Hong Kong under National Security Law; Some Pro-Democracy disband political parties

[True Federalist (진정한 연방 주의자)]

After the July 1st protests plus a bunch of arrests the HK market is up 2.85%.  HK is now up almost 6% since 5/21 when the announcement came out about the new security laws.  Since end of May HK markets are up over 11% and have way outperformed Taipei, Tokyo and Soeul during the same period.   All things equal the view of investors is that the protests will peter out and the city will go its old goals of making money.

Problem is, with Hong Kong losing any shred of autonomy, there's little reason now to treat Hong Kong any differently than Shanghai when it comes to financial matters. I've avoided investing in Chinese and Russian companies not because of disdain for autocrats per se, but because I can't trust the reported financials.

Also, I see you cherry-picked your period for comparison.
YTD, Hong Kong is doing worse than not only the three markets you've mentioned but also Shanghai.

[Mr. Illini]

China says UK will face “consequences” if it offers residency to BNO holders in Hong Kong, says it breaches agreement between countries and international law

https://www.theguardian.com/world/2020/jul/02/china-could-prevent-hongkongers-moving-to-uk-says-dominic-raab?CMP=fb_gu&utm_medium=Social&utm_source=Facebook#Echobox=1593669958

China is accusing Britain of breaking their agreements and international law - isn’t that rich?

[jaichind]

After the July 1st protests plus a bunch of arrests the HK market is up 2.85%.  HK is now up almost 6% since 5/21 when the announcement came out about the new security laws.  Since end of May HK markets are up over 11% and have way outperformed Taipei, Tokyo and Soeul during the same period.   All things equal the view of investors is that the protests will peter out and the city will go its old goals of making money.

Problem is, with Hong Kong losing any shred of autonomy, there's little reason now to treat Hong Kong any differently than Shanghai when it comes to financial matters. I've avoided investing in Chinese and Russian companies not because of disdain for autocrats per se, but because I can't trust the reported financials.

Also, I see you cherry-picked your period for comparison.
YTD, Hong Kong is doing worse than not only the three markets you've mentioned but also Shanghai.

I think the jury is sill out on the medium term economic impact of all this.  On the long run the surge of economic competitiveness of the PRC moving up the economic chain will of course deprive HK of is temporary entrepôt position.    The medium term future will depend on HK attracting international firms that need to tap into the Greater China market AND need high skilled labor force.  Right now the market rate for HK high skilled labor is quite high internationally (an for sure higher than London) and would attract and keep such labor force within HK.  All of these changes could of course change this dynamic. 

One metric that will allow us to measure this would be the expatriate work force in HK.  They tend to be quite mobile and will follow the money.  If they bail out of HK then would mean a shrinkage of labor talent leading international firms to pull out of HK due to lack of the skilled labor they need. That will in turn lower the HK wage for high skilled workers and a vicious cycle will begin.  It is very possible this will take place  but it is not certain.  I will for sure care a lot for personal and professional reasons.  In the meantime I suspect not much will change the next couple of years and any damage will be further out then that.

As for time-frames of stock market returns the best way to measure impact is to measure when an event is known. Ergo looking at at 5/21 is a good time frame since that is when the news of the new security law came out. End of May is a good time frame as more details and local protest response were known by then.  And of course 7/1 is a key date since that is the date the protest movement was going to show of their response.  For sure HK under-performed APAC EOD but what I am trying to measure is not HK as a whole but impact of this law on HK equities.  Even that is inexact as there are other factors but that it the best I can do.

[dead0man]

US Senate passed bill today that would allow certain HK residents to have advantages immigrating to the US.

[True Federalist (진정한 연방 주의자)]

jaichind,

While there will be those willing to overlook China's lack of transparency in financial matters because of its large market and the willingness of its current mandarins to destroy the environment in search of personal profit, most people won't because they either don't have the ability to pierce the opaqueness of its businesses or the willingness to collude in the destruction of China's environment. It's unfortunate that the leadership of today's PRC has largely learned the wrong lessons from the West's robber baron era. The lessons they've learned have mostly concerned how to be more rapacious.

