President Trump may have picked the perfect moment to sign a new bill that gives the State Department the power to sanction Chinese officials over human rights abuses.
The bill, officially known as the Hong Kong Human Rights and Democracy Act, was signed into law on Wednesday. Although largely symbolic in nature, the law does introduce some key provisions which have angered China.
With the markets closed for Thanksgiving, the President has avoided any immediate impact on equities. However, with the potential to compromise trade negotiations, the law could have lasting consequences.
Bipartisan Support for Bill
The Hong Kong bill received bipartisan support in both the House of Representatives and the Senate. It was created in response to months of civil unrest that is still ongoing in Hong Kong.
Protestors in the autonomous region are demanding that the government fully withdraw a China extradition bill, authorize an internal inquiry into alleged police brutality, allow universal suffrage, revoke the declaration of a previous protest as a ‘riot’, and offer amnesty for all protestors who have been arrested so far.
Another less publicized bill was signed by the President, which prevents the sale of tear gas and rubber bullets to Hong Kong police.
New law allows two key provisions for the U.S. government:
- The State Department will be required to review Hong Kong’s trade status at least once per year.
- The government can sanction Chinese officials who are found to commit human rights abuses.
Hong Kong, once a British Territory, was released to China in 1997, with an agreement that would preserve the city’s autonomous status and civil rights. A significant portion of Hong Kong’s young population believes that the terms of the agreement are being eroded.
How Does This Affect Investors?
Asian markets were trading below previous levels on Thursday, following the news of the signing and China’s reaction.
In a statement from China’s Foreign Ministry, the government said that “This is a severe interference in Hong Kong affairs, which are China’s internal affairs. It is also in serious violation of international law and basic norms governing international relations. This Act will only further expose the malicious and hegemonic nature of U.S. intentions to the Chinese people.”
Investors are now concerned that the new law could derail ongoing trade talks, compromising a Phase One deal that is reportedly close to completion.
Whether or not the signing of the law will have a negative impact on U.S. stocks is yet to be seen. Investors should take note of stock movement on Friday, while also following all political news related to the situation.
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