Hong Kong bill may face retaliation - GT

Considering the latest news that US President Trump has signed the Hong Kong bill and the markets sheepish risk-off reaction, so far, the Global Times had previously reported that the signing of the Hong Kong bill by US Present Trump would be ‘nonsensical and self-damaging’. There are implications to this act which will no doubt antagonise the Chinese and potentially jeopardize a trade deal between the two nations, as warned in the article. 

• US Pres. Trump signs Hong Kong Bill that will strain relations with China - Bloomberg

Just at a time where progress towards a so-called 'phase-one deal' was being made, we have barely seen a worthy reaction in markets today, so far, with the yen virtually unchanged, gold remaining in bearish territory and the Aussie down a mere 0.04% at the time of writing, recovering from just a 15 pip drop on the news despite a 0.20% fall in the CNH. The Nikkei, however, opened -0.5% – a prelude to Chinese bourse openings?

• US President Trump tweets on the Wednesday's US stock market record highs

A lack of liquidity in the markets means we may need to wait for a response later once the Chinese make a statement which may come as soon as today.  European markets and potentially Chinese bourses is where the fat on the bone will be with respect to any subsequent moves given that the US is away until next week. US stocks and the US bond market will be closed today in observance of Thanksgiving. On Friday, the New York Stock Exchange and the Nasdaq will resume normal trading hours but will close early at 1 p.m. ET. 

Nevertheless, the following are extracts taken from the Global Times report, which dives into the implications for this act:

Opening paragraph

US senators are encouraging Washington to carry out a "self-damaging mission" in pushing forward a Hong Kong-related bill that may lead to sanctions on China and a review of the trade status of the Hong Kong Special Administrative Region, experts said. They warned that China would come up with equivalent countermeasures if Washington enforces the measure.

Key notes

• The bill, if passed, would sanction Chinese officials found "suppressing Hong Kong's democracy, human rights or citizen freedoms" by freezing their assets in the US and denying them entry to the country. It will also review Hong Kong's condition of autonomy annually that relates to the city's special trade status.
• Shen Yi, an associate professor at the School of International Relations and Public Affairs of Fudan University, slammed the US move as "crazy and nonsensical," and called it a "political show" to vent its anxiety.
• "It is a self-destructive bargain as it uses US companies and financial organizations in Hong Kong to threaten the Chinese government to make compromises," Shen told the Global Times.

Strong opposition 

• In an unprecedented move, seven Chinese institutes - the National People's Congress, The National Committee of the Chinese People's Political Consultative Conference, the Ministry of Foreign Affairs, the Hong Kong and Macao Affairs Office of the State Council, the Liaison Office of the Chinese Central People's Government in the Hong Kong Special Administrative Region (SAR), the Office of the Commissioner of the Chinese Foreign Ministry, and Hong Kong SAR government - condemned the bill's approval.
• "The passage of the bill means US interference in China's internal affairs has escalated and its 'Hong Kong card' has come to the phase of a 'legal war,'" Tian Feilong, an associate professor at Beihang University in Beijing and a member of the Beijing-based Chinese Association of Hong Kong and Macao Studies, told the Global Times on Wednesday.
• "But US interests in Hong Kong will also be jeopardized as the US has a lot of investments in Hong Kong as well as in the mainland through Hong Kong," Tian noted. He also said that such an intervention does not have any legal basis under international law, and implementing those possible laws are not binding. 

Future countermeasures   

• "China can carry out countermeasures, such as sanctioning the senators who pushed the bill forward, the National People's Congress Standing Committee passing resolutions as China's blocking statute and providing sufficient political and interest protection to Hong Kong and mainland officials who may be sanctioned", analysts said. 
• "Hong Kong-based expert Tang Fei, a member of the Chinese Association of Hong Kong and Macao Studies, believes that the passage of the bill will weaken Hong Kong society's consensus and determination to end the current violence and chaos in the city and give Trump leverage in US trade negotiations, and even strategic competition with China."
• "But at the start, its effect will remain in theory as the US president and government are flexible when implementing it. It doesn't necessarily mean a blacklist will soon be made, and the US president can make adjustments according to 'national interests,'" Tang told the Global Times on Wednesday.
• "Passing the bill will surely weigh on the ongoing trade talks between China and the US, as reviewing the special trade status of Hong Kong or revoking the status would also hurt trade ties between China and the US, as much of the trade activities take place through Hong Kong, a global trading hub", another analyst said. 
• "The US Congress has been highly politicized as those politicians only care about their own political goals, ignoring the fundamental interests of their country," Mei Xinyu, a research fellow at the Ministry of Commerce's Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Wednesday. 
• "Such a move will also put the US president in an embarrassing situation, as the Trump administration has been seeking a trade war truce with China by coming up with the first-phase agreement", Mei noted. 
• "Creating leverage out of the Hong Kong issue will also affect trade talks," he said.