[Mr. Illini]

Australia announced that they will offer safe haven visas to HK residents with a path to permanent residency and are suspending their extradition agreement with Hong Kong

[jaichind]

Until now substantial push-back to Bejing has been limited to the inner four of the Five Eyes Countries (UK, USA, Aus, CA), with Europe refusing to follow that line, due to commercial interests, especially those of Germany, in China, and internal divisions (Southern and Eastern member states being pro-China and threatening a veto, Greece and Hungary especially).

trying for a "common EU response", and not wanting "unilateralism" was basically the pretense of the German Government not to do anything that might jeopardize economic relations with Bejing, but eventually they have now caved to pressure (by the public and, presumably, the US). Germany will now, says FM Maas, implement, even if other European Countries do not follow suit:
(a) "easing of immigration restrictions of Hong Kongers" (though likely only symbolic changes, likely around asylum and student visas, not like what the UK has announced)
(b) extension of the arms embargo to Hong Kong
(c) suspension of the extradition treaty

https://www.spiegel.de/politik/ausland/hongkong-heiko-maas-kuendigt-reaktionen-auf-chinas-sicherheitsgesetz-an-a-d902e081-487d-4a5e-ba77-ed47e515d432

What happens now is everyone's guess. Likely the Pressure on other western member states will be high to do the same. China will feel that they have to make Germany pay a very big price for this, like with Australia, and more than with almost any country in Europe they certainly have the ability to do it, but you get to the point where you are beginning to escalate relations with too many of your export markets at once. Germany remains one of the relatively more pro-china countries in the West, split almost equally in the population between closer and less ties with China, and that is goodwill that the Chinese would be unwise to waste. Germany's Huawei decision is still being made, and China has big stakes in that. No side has interest in an escalation, so I think the reaction will likely remain with words.

The PRC under Xi is clearly deviating from the correct policy, in my view, as articulated by Deng:
韜光養晦，決不當頭 (hide your strength, bide your time, never take the lead).  The core issue is that these days the PRC leadership not as insulated from public opinion  as they were in the 1980s especially as it comes to foreign policy.   For Xi's regime to survive he must maintain a certain level of public support, something Deng did not have to deal with as much back in the 1980s.  This is leading to poor policy choices in my view and risk repeating mistakes in the 1930s under pressure from public opinion which led to conflict with Japan when a more rational policy could have avoided a costly war and set back Chinese economic development by decades.

[True Federalist (진정한 연방 주의자)]

This is leading to poor policy choices in my view and risk repeating mistakes in the 1930s under pressure from public opinion which led to conflict with Japan when a more rational policy could have avoided a costly war and set back Chinese economic development by decades.

The only way for China to have avoided that costly war would've been to accept Japanese hegemony. Wang Jingwei was hardly a role model.

[CumbrianLefty]

China was hardly a proper democracy in the 1930s, so was "public opinion" really a relevant thing?

[jaichind]

This is leading to poor policy choices in my view and risk repeating mistakes in the 1930s under pressure from public opinion which led to conflict with Japan when a more rational policy could have avoided a costly war and set back Chinese economic development by decades.

The only way for China to have avoided that costly war would've been to accept Japanese hegemony. Wang Jingwei was hardly a role model.

This was more about policy making in the early and mid 1930s.  Popular pressure pushed the KMT regime into a more confrontationist policy in terms of economic boycott as well as military pressure on Japanese occupied Northeast when in my view priority should have gone into economic development, eradication of radicals like the CCP etc etc as to form the basis of a conflict the drive Japan out of Japanese occupied Northeast a decade or two decade.  A conflict with Japan in 1937 was very ill advised as the ROC was nowhere ready to fight such a war from a military and economic point of view and led to very negative consequences in terms of economic development despite the ROC "winning" the war.     The crisis of 1937 could have easily been deescalated by both sides but public opinion on both sides pushed for a confrontational approach.

[urutzizu]

Didn't think it was possible, but the EU Member States did today agree unanimously to measures to counter China over the NS law. Would not at all be surprised if the Southern and Eastern states conceding on this was part of the larger package of the EU negotiations last week (where the Frugals line up with the states most critical of China over this, while the friends of cohesion or whatever you like to call them are the most pro-china).
Anyway, here is the Text the Member States agreed on Hong Kong. In short:
1. Calls NS Law violation of International Law
2. Will impact EU-China relations
3. Member States back carrying out:

 Considering the implications of the national security legislation for asylum, migration, visa
and residence policy in accordance with the applicable law, including by discussing relevant
aspects at EU level;
 Further scrutinising and limiting exports of specific sensitive equipment and technologies for
end-use in Hong Kong, in particular where there are grounds to suspect undesirable use
relating to internal repression, the interception of internal communications or cybersurveillance;
 Exploring possibilities for stepping up and coordinating scholarships and academic
exchanges involving Hong Kong students and universities;
 Further engaging with and supporting civil society in Hong Kong;
 Ensuring continued observation of the trials of pro-democracy activists in Hong Kong;
 Discussing at EU level the potential risks to EU citizens presented by the national security
legislation;
 Monitoring the extraterritorial effect of the national security legislation;
 Reviewing the implications of the national security legislation on the operation of Member
States’ extradition and other relevant agreements with Hong Kong;
 For the time being, not launching any new negotiations with Hong Kong.

