Update (1000ET): The surprisingly lackluster response from Democrats over the HK national security law has led some to compare them unfavorably to Taiwan's leadership, which delivered a strongly worded tweet in solidarity with HK.
The decision to impose #NationalSecurityLegislation on #HongKong by the #NPC shatters #China's solemn promise in 1997 to respect #HK's autonomy & freedoms. Now is the time for democracies to #StandWithHongKong! #Taiwan will be ready to offer necessary humanitarian assistance. JW— 外交部 Ministry of Foreign Affairs, ROC (Taiwan) 🇹🇼 (@MOFA_Taiwan) May 28, 2020
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Update (0800ET): During an interview on CNBC Thursday morning, GOP Sen. Pat Toomey said he expects China tariffs will be expanded to also apply to Hong Kong as the US prepares to strip the 'special administrative region' of China of its preferred trade status. Wall Street analysts pointed out on Wednesday that the move could disrupt some $38 billion in bilateral trade between the US and HK.
SEN. TOOMEY: HONG KONG MAY BECOME SUBJECT TO CHINA TARIFFS... seems like its all in the price and will just hurt HK status as a trading and financial hub— FxMacro (@fxmacro) May 28, 2020
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One day after the US declared that Hong Kong is no longer "autonomous" from Beijing, China's Politburo Standing Committee on Thursday officially wove a controversial new "National Security" resolution that was approved during last week's National Party Congress into Hong Kong's 'Basic Law' - the de facto constitution left by the British - in defiance of President Trump, and a broader backlash across the West, which has repeatedly stood up to defend Hong Kong's freedoms.
According to the NYT, Beijing will probably initiate a far-reaching 'crackdown' to impose the new law on Hong Kong once it takes effect in September.
Activist groups could be banned. Courts could impose long jail sentences for national security violations. China’s feared security agencies could operate openly in the city.
As we reported last night, losing its 'special status' conferred by the US could strip Hong Kong of its 'international city' designation. As one expert said, Beijing no longer cares about "killing the golden goose" - that is, closing what has been for decades a critical portal to the West and the global financial system.
It's still unclear how many of Hong Kong's freedoms Beijing intends to strip away: this won't become clear until later in the year.
Per the NYT, Hong Kong’s Chief Executive Carrie Lam appeared to hint that certain civil liberties might not be an enduring feature of Hong Kong life. "We are a very free society, so for the time being, people have the freedom to say whatever they want to say," said the chief executive, Carrie Lam, noting, "Rights and freedoms are not absolute."
Though US equity futures pointed to a higher open again on Thursday, analysts cautioned that the growing tensions could trigger a massive "risk off" move in markets in the situation escalates. Pictet’s Luca Paolini said on Bloomberg Television that markets seem to be ignoring this because they're assuming it's just rhetoric.
"For now it’s just words, but if the escalation takes place it’s the worst possible time to have this kind of escalation considering the global economy continues to be incredibly weak," Paolini said.