U.S. lawmakers to unveil bill banning investment in firms tied to China's military

WASHINGTON (Reuters) – A group of Republican lawmakers plans to unveil legislation this week to keep Americans from investing in foreign defense companies with ties to China’s military, according to a document seen by Reuters, the latest in a string of measures aimed at curbing U.S. funding for China-based firms.

Representatives Mike Gallagher, Jim Banks and Doug LaMalfa plan to introduce the bill, which would require Treasury Secretary Steve Mnuchin to submit a report to Congress listing foreign defense companies that have “substantial contracts with, ties to, or support from” the Chinese military.

Six months after the report is issued, American companies and citizens would be required to divest from those firms and would be banned from making new investments in them.

“On one hand, Congress is asking taxpayers to help grow our military so we can compete with China. On the other hand, large U.S. investment funds are dumping U.S. dollars into China’s military industrial base,” Banks said in a statement. “We need to end our cognitive dissonance and stop funding the rise of our chief global adversary.”

The move comes as the U.S. government has begun extending its trade and technology battle with Beijing to capital markets, as ties between the rival nations have soured over the origins of the deadly coronavirus.

While it was not immediately clear if Democrats or other Republicans would support the bill, anti-China sentiment is running high in the Capitol after China moved to curb Hong Kong’s independence. Both the Democratically-led House of Representatives and the Republican-controlled Senate approved legislation to punish top Chinese official for human rights abuses against Uighur Muslims.

On Friday, President Donald Trump said his administration will study ways to safeguard Americans from the risks of investing in Chinese companies, ratcheting up pressure on the firms to comply with U.S. accounting and disclosure rules.

Earlier this month, an independent board tasked with administering federal worker and military pension funds halted plans to allow one of its funds to track an index that includes controversial Chinese companies, under pressure from the White House.

Those moves came after China’s Luckin Coffee, which trades on the Nasdaq stock exchange, said in April that as much as 2.2 billion yuan ($310 million) in sales last year had been fabricated.

The revelation strengthened the position of China hawks in the Trump administration who argue that investors in Chinese companies are vulnerable to unforeseen risks because they are not subject to the same auditing and disclosure rules as U.S. companies.

The Senate passed legislation earlier this month that could prevent some Chinese companies from listing their shares on U.S. exchanges unless they follow standards for U.S. audits and regulations.

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China's Hong Kong law 'grave concern', sanctions no solution: EU

Bloc says move could impact China-EU ties, but rules out taking any action against its major trading partner.

The European Union has criticised China for asserting more control over Hong Kong and suggested the move would have an impact on China-EU relations – but the 27-nation bloc ruled out taking any action against its major trading partner.

“We express our grave concern at the steps taken by China,” EU foreign policy chief Josep Borrell said on Friday after chairing a video meeting of the foreign ministers. “Our relations with China are based on mutual respect and trust. I want to underline this – respect and trust – but this decision calls this into question.”

More:

  • US, UK, Canada, Australia condemn China over national security legislation 

  • Taiwan condemns new Hong Kong security legislation

  • Pompeo declares Hong Kong ‘no longer autonomous’ from China

On Thursday, the Chinese parliament rubber-stamped a national security law that will bypass Hong Kong’s internal legislature and punish subversion, secession and “terrorism” in the semi-autonomous territory.

Critics and rights activists fear the law will be used to quash political dissent in the former British colony, whose people had been promised that their rights and freedoms would be respected following its 1997 handover to Beijing.

Pro-democracy activists in Hong Kong fear the law could severely restrict political activity and civil society and view it as an assault the regional financial hub’s autonomy.

‘Don’t think sanctions are the way’

“This risks to seriously undermine the ‘one country, two systems’ principle and the high degree of autonomy of the Special Administrative Region of Hong Kong,” Borrell told reporters.

When asked if Brussels might threaten sanctions, he said, “I don’t think that sanctions are the way to solve problems in China.”

Borrell said only one of the member states raised the issue of possible sanctions, but he did not name the country. 

An EU-China summit is scheduled in Germany in September this year. Borrell said its timetable might change due to the coronavirus pandemic.

The cautious EU statement came after the United States, Britain, Canada and Australia on Thursday issued stern criticism of the Chinese legislation.

The US called on China to back off on the security law, while the UK warned it would extend the visas and possibly provide a path to citizenship for some British passport holders from Hong Kong.

Hong Kong to be raised at UNSC

Britain and the US also announced plans to informally raise the issue at the United Nations Security Council on Friday, diplomats said, a move likely to anger Beijing.

