China’s Hong Kong move adds to a stew of tensions

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Good morning. David Meyer here in Berlin, covering for Alan.

This is not the geopolitical worst of times, but neither is it the best. Right now there are a number of reasons to be looking in China’s direction with a degree of unease.

The most urgent issue is the approval by Chinese lawmakers of an expansion of the country’s national security law to Hong Kong. U.S. Secretary of State Mike Pompeo has already claimed that Hong Kong no longer merits its special trade status as far as the U.S. is concerned. The new law is likely to trigger more official pushback from the Trump administration, and the question now is whether multinationals will continue to use Hong Kong as a regional base. The Hang Seng fell around 1{4bae5313c1ffa697ce99995897f7847f1ebf3bca0fb7c37396bb602eb24323d3} on the news.

This all spells further trouble for U.S.-China diplomatic and trade relations—the commitments made in the two countries’ “phase one” trade deal are already looking rickety to say the least, and accusations about the origins of COVID-19 are festering on both sides.

But we can also add into the mix the ongoing Huawei brouhaha. Huawei CFO Meng Wanzhou yesterday failed in a legal challenge to her Vancouver house arrest and pending extradition to the U.S. The Chinese embassy in Canada reacted by saying Canada is an “accomplice to United States efforts to bring down Huawei and Chinese high-tech companies.”

And then there’s the issue of Indian and Chinese troops scuffling at the two countries’ Himalayan border. There have been quite a few skirmishes on the border over the years, but analysts fear this standoff, which relates to disputed territories, could escalate. Thousands of Chinese troops are on what India claims is its soil. The Chinese side says India has been building defense facilities on Chinese land. And each country has a fervently nationalistic government right now.

None of this is to say that disaster is imminent—none of these issues just popped up out of nowhere. But tensions are running high, and with them risk.

More news below.

David Meyer

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