Trump might penalize China for Hong Kong law, however it will not be really destructive: financial expert

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Trump may punish China for Hong Kong law, but it won't be very damaging: economist

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U.S. President Donald Trump might penalize Beijing for deteriorating Hong Kong’s autonomy and other human rights abuses — however his alternatives will not be really destructive to China, stated a leading Chinese financial expert on Friday.

Hong Kong has unique benefits under American law, which deals with the area more positively than the mainland, and has actually up until now excused the Asian monetary center from penalizing tariffs that the U.S. has actually troubled China. Observers state the U.S. can withdraw that unique status for Hong Kong which would harm China, which depends on Hong Kong as a bridge to the remainder of the world.

But Li Daokui, an economics teacher from Tsinghua University, informed CNBC that any risks to withdraw Hong Kong’s unique benefits from the U.S. will not be “very much credible” due to the fact that American services would get harmed too.

China on Thursday authorized a questionable nationwide security law in the unique administrative area of Hong Kong, a relocation that critics state will deteriorate the flexibilities of its individuals and enable Beijing higher control over the semi-autonomous area.

Trump is set to hold a press conference later on Friday to go over China. The president didn’t offer information, however there is speculation he might reveal his administration’s reaction to numerous advancements today.

Earlier in the week, U.S. Secretary of State Mike Pompeo stated that Hong Kong was no longer self-governing from China, after Beijing revealed strategies to vote on the Hong Kong law throughout its parliamentary conference.

The U.S. House of Representatives likewise passed legislation today requiring sanctions versus Chinese authorities over the detention and abuse of Uighurs, a Muslim minority group in China.

“If you think about it, Hong Kong is not a center of trade of commodity,” Li stated on “Street Signs Asia.” He included that the city is rather a monetary services center where substantial quantities of cash circulation through.

“If President Trump threatens to close (the) door (on) Hong Kong in terms of money flow, it will inflict tremendous damage to the US business community, so that’s a cost too high for President Trump to pay,” stated the teacher who was formerly a member of the financial policy committee at China’s reserve bank, and acted as an external consultant to the International Monetary Fund.

U.S. sanctions on China

Li stated it’s “highly likely” that Trump would enforce sanctions on particular top-level Chinese federal government authorities, such as by closing their monetary accounts in the U.S. But however, the real political damage from such action is “not very much,” he included.

That’s due to the fact that anti-corruption project in China over the previous couple of years has actually led numerous Chinese authorities to “cut off their financial ties with U.S. entities,” he discussed.

Other observers likewise stated it’s not in the interest of the U.S. to harm China, specifically at a time when relations in between the 2 nations have actually degraded substantially. In addition to Hong Kong’s autonomy, the U.S. and China have likewise just recently clashed over trade and the origins of the coronavirus. 

Yukon Huang, a senior fellow with the Asia program at think tank, Carnegie Endowment for International Peace, stated Trump needs to send out a “firm signal” on the concern of Hong Kong however will likely stop at “symbolic” actions.

“More likely he’s going to apply some sanctions, he’s going to penalize some of the officials,” Huang informed CNBC’s “Street Signs Asia.”

But the president would not “go too far in terms of actually making the economic relationship even more difficult,” he included. “After all there’re elections coming up, a break down in terms of U.S.-China relations probably doesn’t serve either side very well.”

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