Britain’s UN mission confirmed that Britain and the US notified the 15-member Security Council that it would raise the issue on Hong Kong behind closed doors under “any other business”.

The move comes after China, backed by Russia, opposed a US call on Wednesday for a formal open council meeting on Hong Kong, arguing that it was an internal matter and not an issue of international peace and security.

China’s mission to the UN did not immediately respond to a request for comment on the US and British plan to raise the issue informally on Friday.

The Security Council has been meeting virtually amid the coronavirus pandemic.


The Stream

Is Hong Kong’s autonomy dead?

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China hopes U.S., North Korea can resume meaningful dialogue

BEIJING (Reuters) – China hopes the United State and North Korea can resume meaningful dialogue as soon as possible, the Chinese government’s top diplomat Wang Yi said on Sunday.

The United States should not to squander the hard-won outcomes of engagement, State Councillor Wang said at his annual news conference in Beijing.

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Hong Kong activists call for protest march against new security laws

HONG KONG (Reuters) – Hong Kong activists called for a protest march on Friday against Beijing’s plans to impose national security legislation in the city, prompting alarm that the new laws could erode its freedoms through “force and fear”.

“We kind of expected China to do something to suppress us. This step is too much,” said Leung, 21, a criminology student in Hong Kong.

The move hit financial markets, due to concerns the semiautonomous city’s status as a global financial hub was at risk, with Hong Kong stocks selling off as China’s parliament sat on Friday to discuss the new law.

While it was unclear whether the unauthorised march, proposed to start at noon near the central financial district and end at China’s Liaison Office, will materialise, it was a sign that Hong Kong could soon plunge into renewed unrest.

The legislation could be a historical turning point for Hong Kong and heighten geopolitical tensions between Beijing and Washington, whose relationship is already weakened by trade disputes and reciprocal accusations over the coronavirus pandemic.

“It is starting to look like a U.S.-China summer of discontent in the making,” said Stephen Innes, chief global market strategist at AxiCorp.

Related Coverage

  • U.S. senators seek to sanction Chinese officials over Hong Kong
  • China law requires Hong Kong to enact national security rules as soon as possible

Innes said the new law could potentially reignite the pro-democracy demonstrations of 2019, the biggest crisis the former British colony has faced since it returned to Chinese rule in 1997.

Hong Kong stocks fell 3.2%, leading falls in Asia and the Hong Kong dollar dropped slightly against the U.S. greenback.

Speaking on Friday in his annual report to the Chinese parliament, Premier Li Keqiang said China will establish a “sound” legal system and enforcement mechanisms to ensure national security in Hong Kong and Macau, its other semi-autonomous city.

China’s proposed new legislation for Hong Kong requires the territory to quickly finish enacting national security regulations under its mini-constitution, the Basic law, according to a draft of the legislation seen by Reuters.

The document said the law will tackle secession, subversion and terrorism activities, as well as foreign interference. It says it will safeguard the central government’s “overall jurisdiction” as well as Hong Kong’s “high autonomy”.

A previous attempt to adopt similar legislation in 2003 was met with a protest that drew around half a million people onto the streets and was eventually shelved.

Pro-democracy activists and politicians have for years opposed the idea of national security laws, arguing they could erode the city’s high degree of autonomy, guaranteed under the “one country, two systems” handover agreement, which China says it is undermined by protesters.

“It is essentially declaring directly that ‘one country two systems’ is null and a failure,” said Eric Cheung, principal lecturer at Hong Kong University’s department of law.

“THE END OF HONG KONG”

Local pro-democracy lawmakers denounced the plans on Thursday night as “the end of Hong Kong”.

“Beijing is attempting to silence Hong Kongers’ critical voices with force and fear,” pro-democracy activist Joshua Wong tweeted. “Deep down protesters know, we insist not because we are strong, but because we have no other choice.”

The introduction of Hong Kong security laws on the agenda of the Chinese parliament, which begins its annual session on Friday after a months-long delay due to the coronavirus, drew a warning from U.S. President Donald Trump that Washington would react “very strongly”.

The U.S. State Department also warned China, saying a high-degree of autonomy and respect for human rights were key to preserving the territory’s special status in U.S. law, which has helped it maintain its position as a world financial centre.

Taiwan’s Mainland Affairs Council urged Beijing on Friday not to lead Hong Kong into “bigger turmoil” due to wrong policy decisions.