 

Obviously not as far-reaching as what the Five-Eyes have introduced, and it delegates almost entirely to MS level, where it is likely that Countries like Greece, Portugal, Romania or Hungary will not actually implement any of it. But it still the most substantive step towards a more confrontational EU-China relationship yet (and perhaps to the Cynics, proof that the EU can, if it wants to, still act on foreign policy). China will likely react with angry words, but no actions (as with the German measures), because it cannot afford the EU joining the five eyes axis against China.

[Mr. Illini]

Carrie Lam is postponing legislative elections by a year, using coronavirus as the excuse

https://apnews.com/ece28d6c700f34d496327ae7a66ed2bd

[CumbrianLefty]

The reports earlier this week that HK's hospital system was "near collapse" never rang true and were contradicted by several eyewitness accounts. It is now clear why that story was planted.

You almost have to admire the cynicism.

[NewYorkExpress]

https://www.cnn.com/2020/08/01/china/hong-kong-activists-arrest-warrant-intl-hnk/index.html

Hong Kong police have issued arrest warrants for six overseas-based democracy activists who are alleged to have breached the city's newly imposed national security law, according to Chinese state media.

The six include United States citizen and resident Samuel Chu and Nathan Law, a former Hong Kong lawmaker and prominent pro-democracy campaigner who fled the city and is now living in London, according to the report.

The issuing of the warrant appears to mark the first time that authorities have used the new national security law, imposed by Beijing on June 30, to target activists based outside of the city.

The law criminalizes secession, subversion, terrorism and foreign interference, and it applies to offenses committed "outside the region" by foreigners who are not residents of Hong Kong or China.

[NewYorkExpress]

https://www.bbc.com/news/world-us-canada-53699084

The US Treasury has imposed sanctions on Hong Kong chief executive Carrie Lam, and 10 other top officials from Hong Kong and mainland China.

The sanctions were used to target those undermining Hong Kong's autonomy, said Treasury Secretary Steven Mnuchin.

<snip>

Among those sanctioned are Hong Kong's police commissioner and several political secretaries.

<snip>

The 11 sanctioned officials will have all property in the US seized and financial assets frozen.

No personal sanctions against Xi Jinping yet, but I have to assume they are coming (and that's one of those things I hope a Biden Administration does.)

[lfromnj]

Lol ban their kids from coming to US colleges.

[NewYorkExpress]

Lol ban their kids from coming to US colleges.

Really we should be banning all Chinese citizens from entering the U.S until the Communist Party is overthrown.

The Chinese Communist Party is much like the Nazi Party in that you have to join, if you don't want to be hunted down by the secret police...so everyone's a member.

If Trump/Biden were to introduce a travel ban again, China should be on the list (and probably should be one of only like three countries on it... the other two being Russia and Venezuela.)

[CumbrianLefty]

Lol ban their kids from coming to US colleges.

Really we should be banning all Chinese citizens from entering the U.S until the Communist Party is overthrown.

The Chinese Communist Party is much like the Nazi Party in that you have to join, if you don't want to be hunted down by the secret police...so everyone's a member.

If Trump/Biden were to introduce a travel ban again, China should be on the list (and probably should be one of only like three countries on it... the other two being Russia and Venezuela.)

Wibble.

(though that could arguably be applied to the whole post really)

[Mr. Illini]

Police have arrested influential democracy activist and media tycoon Jimmy Lai, alleging foreign collusion

https://www.theguardian.com/world/2020/aug/10/hong-kong-media-tycoon-jimmy-lai-arrested-over-alleged-foreign-collusion?CMP=fb_gu

[NewYorkExpress]

https://www.cnn.com/2020/08/10/politics/china-sanctions-rubio-cruz-cotton-smith/index.html

China said on Monday it has imposed sanctions on 11 Americans, including six US lawmakers, for "behaving badly on Hong Kong-related issues."

