With his decoupling from China will only make China stronger. If he tries to make the rest of the world choose between the USA or China, dont be surprised if they choose China.
Trump has only shortened the time until China becomes the dominant economic force on the planet. My concern is that there is a very real possibility of war as we sink to second place. It will be critical that the next president have a deft hand to counter the damage this one man has created.
trump is killing Americans.
Personally, I thought the language was very strong and some of my Hong kong friends are in tears. the market relief seems misplaced to me.
1. If we assume there is a sense of proportionality with regards to what is unwittingly inflicted on Hong Kong as a result of normalising its status with the mainland on the US side, that must mean what the US should be prepared to deliberately pursue against Beijing should at least be equivalent, or more powerful.
2. So, the price Hong Kong will have to pay will be high, but the US, in order to make their displeasure meaningful, will have to make Beijing pay more still. The critique that the US, by raising its stakes, accelerates the return of Hong Kong, thus playing into Beijing's hands, misses the mark - the US will go over the top, and demonstrate that doing so will be painful to Beijing directly. Punishing Hong Kong for being dissatisfied with Beijing makes no sense.
3. The joint statement with the UK, Australia and Canada, by definition a multilateral approach, hints at how a robust response to Beijing might be done. If you want to go fast, travel alone. If you want to go far, travel together. To the extent this is possible, a long term engagement seems likely to involve other actors.
4. Accordingly, the depth and scale of these sort of measures seem likely to go far beyond what we have seen in 'peacetime', and this will bring the relationship to new lows. How far it goes, and implementation, these policy differences are so big and important, that lasting and credible decision making should be done with the election in mind. Statesmen make tough decisions that last, so President Trump has his work cut out for him - whether or not he wins the election.
5. What does this mean for markets? For Chinese markets, as an emerging market, where political stability is usually more important, I think it is positive, because nothing focuses attention better than a common enemy, consolidating Xi's position. More fiscal spending in order to ensure a post-virus recovery will be good for the economy, and can be justified as a temporary salve to soothe things over with the vested interests. However, it also increases the debt burden, building further on an imbalance that will have to be reckoned with, down the road.
For the US, as a developed market, where corporate earnings is usually more important, this isn't my wheelhouse... so I, uh, don't know*. To the extent that US-China matters, it will depend on the extent of policy differences between Biden and Trump. The more they disagree, the more the uncertainty this creates, and so the higher the related stock market volatility, and risk to valuations. This first round will eventually be resolved once we know the election result, kicking off a second round aligned to the winner's preferences.
Well, the stock market did just fine during World War II, didn't it.
*investing legend Warren Buffett has been cautious, the younger hedge fund manager Bill Ackman, who is having a good year, is buying American, and the macro guru Stanley Druckenmiller + 'Finance Twitter consensus', as far as I can tell, thinks this is bad risk/reward, in that the stock market recovery has far outrun the underlying fundamentals - hopefully this gives a flavour of the range of opinion.
Long ago Xi has pegged Trump. He never would have proceeded against HK on extradition if he thought there was any chance of a substantive response from the US on his current move, which was certainly planned in advance.
In the long annals of Chinese imperial history, Xi must think the gods have cut him a major break by offering Trump as an adversary.
President Trump would be wise to realize that, in spite of his throng language and proposed policy actions, Xi (and the CCP) will never, and can never afford to back down. The opposite of rejuvenation is humiliation. And Xi has likely pulled off the HK legal change due to perceived political vulnerability on the part of President Trump. But Xi would be remiss if he underestimates either President Trump’s resolve or America’s resilience. This is thereby the next step in a long-term strategic battle for influence and economic power.
Face it. We're heading toward a cold war with China. Perhaps we're already there.
The policy debate will now focus on how tough the USA needs to get weighed against the potential for severe economic damage to BOTH countries and, by proxy, the world.
Of course, some people here spout nonsense like 'garbage bluster' or simplistic trolling such as 'trump is killing Americans'. In other words, they have nothing substantive to say.
So, I'll instead quote someone from today who actually knows what he's talking about:
“Frankly the U.S. government is -- I’ll use the word ‘furious,’ at what China has done in recent days, weeks, and months,” White House economic adviser Larry Kudlow said Friday. “They have not behaved well and they have lost the trust, I think, of the whole Western world.”
