Australian dollar hit as US/China war of words erupts over Hong Kong

First it was the US Congress, via Reuters:

The U.S. Senate, in a unanimous vote, passed legislation on Tuesday aimed at protecting human rights in Hong Kong amid China’s crackdown on a pro-democracy protest movement that has gripped the vital financial center for months.

Following the voice vote by senators, the “Hong Kong Human Rights and Democracy Act” now goes to the House of Representatives, which earlier approved its own version of the measure. The two chambers will have to work out their differences before any legislation can be sent to President Donald Trump for his consideration.

The Senate then passed a second bill, also unanimously, that would ban the export of certain munitions to Hong Kong police forces. It bans the export of items such as tear gas, pepper spray, rubber bullets and stun guns.

…That official, who spoke on the condition of anonymity, said if the measure gets to Trump’s desk there would likely be an intense debate between Trump aides worried that it could undermine trade talks with China and those who believe it is the time to take a stand against China on human rights and Hong Kong’s status.

Then the inevtiable glass-jawed response:

On November 19th, the US Senate passed the “Hong Kong Bill of Rights on Human Rights and Democracy.” The bill disregards the facts, confuses right and wrong, violates the axioms, plays with double standards, openly intervenes in Hong Kong affairs, interferes in China’s internal affairs, and seriously violates the basic norms of international law and international relations. The Chinese side strongly condemns and resolutely opposes this.

In the past five months, the persistent violent criminal acts in Hong Kong have seriously jeopardized the safety of the public’s life and property, seriously trampled on the rule of law and social order, seriously undermined Hong Kong’s prosperity and stability, and seriously challenged the bottom line of the “one country, two systems” principle. At present, what Hong Kong faces is not the so-called human rights and democracy issues, but the issue of ending the storms, maintaining the rule of law and restoring order as soon as possible. The Chinese central government will continue to firmly support the Hong Kong SAR Government in its administration of the law, firmly support the Hong Kong police in law enforcement, and firmly support the Hong Kong Judiciary in punishing violent criminals in accordance with the law, protecting the lives and property of Hong Kong residents and maintaining Hong Kong’s prosperity and stability.

Since the return of Hong Kong to the motherland, the practice of “one country, two systems” has achieved universally recognized success. Hong Kong residents enjoy unprecedented democratic rights and fully exercise various freedoms in accordance with the law. The relevant bills of the US Congress completely ignore the objective facts and completely ignore the well-being of Hong Kong residents. For the ulterior political purpose, the Hong Kong violent elements are smashed, bullying and attacking innocent citizens, forcibly occupying the campus and besieging young students. Organized attacks on the police and other criminal acts are striving for the pursuit of “human rights” and “democracy”. The purpose is to support the extremist forces and violent elements in the anti-China chaos and to undermine Hong Kong’s prosperity and stability so that they can borrow Hong Kong. The problem hinders the sinister plot of China’s development. This bad behavior of the United States not only harms China’s interests, but also undermines the important interests of the United States itself in Hong Kong. Any attempt by the US to intervene in China’s internal affairs and hinder China’s development will not succeed. In the end, it will only be a waste of effort.

I want to stress once again that Hong Kong is China’s Hong Kong and Hong Kong affairs are purely China’s internal affairs. We are telling the US to recognize the situation and take the plunge. We will immediately take measures to prevent the case from becoming a law. We will immediately stop interfering in Hong Kong affairs and interfering in China’s internal affairs so as not to ignite the fire and suffer from self-sufficiency.

If the US side is willing to go its own way, China will surely take effective measures to resolutely counteract and firmly safeguard national sovereignty, security, and development interests.

It is anybody’s guess where this ends up but for now stocks that were already hurting from WBC are now crumbling:

The Australian dollar is hit:

And bonds are back:

It would be fantastic to see the US take a stand but I am not holding my breath.

Houses and Holes

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

Latest posts by Houses and Holes (see all)

Comments

  1. Luckily both sides have heaps of debt to monetise……….they can’t successfully browbeat China while Russia has their back, an to hive off Russia they have to let Europe into Russia…..interesting times.

  2. We really had a good go on the AUST 10 year at 1.35% to break higher (for higher yields) and it held convincingly
    Think we are on our way now to test very strong support at 0.85% and think we will break lower this time for 0.50% Aussie 10 year

    Think although AUD market is short, but still think we are now on our way to 64s65s, high 69s have held very well

    Everyone blows their trumpet but in fairness I called the top in both AUDGOLD 2330 and USDGOLD 1560 (actually to the day) and said we had a long way to fall and i got a lot of criticism on the gold

    I still believe we will have a nice correction on ASX and dow but maybe not that much, I’m hoping to see ASX under 6,000 in next 6 months but hoping is never good, shares seem quite strong maybe there’s 5/10% lower

    I know you all think I’m out there re sunspots, we are headed into the bottom of SOLAR CYCLE 24, in January. The change in solar activity is heavily connected to the volatile weather conditions we are seeing now, if you don’t think intense changes in the sun, (noted by NASA) don’t affect weather activity

    The global economy is headed down very very hard into January as we hit solar minimum

    *Gold market is extremely long, CFTC open positions I think 300,000 open long contracts, if we break into low 1400s and into high 1300s in USDGOLD it’s going to be a blood bath

    I’ve been overseas reading the insanity of house predictions and I’ve been hearing from everyone that Chris Joye said house prices are going up 30%, this is the mother of all orgasmic bubbles, everyone has turned bullish. I think you’ll see house prices much much lower late 20 early 2021 think we will see higher home loan interest rates through later 2020.
    Think higher Aussie home loan rates are the BLACK SWAN that no one is talking about
    If everyone who is buying a home now basing their repayments on 3% rates and home prices 30% higher are going to be reasonably disappointed

    Before you give me too much shit, just give me until RBA meeting first week of Feb, think RBA will be cutting more than 0.25%.

    I think we will possibly see emergency cuts mid meeting by Feb.

    I did also say $62 would be high in oil, (the oil shock – the shock that oil prices dropped 20% straight after

    If I take a bit of crxx on here, I’d like to point out where I was correct, everyone else seems to

  3. https://twitter.com/BaldingsWorld/status/1196663511335591936?s=19

    Balding has heard a rumor of something big, could the US actually take a stand on the human rights of Urgurs , stop trade or better still flow of money into/out of China.
    No idea what but the US has sent warships to SCS & Japan & Korea might allow missiles in their country or maybe just about the fact 朱媛 the granddaughter of Zhu Rongji (architect of China’s openings up & joining world trade) was inside the Poly University in Hong Kong
    So many things in play.

Leave a reply

You must be logged in to post a comment. Log in now