President Donald Trump has quite rightly followed through on his threat to respond to Beijing's choke hold on Hong Kong's freedoms. Hong Kongers woke up on Wednesday to find that he had signed into law the Hong Kong Autonomy Act, which authorizes the United States to impose sanctions on people, entities and banks found to have undermined the city's special status and rights.
On July 1, Beijing introduced a frightening treason-and-sedition law that penalizes just about anything that the Communist Party doesn't like. Comments critical of the Hong Kong or Beijing governments risk running afoul of the law, with offenders condemned via jury-free trials in front of hand-picked administration-friendly judges, or shipped off to China and its kangaroo courts.
The president also explained that the United States no longer considers Hong Kong autonomous enough to justify special treatment on exports and imports. Hong Kongers will no longer have preferential immigration status when traveling to the United States, which will restrict sales of weapons and sensitive technology to the city. Washington has also suspended its extradition treaty to Hong Kong, and will prevent the Hong Kong police from training at federal law-enforcement academies.
China's action to undermine Hong Kong's freedoms constitutes "an unusual and extraordinary threat" to the U.S. national security, foreign policy and economy, Trump said. "I hereby declare a national emergency with respect to that threat."
Trump used part of his press conference on the Hong Kong act to praise himself for successfully persuading Britain to ban equipment made by the Chinese telecom Huawei Technologies from its high-speed 5G network, as the cold war between the United States and China grows increasingly frosty. British Prime Minister Boris Johnson had resisted that step, but finally and correctly adjudged it a security risk for a company run by a former Chinese army technologist to be given root access to the British telecom system.
The United States has not specified which officials it will target with its Hong Kong law. But Hong Kong Chief Executive Carrie Lam can cancel any U.S. vacation plans. American authorities can seize or freeze any U.S. assets linked to anyone involved in the arrest or imprisonment of individuals under the new national security law, or the curtailment of rights like freedom of speech.
The Hong Kong administration is increasingly paranoid, and intent on silencing its opposition. Rather ludicrously, it claims that pro-democracy candidates seeking election to Hong Kong's congress in elections this September may be breaking the law by undermining the government that they are seeking to join. If actually participating in the government is considered a crime against the government, we have little hope.
The democratic candidates held unofficial primaries this weekend. I joined 610,000 fellow Hong Kongers, or 8.2% of the city's 7.4 million population, in casting a ballot for the person we feel can launch the strongest challenge for a geographic seat.
Half of the Hong Kong congress is appointed by professional groups, rigging the makeup dramatically in Beijing's favor. The Lam administration is worried that pro-democracy candidates will win more than 35 of the 70 seats, beating them at their own rigged game. They raided the offices of the democrats the night before the vote, claiming the timing of their raid over a 2013 alleged cybersecurity breach was pure coincidence. Yeah, right.
The 35 seats would give the pro-democracy camp the numbers to block legislative initiatives, including the budget. Lam and her cronies appear to have a fundamental misunderstanding of how politics works; rather than reaching a political compromise with elected candidates, they believe any opposition is too much, and would like simply to prevent pro-democracy candidates from running. The administration has already proved with the removal of six elected candidates that they will bar elected democrats from taking office.
Beijing's liaison office in Hong Kong has stated that this weekend's poll was illegal, without indicating which laws it breaks. China responded on Wednesday that it will impose retaliatory sanctions on U.S. individuals and entities. The Chinese foreign ministry said that Beijing strongly opposes the U.S. course of action, and urges Washington to stop interfering in China's internal affairs. Though by criticizing U.S. sanctions within its own borders, China is interfering in U.S. affairs.
Investors should watch developments. Although Chinese stocks have been on a bull run, that could be in jeopardy if trade fighting intensifies.
In Hong Kong, the Hang Seng opened up strongly on Wednesday, with a gain of 1.6%, but collapsed into the red by late morning. They were down 0.3% in afternoon trade. Financials led the losses, down 1.2%.
The Chinese authorities have been supporting Chinese and Hong Kong stocks through verbal encouragement and direct intervention. But their financial resources are not unlimited, and the CSI 300 of shares in Shanghai and Shenzhen was also down today, off 1.3% for a second straight day of losses.
The 66 articles in Hong Kong's treason-and-sedition law apply to citizens of any nation, wherever they are. That raises the prospect of a person being subject to arrest for Beijing-critical comments should they visit Hong Kong, or even transit through its airport. Beijing has sent secret agents to Hong Kong, who operate outside the local legal system, housing them in its new office at what used to be the Metropark Hotel next to the city's Victoria Park.
The Canadian government has warned that its citizens "may be at an increased risk of arbitrary detention on national security grounds and possible extradition to mainland China." China has charged the Canadians Michael Kovrig and Michael Spavor, who it detained in 2018 shortly after Canadian officials detained Huawei executive Meng Wanzhou, with spying.
China has successfully used its economic might to isolate and bully other nations on issues it sees as important. But there appears to be a groundswell of international diplomatic opinion that there ought to be a cooperative approach in dealing with an increasingly assertive China. Beijing is currently at loggerheads with India over its Himalayas border, Australia on trade, Vietnam over fishing and oil rights, the Philippines, Brunei and Malaysia over access to natural resources in the South China Sea, not to mention Taiwan and the United States.
China claims virtually the whole of the South China Sea as its own, pushing its Nine-Dash Line right to the coastlines of most Southeast Asian nations based on the notion that its fishing vessels used to visit those islands in times gone by. U.S. Secretary of State Mike Pompeo said this week that China's claim, which the Philippines successfully contested at the Permanent Court of Arbitration in The Hague, is "completely unlawful."
Pompeo took China to task for its "campaign of bullying to control" offshore resources by building artificial, military-equipped islands and chasing off foreign fishing boats. Pompeo said "Beijing has failed to put forth a lawful, coherent maritime claim in the South China Sea," where it claims territory about the size of Mexico. Under normal law, nations can claim a 12-mile territory from their mainland.
Trump's national-security adviser, Robert O'Brien, is this week meeting in Paris with his counterparts from Britain, France, Germany and Italy to discuss the future course of action on China.