China: Rebuffing Washington’s Threats

Published on June 1, 2020

In mid-May, the National Security Commission of the Communist Party of China submitted a 52-page strategic research report to the country’s top decision-making body, the Politburo.

The subject of the report was “on the US launching a new cold war against China,” and a summary of it was subsequently circulated to provincial heads and ministerial officials last week.

The report stresses that a long-term rivalry between China and the US is inevitable, and that “in the face of US aggression,” China should adopt “a calm mentality” and be prepared to engage in a long-term battle with the US.

The report also notes, rather gamely, that as China maintains its nuclear deterrence and boosts its military strength, the US will not readily resort to a military showdown with China over China’s core interests.

Responding to Trump’s Threats

With that as a backdrop — on Saturday morning, local time, Han Zheng, Executive Vice Premier in charge of Hong Kong and Macau affairs, convened a video conference call to discuss the retaliatory measures threatened against Beijing and Hong Kong by US President Donald Trump in a White House press conference on Friday afternoon.

Attendees of the video meeting included Hong Kong Chief Executive Carrie Lam, Xia Baolong, Vice Chairman of the CPPCC and director of the Hong Kong and Macau Affairs Office of the State Council, and the heads of security, finance, and financial and banking supervisory agencies of both the central government and Hong Kong Special Administrative Region (HKSAR).

From what we understand, it went as follows:

*The attendees characterized a “majority” of President Trump’s Friday sanction threats as bluff;

*If Trump really wanted to play tough, participants said, he would have announced a timeline for scrapping the special trade arrangement with Hong Kong, for raising tariffs on goods from HK, and for putting the city’s products under the same tariff regime as Mainland China, but he touched on none of those;

[NB – we would caution that we expect further details, including on sanctions and the revocation of Hong Kong’s “special status,” to be forthcoming from the White House];

*Attendees wondered how far the US would go in imposing sanctions on China and determined that Washington would need to determine the “loss,” meaning cost, of these measures first before taking actions;

*Trump has no room, they believed, to “immediately” terminate the phase one US-China trade accord as the US economy is going through a difficult period with negative GDP growth and record-setting unemployment, or to “immediately” revoke Hong Kong’s special trade status as the city contributes tens of billions of dollars a year to US trade each year and is closely tied in with large US corporate interests;

*And finally, they noted all bets would be off if Trump’s re-election campaign were at risk, with sanctions then coming on Hong Kong regardless of what they felt would be the consequences to the US.

Defiantly, and surely intended for domestic public consumption as well, attendees predicted that revoking Hong Kong’s special trade status would not change its status as a global financial and commercial hub, and that further integration with Mainland China would continue to ensure its long-term prosperity.

Talking points, on top of claims over the resilience of the HKSAR economy, also included reference to the World Trade Organization (WTO) and Asia-Pacific Economic Cooperation (APEC) – in that the Hong Kong Basic Law permits the HKSAR to join these and other organizations separately from the Mainland as “Hong Kong, China,” and will thus not be affected by any change in US policy towards HK.

That, at least, is the narrative from Beijing.

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