Boiling Points, Rubber Stamps And Expelled Students

Boiling Points, Rubber Stamps And Expelled Students

Global equities are still biased to rise, but tension between the world’s two superpowers and an executive order targeting America’s most profitable companies are weighing a bit on otherwise ebullient sentiment around the reopening of economies.

Chinese lawmakers rubber-stamped the national security measure at the heart of the renewed turmoil in Hong Kong, daring Donald Trump to make good on a threat to do something about it by the end of the week. Mike Pompeo’s admonishment from Wednesday opens the door to any number of options, while the House’s passage of the Uighur bill means the president has legislation on his desk that would pave the way for sanctions on Chinese officials.

China’s passage of the draft decision on the national security legislation (2,878-1-6, if you’re keeping score at home) presages what’s expected to be a lengthy period of review, during which Beijing will sort out the specifics of the new laws targeting subversion, secession, terrorism and foreign interference in Hong Kong, where shares slipped Thursday, even as they trimmed losses, in what some suggested was buying by mainland funds.

China Construction Bank and Industrial and Commercial Bank of China were among the largest contributors to the rebound, fueling speculation of intervention.

“There are signs that mainland funds are buying into big-cap Chinese firms in Hong Kong… to support the index”, one source told Bloomberg, for an article reminding you that “mainland money is flowing into Hong Kong’s stocks at an unparalleled pace this year [with] eligible investors… pump[ing] more than $35 billion across the border”. Traders also flagged state banks selling dollars in a bid to prop up the offshore yuan, which brushed a record low.

Premier Li Keqiang said Thursday China doesn’t want a “cold war” with the US. He advised Washington to respect China’s interests. “We have all along rejected a cold war mentality”, Li mused. “Decoupling between the two economies will do neither side any good and will also be harmful to the world”.

Around the same time, The New York Times said Trump plans to expel Chinese graduate students with links to PLA-affiliated schools in China.

“The Trump administration plans to cancel the visas of thousands of Chinese graduate students and researchers in the United States who have direct ties to universities affiliated with the People’s Liberation Army”, The Times said, in a pre-dawn article. “It portends possible further educational restrictions, and the Chinese government could retaliate by imposing its own visa or educational bans on Americans”.

Chinese students are the biggest foreign student population in the country, The Times reminds you. The crackdown would be limited to a certain class of that population. Only around 3,000 will be affected, less than 1% of the more than 350,000 Chinese students studying in the US.

Elsewhere, the Bank of Korea cut rates to a record low, as expected. Governor Lee said the BoK may turn to unconventional policy measures, but was short on specifics.

The central bank said the South Korean economy will likely contract by 0.2% for the year. That is a truly large downgrade from the previous estimate (+2.1%).

It would mark the first contraction for the global bellwether since the Asian financial crisis.


2 thoughts on “Boiling Points, Rubber Stamps And Expelled Students

  1. “Only around 3,000 will be affected, less than 10% of the more than 350,000 Chinese students studying in the US.”
    While 0.86% is indeed “less than 10%”, I suspect that either you intended to say “30,000 will be affected” or “less than 1%”. Of course, who cares about details or math?
    Perhaps the adverse effects of decreased foreign student enrollment on university finances and the (inflation adjusted) reduction in state support over the last few decades might be worth discussion. Just as the US has too many malls, perhaps the US also has too many state universities? (Private colleges and universities are closing every year and so this issue is resolving itself.) Or perhaps the states need to increase funding for public higher education?

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