Sanction Chinese Banks For Beijing’s Repression In Hong Kong

A failure by President Trump to make Beijing pay dearly for squashing home rule in Hong Kong would prove correct Mao Tse-tung’s assertion that America is a paper tiger, spell the end of the Western Alliance as an effective bulwark for democracy and could inaugurate the Chinese Century.

When China took control of Hong Kong from the United Kingdom in 1997, it agreed to permit the city-state home rule and to continue its market economy for 50 years in exchange for recognition of Beijing’s sovereignty — the two systems, one country solution.

After months of demonstrations against Beijing’s attacks on Hong Kong’s political autonomy, the Chinese legislature is imposing a national security law that effectively curtails free speech and other civil liberties and establishes that the Chinese Communist Party will make law in the city-state and generally suppress dissent. It will permit mainland China’s security agencies to police Hong Kong.

Secretary of State Mike Pompeo declared the United States will no longer treat Hong Kong as an autonomous territory.

The Unites States may now impose the same tariffs on Hong Kong’s exports into the United States as it does mainland exports, but the United States enjoys a large trade surplus with Hong Kong. Those tariffs would penalize American exporters more than Hong Kong businesses. The Department of Commerce may now restrict U.S. sales of high-tech products, but China’s national champions, not competitors in Hong Kong, pose the real threats to American preeminence.

The administration can restrict visas and impose sanctions on individuals and companies that enable Beijing’s policy but those kinds of measures have proven ineffective for dislodging Russia from the Crimea.

The real hammer and anvil would be sanctioning Hong Kong and Chinese banks.

Mainland banks have more than $1 trillion dollars in assets in Hong Kong banks. They do much of their global business through the city-state, because their Shanghai operations are burdened by Chinese capital controls.

1 2 3
View single page >> |

Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and widely published columnist. He is the five time winner of the MarketWatch best forecaster ...

more
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.