Would China forcibly stifle the protests in Hong Kong?

WED, JUN 12, 2019

YOUR AFTERNOON NEWS UPDATE AND MARKET ACTION FROM CNBC

AS OF WED, JUN 12, 2019 • 12:14 ET

DJIA		25970.92
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EDITOR'S NOTE

I wanted to write about a few other things today (CPI coming in soft again, the awesome response to Sandy's housing rant, the fact that Beyond Meat is the IPO of what was supposed to be Uber's year, etc...), but Hong Kong demands our attention.

I went to "Honkers," as my expat friends in London affectionately called it, back in 2013. It was an awesome week--I felt like I was in a giant, buzzing, urban rain forest. Their skyscrapers are so tall they put ours to shame. The food was awesome (although more so the pork buns than the chicken feet, for me). It all seemed so exciting and multicultural and ahead of the times--you could drop your airport luggage off at the train station and meet it at your destination!

But even then, there were concerns about China. The British had agreed in 1997 to hand control of Hong Kong back to China over a fifty-year period. But the key was that except for defense and foreign relations, "the social and economic systems as well as the lifestyle in Hong Kong would remain unchanged for 50 years." Now, not even twenty years into that agreement, the fears of those who warned that China would suppress Hong Kong's traditional freedoms are being realized.

A million people out of a population of less than 7.5 million have thronged the streets of Hong Kong this week over a new bill that critics warn would end their independent judiciary and could place anyone there at risk of facing trial in mainland China. These are the biggest protests yet since the handover, and now the police chief is telling protesters those who don't go home "might regret your decision for your entire life." This morning, police fired rubber bullets and tear gas on the crowds.

Keep in mind Hong Kong's leader now is Carrie Lam, who is backed by Beijing. She has continued to say the extradition bill is right, adding "I have never felt a guilty conscience over this." The bill is likely to be put to a rushed (i.e. rubber-stamp) vote within days.

The rest of the democratic world has been relatively quiet so far as this has all played out. Perhaps they feel there is no role to play given that Hong Kong's handover was long ago agreed to. Or perhaps they're afraid to speak up. The real question is what happens if China cracks down more violently against these protests--just a week, no less, after we marked the 30th anniversary of the Tiananmen Square massacre. Beijing also has to weigh its response with just two weeks left before world leaders gather at the G20 summit in Japan.

Our State Department has already warned that "the continued erosion of the 'one country, two systems' framework puts at risk" Hong Kong's "special status." That language is key--as Michelle Caruso-Cabrera observed on our show the other day, if Hong Kong loses that designation from the U.S., it could mean an exodus of the financial industry that is the island's lifeblood.

It could also mean Hong Kong--which, for instance, is currently exempt from the President's tariffs on China--would effectively become "just another Chinese city."

Stay tuned...and we'll see you at 1 p.m.,

Kelly

Kelly Evans

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