I'd be curious to hear if there are any rumblings in the U.S. about allowing some sort of "asylum" arrangement for Hong Kongers who'd like to flee (bringing their wealth with them) similar to the way the US, UK and Canada got a lot of investment/immigration from the uncertainty surrounding the 1997 handover. The British government seems to be dangling this as a possibility at least for about 300K who hold special passports. This would obviously be a highly inflammatory move if the U.S. were to undertake it, but it also seems to be a natural extension of the pullback on special trade privileges and could be a source of leverage, that is if the U.S. is sincere about trying to get China to back off versus resigning Hong Kong to being swallowed up by Xi prematurely.
The first indicator of emerging markets as an asset class is offshore yuan trading. On Wednesday the dollar traded as high as 7.1963 against the offshore currency. All other discussions about the future will take time. I am watching the yuan being sold to buy the dollar simply on fears of a poor economic performance by China and its massive budget deficit this year. There will be collateral damage if the trend continues.
1. It’s time for Boris to offer asylum to all HK students, offer them a swift transfer into Russell Group universities and transfer of credits.
2. Any remaining British citizens still working in the HK Police should be investigated and if possible stripped of their citizenship.
3. HK Government officials and members of the CPPCC who hold British passports should have their citizenship taken away. The children of these people should be denied access to British universities.
Thanks for this Bill. Despite not much caring for the US president's approach to doing business, one thing you cannot say is that he doesn't try to do what he has set out in his original manifesto. At the time of the last presidential elections, I was living in the west and a friend pointed out that DT was actually taking part in the debates and process. But differently. I watched some 'debates' and thought he was actually taking the piss. I could not believe he was serious. Every other candidate would earnestly talk about employment, the economy and all that. DT would just say loudly 'look at him. He's got a huge nose! How can you take him seriously?' He may not have been but that was how it seemed to me at the time. By the end of the campaign, everyone else had changed to try to be like him. Of course, they were so much less practiced than him and so pretty useless at it. Remember, "You're Fired!!!" on the Apprentice?? As for his tweeting, it was and remains a total joke but look what has happened to Twitter! Just after DT started tweeting regularly and invited the top 50 US businessmen for a sit down, I read Jamie Dymon from JP Morgan had taken on board what DT was doing on Twitter and said that he thought it a great idea and that he'd do the same.
Being an investment strategist it was my job to determine whether or not the next US president would have a harmful effect on financial markets. So being a nerd, I looked behind the headlines, admittedly not very far as I stopped at his website. The first item was ... China. It said that on day 1 of his presidency he would declare China to be a currency manipulator which carries automatic sanctions (not sure what they are). So all this focus on China is set out very clearly on his website (I haven't looked lately but it was there in 2015 and 2016). It really shouldn't come as a surprise to anyone. For me, its not only the fact that he was pretty much the first person to call a spade a spade regarding China in the public domain, but he is also the first person to actually do something too.
Totally weak response and equity markets are likely to rip higher in the weeks ahead.. Other than invoking sanctions on the big 4 chinese banks or coming up with a bill to subsidize US MNC for ripping apart supply chains and reshoring them either in the US or friendly countries, dont think the Chinese are going to care much. In my opinion, the weakest link for the Chinese is the USD, i.e. the reserve currency. In a world where they are a current account deficit country, their ability to project power outside the country will be limited to their access to USD reserves. To that end, the trade pact served an important strategic purpose. Acting against the big 4 chinese banks or actively rupturing supply chains will accelerate this problem.
It is not Trump viz China or even Trump viz XJP. The UK, Canada, Australia are active in declaratory policy. France took the firmest line with "Wolf" disinformation re the origin of the virus. The Germans will not allow the EU to stray into the domain of principle, but if there is resistance rather than submission in HKG once the new measures come into effect, Chancellor Merkel will not hold the line. In Japan also the option of silence would be untenable. India, Vietnam, Indonesia will do nothing for HKG but they are resisting physical expansionism & will continue to do so--especially if USA does not rush in ...
All I can think of is this timely quote from The History of the Peloponessian War: “[some states’] over-mastering desire for victory makes them neglect their own best interest”. At the risk of mixing my metaphors, I would call this Pyrrhic although that would imply Trump will get a victory.
