The cross-asset reaction to Donald Trump’s signing of the Hong Kong bill was generally muted. The yuan fell and global equities were weak, but nothing particularly dramatic unfolded in the wake of the US president’s decision to sign the bills into law.
All eyes are now on Beijing for clues as to how Mainland authorities will respond. The immediate reaction was more threats, as officials again accused the US of interfering in the country’s internal business.
Later, the Ministry of Foreign Affairs weighed in, warning that no one should underestimate China’s resolve when it comes to safeguarding its interests. US Ambassador Terry Branstad was summoned. Vice Foreign Minister Le Yucheng told him to stop meddling in Hong Kong, apparently.
The most forceful response came from Global Times editor Hu Xijin, who tweets on behalf of the party.
“The US has no jurisdiction over Hong Kong [and] The Hong Kong Human Rights and Democracy Act will not entitle such a right to the US”, Hu said Thursday. “If Washington hopes to turn Hong Kong into an arena of China-US game, it needs to bear moral responsibilities for the potential losses of Hong Kong people”.
If you think that sounds ominous, Hu’s tone was considerably more shrill three hours later when, in a subsequent tweet, he warned that “China will not allow Hong Kong’s radical opposition [to] collude with the US”. “If Washington sanctions pro-establishment individuals, I believe Beijing will take action against Washington’s proxies in Hong Kong”, he continued.
The bill, you’re reminded, provides for sanctions against officials thought to be engaged in efforts to undermine the city’s autonomy or deemed responsible for human rights abuses.
Finally, in a tweet that crossed just before dawn in Washington, Hu said the following:
Based on what I know, out of respect for President Trump, the US and its people, China is considering to put the drafters of the Hong Kong Human Rights and Democracy Act on the no-entry list, barring them from entering Chinese mainland, Hong Kong and Macao.
That would mark an escalation, depending on how broadly Beijing decides to construe the term “drafters”.
Although you can be sure there’s plenty of back-channeling going on between the White House and top Chinese officials, this will, at the least, mean that the potential for another trade escalation is higher than it was previously. That said, the Hong Kong legislation was going to become law whether Trump signed it or not. It had a theoretical veto-proof majority and China will doubtlessly take that into consideration when considering how to interact with the administration.
Mike Pompeo has been somewhat vocal about supporting the pro-democracy demonstrators, but most of the full-throated defenses of the protests have come from lawmakers, not administration officials.
In a June 18 call, Trump is said to have told Xi he would remain mostly quiet on the issue in order to facilitate a trade deal. That call is the subject of considerable consternation among Democrats.
Still, Mike Pence’s somewhat confrontational speech late last month along with the blacklisting of Hikvision and other companies and entities associated with human rights abuses in Xinjiang, certainly leaves the door open for Beijing to claim a vast, sweeping conspiracy to meddle in the country’s internal affairs in violation of international law.
“[The ‘Phase One’] trade deal is likely to be delayed”, Hao Zhou, a senior EM economist at Commerzbank remarked on Thursday, adding that the December 15 tariff escalation will probably be postponed, in line with recent media reports.
“While Trump talked up sentiment in the past two days, it will probably fade in the next two”, Hao added.