** On May 6, U.S. Secretary of State Mike Pompeo announced a delay in the annual certification now required by Congress of whether Hong Kong still enjoys a level of autonomy from Beijing that can “justify continued special treatment by the U.S. for bilateral agreements and programs.” The reason for the delay was, precisely, “to account for any additional actions that Beijing may be contemplating [at] the May 22 National People’s Congress that would further undermine the people of Hong Kong’s autonomy” (see SGH 5/15/20, “China: This is Not 2019”).
** Today’s actions will make that certification tough, if not near impossible politically, which could result in the removal by Congress of some special business and trading privileges granted to the Hong Kong Special Administrative Region. But an equally plausible, and perhaps more targeted, response from the Trump administration and Congress would be sanctions or actions aimed at individuals in Beijing, the Communist Party of China, or at the People’s Republic of China itself.
Investors' concerns over escalating U.S.-Chinese tensions that re-emerged Thursday -- are spilling over into the Friday trading session as the three-day Memorial Day weekend approaches.
Dow Jones Industrial Average futures are off 0.4%, S&P 500 futures have fallen 0.3% and futures on the Nasdaq Composite declined 0.5%.
Overseas stocks are lower as well, led by a drop of 5.6% in Hong Kong, where stocks plunged in response to a Chinese plan to impose new national-security laws. The U.K.'s FTSE 100 Index is off 1%, while Japan's Nikkei 225 Index fell 0.8%.
Oil is also down in early Friday trading, ending a 6-day hot streak with a thud. Benchmark crude-oil futures are down almost 7%.
(Policy Validation - Dow Jones 5/22/20)
WASHINGTON -- U.S. senators are introducing a bipartisan bill that would sanction Chinese party officials and entities who enforce the new national-security laws in Hong Kong, and the legislation also would penalize banks that do business with the entities.
Sen. Chris Van Hollen (D., Md.) and Sen. Pat Toomey (R., Pa) said they had been working on the bill already but Thursday's developments made the legislation more urgent. They said they will urge Senate leaders to take up the matter quickly.
Earlier Thursday, China signaled it will impose new national-security laws on Hong Kong, dealing a blow to the territory's autonomy as Beijing moves to stop widespread pro-democracy protests that have challenged leader Xi Jinping.
"We would impose penalties on individuals who are complicit in China's illegal crackdown in Hong Kong," Mr. Van Hollen said. He called the move by Beijing "a gross violation" of China's agreement with the U.K. to preserve more freedom and autonomy in the territory.
Mr. Toomey called the move by China "very, very deeply disturbing."
Last year, President Trump signed a bill designed to show solidarity with pro-democracy protesters in Hong Kong, despite expressing concerns it could complicate U.S.-China trade talks.