Trump has taken the strategic rivalry strategy and eaten it with a lump of e-coli.
Is China running away scared?
Respectfully thank you for the invitation to comment Bill. US actions towards China, and the latter’s responses to it. Your points of view were most informative and interesting. So were the views of those who commented here.
English is not my native language, so sincere apologies in advance for inevitable errors in grammar and syntax, especially if those errors come across as culturally impolite. Cultural protocols having been dispensed with, allow me to define the “promontory” from which I will base my thoughts re your request for a comment about US and China relations today.
Economic, cultural, political growth is an invisible but powerful undercurrent similar to the main undercurrents underneath our oceans. For lack of a better term, the outward nature of this undercurrent is political and economic but its main force is religious and ideological. And it dynamically alive. One cannot physically see it on the economic radar, but its location and destination can be tracked by the sound and heat waves it radiates in its wake.
This invisible undercurrent started way back, about 2,500-3,000 years ago. The direction it took followed the path of the moon- from the west to the east. Originating from India, it flowed towards China, then Korea, until it reached Japan. On its path disasters and calamities preceded order and prosperity that came afterwards. Approximately 60 years ago, this current started to move to the opposite direction. From the Asian east, starting in Japan, it is moving back to the western side towards India. It is like a stealth jet.
This shift and its path is characterized initially by economic and political turmoils but followed by prosperity. It seems political and economic forces cannot stopped this undercurrent but can only benefit from it. This undercurrent acts like an economic magnet that attracts benevolent forces from without or a plow that brings up to the surface benevolent economic forces.
From Japan and moving towards India, major economic shifts sprouted unsuppressed. Western economic entities gravitate towards it or native economic forces become strengthened by it. The times pan, though measured in decades, is apparent.
I can only surmise, the foundational force that propels this invisible current is very primal and humanistic in nature. This is my promontory. Having defined it, here is my brief view of your request.
The four countries - Japan, Korea, China, India, and beyond say Africa will benefit economically from this irreversible undercurrent. There will be inevitable hiccups along the way like this covid19 virus. But the benefits will occur, regardless of what the US will do. Perhaps, regardless also of what the internal power structures of China or even India will do as well.
But there is a catch. For this “living, benevolent and humanistic dragon” to march on and benefit all, it must be fed, or must feed on “inclusive” and “compassionate” actions.
Of course that is just a hunch. But there is a basis for that hunch.
Imagine if the Roman Empire, did the opposite in their governance. Instead of insisting on being “exclusive” and aggregating all the resources of their client states to themselves, what if they pursued equal prosperity and inclusiveness towards everyone including the barbarian states? What if?
Would the Germanic tribes invade and destroy them if these tribes are just as prosperous or even more prosperous than Rome? Would South Americans migrate up North, if they are more prosperous than the those up North? Water seeks its own level. But what if, by humanistic and collective choice, one make the water stop seeking other levels? What if we can make “water” be content at the level where it is now? This is inclusive economic growth.
If Japan, Korea, China, and India, learned from the Romans and does the opposite, like making their neighbors just as prosperous, or even slightly more prosperous than them, what would the world look like, 50 years from now? Instead of constructing expensive border walls, one can utilize that same money for more beneficial ventures.
Perhaps this is the direction that China is going with its infrastructure expansion. Ambitious but so far sighted. An improved variation of the European Union.
Moreover, the traditional model of export growth is exporting goods. But nobody ever tried exporting “utilities” on a massive scale. Natural gas yes, but how about energy? Energy industries, even if regulated in their profits are profitable ventures, done well.
What if one can create an enormous power grid spanning an area as big as Asia? The new Silk Road is already in place reaching up to Africa. The maritime silk road will soon be for Asia pacific islands. That is for transport. Imagine if High-Tension energy follows the same route.
It’s like expanding Rome’s walls, making it so wide and inclusive, it includes the Gauls, Germania, Asia Major and Minor, the Asian Steepes, and even Britannia. The only purpose of that wall is to protect the people inside it against the fierce northern icy winds.
If this is where China and possibly India is going, wow! If the four - Japan, Korea, China, India can only work together peacefully like long lost brothers, wow! That invisible undercurrent will expand beyond the Asian shelf to benefit the entire humankind. Peacefully.
