China accuses US of ‘sinister intentions’ after Trump signs bills supporting Hong Kong protesters

China’s Ministry of Foreign Affairs said Thursday the U.S. has “sinister intentions” and its “plot” is “doomed to fail,” after President Donald Trump signed two bills supporting Hong Kong protesters into law.

State media also published a statement from the Hong Kong liaison office, emphasizing its commitment to defending its “one country, two systems” policy.

“We are officially telling the U.S. and the handful of opposition politicians in Hong Kong who follow America’s lead to not underestimate our determination to protect Hong Kong’s prosperity and stability, don’t underestimate our belief to protect the ‘one country, two systems policy’ and don’t underestimate our capabilities and strategies in protecting our country’s sovereignty, safety, growth and rights,” the office said, according to a CNBC translation of an online-Chinese language statement.

Hong Kong is a semi-autonomous territory which operates under the “one country, two systems” principle — a structure that grants the city’s citizens some degree of financial and legal independence from the mainland.

In a statement released by the White House, Trump said, “I signed these bills out of respect for President Xi, China, and the people of Hong Kong. They are being enacted in the hope that Leaders and Representatives of China and Hong Kong will be able to amicably settle their differences leading to long term peace and prosperity for all,”

That statement, along with the one issued by the Ministry of Foreign Affairs, came just hours after Trump signed the Hong Kong Human Rights and Democracy Act of 2019 into law. He also signed another bill banning the sale of munitions like tear gas and rubber bullets to Hong Kong police.

“This so-called bill will only make the Chinese people, including our compatriots in Hong Kong, further understand the sinister intentions and hegemonic nature of the United States.

“So is this just another worthless letter?”

From Conservative Treehouse today:

“The Hong Kong Human Rights and Democracy Act would require the State Department annually re-certify Hong Kong’s autonomous nature, in order for the so-called “special treatment” the U.S. affords Hong Kong to continue.”

As Kyle Bass has pointed out in detail, China depends on the free exchange of the Hong Kong Dollar, to obtain the great bulk of the hard foreign exchange that it needs. If Hong Kong is no longer granted its currently recognized Sovereign Status, it would likely be a fatal blow to the financial system that keeps mainland China’s financial house of cards from collapsing.

The Chinese economy has a debt load that makes Greece look like Switzerland by comparison - the largest debt bubble in human history, and much of it spent on things that will never be able to pay back the loans (ghost cities, zombie factories). More than half of China’s industrial companies are currently at risk of even being able to cover the interest payments on their debt, and their banking system is rife with fraud.

Domestically, they can manipulate everything in their totalitarian system. But to buy the oil, gas food and raw materials that they need to import, they need hard currency - real money, like Euros or Yen; but 80% of their foreign exchange needs are US Dollars. The Mainland’s Monoply money (Yuan or Renminbi, which they have printed recklessly) is not freely exchangable with the World’s hard currencies. Only the Hong Kong Dollar is, and that depends entirely on the Western Nations formal recognition of Hong Kong as politically autonomous.

The annual certification required by this law, means that every year there will be an opportunity to send the Chinese economy crashing into an epic contraction and loss of wealth. It is a financial knife against the Chicom’s throats.

“to whom does China owe this debt?”

The great bulk is held domestically. The Government of China is trying in many ways to convert whatever assets they can into foreign currency, at the hugely inflated values they are currently priced at domestically (like listing their companies on foreign stock exchanges, or within International indexes for stocks and bonds. The real value of those assets, if accounting was done as it is in most of the rest of the world, with a fairly priced currency is a lot less (hard to say how much, roughly half is my SWAG).

Compared to Greek debt default, the International financial system is much more insulated from the potential effects of a Chinese default crisis, because it is mostly domestically held. he Chinese domestic financial system however, is significantly MORE overleveraged than the Greeks were - but their totalitarian Government can dictate every aspect of domestic financial transactions, such as endlessly requiring banks to lend more more money to debtors who can’t make payments, and just printing money for the banks to lend.

It is different in the real world, where the Saudis won’t take their play money in exchange for real oil, or the Australians for metals, or the Americans or South Americans for soybeans. China’s economy is hugely imbalanced by global standards - exceptionally dependent on exporting manufactured goods, and highly dependent on imported oil, raw materials and food.

Their hard currency transactions are not something where they simply force everyone endlessly accept baseless revaluations. Their hard currency economy is a much more closely run, and vulnerable affair.

Hong Kong is the financial capital - the goose that lays the golden eggs for the Mainland’s access to hard foreign currency. That access is very dependent on Hong Kong continuing to enjoy the recognition of “Sovereign Status” (political autonomy) by the West, so that the Hong Kong dollar is a freely exchangeable currency with Western currencies (which the Renminbi is not). If the communists insist on seizing political control of Hong Kong, they will be eating that precious goose, and loosing their main access to foreign exchange.

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