The action is the latest in escalating tensions between the two countries and a back-and forth in sanctions. The US on Friday sanctioned Hong Kong Chief Executive Carrie Lam as well as 10 other Chinese and Hong Kong officials for their role in crackdowns on political freedom in the region -- the latest measure taken by the Trump administration in response to China's imposition of a controversial national security law on Hong Kong.

"The US action (Friday) was a blatant interference in Hong Kong's affairs and in China's internal affairs," Chinese Foreign Ministry spokesman Zhao Lijian said on Monday. "It was in serious violation of international law and basic norms governing international relations."

Sens. Marco Rubio of Florida, Ted Cruz of Texas, Tom Cotton of Arkansas, Josh Hawley of Missouri and Pat Toomey of Pennsylvania and Rep. Chris Smith of New Jersey were the US lawmakers sanctioned by Beijing.

<snip>

Humans Rights Watch Executive Director Kenneth Roth, President of the National Endowment for Democracy Carl Gershman, President of National Democratic Institute Derek Mitchell, President of the International Republican Institute Daniel Twining and President of Freedom House Michael Abramowitz were also sanctioned.

No sanctions against President Trump or his family to this point.

[lfromnj]

Being sanctioned by China should be a badge of honor

[lfromnj]

Also why aren't any Democrats being sanctioned ?

[Storr]

Also why aren't any Democrats being sanctioned ?

If the intelligence rumors are true about the CCP wanting Trump to lose, I'd suspect they don't want to provoke the ire of Democrats in case Biden wins. There's no doubt that the CCP would prefer a return to  the pre-trade war status quo (tariffs back down to pre-Trump levels) without having to give into meaningful (or any for that matter) US demands, and they know they won't get that from a second Trump term.

[Kingpoleon]

https://www.cnn.com/2020/08/10/politics/china-sanctions-rubio-cruz-cotton-smith/index.html

China said on Monday it has imposed sanctions on 11 Americans, including six US lawmakers, for "behaving badly on Hong Kong-related issues."

The action is the latest in escalating tensions between the two countries and a back-and forth in sanctions. The US on Friday sanctioned Hong Kong Chief Executive Carrie Lam as well as 10 other Chinese and Hong Kong officials for their role in crackdowns on political freedom in the region -- the latest measure taken by the Trump administration in response to China's imposition of a controversial national security law on Hong Kong.

"The US action (Friday) was a blatant interference in Hong Kong's affairs and in China's internal affairs," Chinese Foreign Ministry spokesman Zhao Lijian said on Monday. "It was in serious violation of international law and basic norms governing international relations."

Sens. Marco Rubio of Florida, Ted Cruz of Texas, Tom Cotton of Arkansas, Josh Hawley of Missouri and Pat Toomey of Pennsylvania and Rep. Chris Smith of New Jersey were the US lawmakers sanctioned by Beijing.

<snip>

Humans Rights Watch Executive Director Kenneth Roth, President of the National Endowment for Democracy Carl Gershman, President of National Democratic Institute Derek Mitchell, President of the International Republican Institute Daniel Twining and President of Freedom House Michael Abramowitz were also sanctioned.

No sanctions against President Trump or his family to this point.

It’s kind of bigger news to me that they are going to sanction all HRW-like organization leaders.

[NewYorkExpress]

https://www.bbc.com/news/world-us-canada-53773776

The US has designated the Confucius Institute (CI), the Chinese government-run global education programme, as a foreign propaganda mission.

The order says CI, which offers language and cultural programmes overseas, is "owned or effectively controlled" by a foreign government.

Staff will be required to register and adhere to restrictions similar to those placed on diplomatic embassies.

It comes amid worsening relations between China and the US.

In a statement announcing the move, US Secretary of State Mike Pompeo called the Confucius Institute "an entity advancing Beijing's global propaganda and malign influence campaign" on American classrooms and campuses.

"The United States wants to ensure that students on US campuses have access to Chinese language and cultural offerings free from the manipulation of the Chinese Communist Party and its proxies," Mr Pompeo continued, adding that the move was made to better inform educators.

China criticised the US measure as "demonising and stigmatizing the normal operation of China-US co-operation projects".

"We urge the US to stop politicising educational exchange programs, stop interfering with normal people-to-people and cultural exchanges, and stop undermining China-US mutual trust and co-operation," said foreign ministry spokesman Zhao Lijian.

I'm honestly astonished Trump hasn't decided to do something really crazy, like land troops in Hong Kong yet.