That’s it! Thank you Bill for the invite. Apologies if my comment was too long and have abused your hospitality.
Trump‘s irrational policy makes it difficult for European leaders to do what would be extremely necessary towards China: stand united. The West‘s division will leave China as the only profiteer - as we can see now regarding Hongkong.
Playing poker with Trump is an easy task. He loves to bet his opening cards, and then double down regardless of what the next cards bing to his hand, noticing that he bluffs with impunity, all Xi has to do is stay with Trump, don't fold unless his hand is pairless, but hold until that last card, the River card shows up and leaves Trump with nothing but a high pair. You can call his bluff, for he will waste money in order to bluff for he wants to win every hand and of course that's impossible. China will end up outplaying and outmaneuvering our moronic bluff of a President, that is unless Xi is not good at cards and calling bluffs.
Nothing new under this son hete.
Brinksmanship is how Trump sustains the illusion of being thr Great Negotiator - actially Great Illusionist.
As Xi knows he'll come back to the table and the endless one upmanship will restart post COVID I
A circular game only ended when Mr.T trips on his own rhetoric and implodes once the Pandoras Box of horrors that's been.brewing springs open in early Fall.
November will be bloody - hopefully only metaphorically, since the Republic trully faces Civil War II whatever the election result.
It's that bad.
Is the Leader of China afraid to go to sleep tonight?
trumpie is going to send Eric over there.
ALL IS WELL!!!!!!!
Bill, you’re on the money. Thanks.
Weak sauce. If it's not sanctioning the big 4 banks, forced removal of all US/Western supply lines/manufacturing from China, sanctioning/freezing/seizure of assets of top PRC officials and their families in the West, or banning of PRC propaganda from Western platforms they don't care.
Respectfully reposting. It seems the previous comment didn't get through the thread.
Economic, cultural, political growth is an invisible but powerful undercurrent similar to the main undercurrents underneath our oceans. For lack of a better term, the outward nature of this undercurrent is political and economic but its main force is religious and ideological. And it dynamically alive. One cannot physically see it on the economic radar, but its location and destination can be tracked by the sound and heat waves it radiates in its wake. Like a slow stealthy vehicle.
This invisible undercurrent started way back, about 2,500-3,000 years ago. The direction it took followed the path of the moon- from the west to the east. Originating from India, it flowed towards China, then Korea, until it reached Japan. On its path disasters and calamities preceded order and prosperity that came afterwards. Approximately 60 years ago, this current started to move to the opposite direction. From the Asian east, starting in Japan, it is moving back to the western side towards India.
This east-to-west shift and its path is characterized initially by economic and political turmoils but followed by prosperity. It seems political and economic forces cannot stopped this undercurrent but can only benefit from it. This undercurrent acts like an economic magnet that attracts benevolent forces from without or a plow that brings up to the surface benevolent economic forces.
But there is a catch. Suffering and misery awakens this dragon. However, for this “living, benevolent and humanistic dragon” to march on and benefit all, it must be fed, or must feed on “inclusive” and “compassionate” actions. Otherwise, it buries itself back and the suffering, and the prevailing sense of powerlessness stays.
Speaking of Taiwan ... Despite the Wuhan coronavirus (COVID-19) pandemic, Taiwan registered 1.54 percent economic growth during the first quarter, the highest of any of Asia's Four Dragons and one of the highest in the world. https://www.taiwannews.com.tw/en/news/3941096
A source told London's Sunday Express “don’t be surprised if we end up recognizing Taiwan and joining others in defending it with military assets.”
We are at the beginning of June. Elections are in November. New term starts in January. Even if ultimately reelected, Trump is a lame duck for now, and China will not even need to respond, whatever he says.
He wasn’t specific. However, whatever the specifics may be, if they follow the scheme and broader actions he listed, they’re set to be very harsh, even without factoring in retaliation and counter retaliation. He said clearly HK status will be revised. He doesn’t look like he will backtrack from that. Looking at November, China turned into the pillar of his re-elections campaign. Above all, it is crystal clear to anybody that China is ‘enemy’ number one. China is on target.
Heard rumors that the administration had been considering using IEEPA to declare a national emergency. If that's true, what was announced is a significant scale-down.
Hong Kong does not pay taxes to China’s treasury.