An editorial in the state-backed China Daily newspaper late on Thursday said the proposed legislation will “better safeguard Hong Kong’s development”.

“The overreaction of those rioters and their foreign backers, who see such legislation as a thorn in their side, only testifies to the pertinence of the decision and the urgent need for such legislation,” it said.

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U.S. Senate Republican leader threatens 'reexamining' U.S.-China relationship

WASHINGTON (Reuters) – U.S. Senate Republican leader Mitch McConnell on Thursday threatened to reexamine the U.S.-Chinese relationship if Beijing pursues a “further crackdown” on Hong Kong, after China was set to impose new national security legislation on the former British colony.

“A further crackdown from Beijing will only intensify the Senate’s interest in reexamining the U.S.-China relationship,” McConnell said in a statement.

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China warns of military conflict risk as US steps up warplane flights over South China Sea

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The flyovers came with increased military operations by both the US Navy and Air Force in the South China Sea, East China Sea, the Taiwan Strait and the Yellow Sea this year. China has warned of a growing risk of military conflict between the two countries. The US Pacific Air Forces said B-1 bombers conducted a mission in the South China Sea just days after training with the US Navy near Hawaii.

Risks of military conflict cannot be ruled out in the South China Sea and Taiwan Strait

Song Zhongping

A spokesman said the warplanes were “demonstrating the credibility of US air forces to address a diverse and uncertain security environment”.

Li Jie, a military specialist based in Beijing, said the US was trying to keep up strategic deterrence, with the US Air Force conducting 11 flights in March and 13 in April over the Taiwan Strait and South China Sea.

He said: “Obviously, decision makers in the Pentagon are trying to use the bombers as a new tool in its strategic deterrence against China.

“We will see intensified B-1 interference into airspace over the Taiwan Strait and the South China Sea in May.”

Mr Li said two B-1B bombers flew over the East China Sea and also flew over the waters off the coast of northeast Taiwan on May 6.

Zhu Feng, director of international studies at Nanjing University, said tensions in the South China Sea had become increasingly “tense and turbulent” in the past three months and were closely linked to political and diplomatic conflict between the two countries.

The US Air Force deployed four B-1B bombers and about 200 airmen from Texas to the Andersen Air Force Base in Guam on May 1.

A spokesman said the mission was to support Pacific Air Forces and to conduct training and operations with allies and partners.

The US Air Force sent two B-1B Lancers for a 32-hour round-trip flight over the South China Sea on April 29.

It rotated B-1, B-2 and B-52 bombers, the three strategic bombers in the US air force fleet, among other military aircraft to fly over the contested waters near China.

Song Zhongping, a Hong Kong-based military affairs commentator, said the frequent flyovers of B-1 and B-52 jets were not only to display the US military presence but were exercises looking ahead to potential battles of the future.

He said: “The B-1, replacing B-52, needs to fly around the waters to know the battlefield conditions well.

“China and the US are entering into a full-fledged competition and the situation is grimmer than the US-Soviet Union Cold War.

“Risks of military conflict cannot be ruled out in the South China Sea and Taiwan Strait. And they are increasing.”

On May 14, the Chinese navy started an 11-week military exercise in waters off the northern port city of Tangshan in the Yellow Sea.

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The US sent a warship through the Taiwan Strait on the same day, marking the sixth passage of the strait by a US Navy vessel this year.

The US Indo-Pacific Command the US Navy had conducted a mine warfare training exercise in the East China Sea.

China is also upgrading its military strength in the region.

It put two new upgraded nuclear-powered strategic submarines into service last month and it is also considering the launch of a new generation of strategic bomber, the Xian H-20 supersonic stealth bomber, possibly within this year.

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China calls for coronavirus vigilance, warns against complacency

BEIJING (Reuters) – Chinese health authorities called on Tuesday called for vigilance to be maintained against the novel coronavirus as new clusters emerge, even though the peak of the epidemic has passed in the country where it first appeared.

In the past two weeks, new cases have been reported in seven provinces, including Hubei, the original epicentre of the outbreak late last year.

On Monday, Wuhan, capital of Hubei, reported its first cluster of infections since a lockdown on the city was lifted a month ago.

The reappearance of clusters suggested that counter-epidemic measures could not be relaxed, Mi Feng, spokesman at the National Health Commission, told a media briefing.

While prevention and control efforts had normalised, that did not mean measures could be eased, Mi said.

As of Monday, mainland China had 115 current confirmed cases, while 5,470 people were under medical observation for signs of novel coronavirus infection.

A major worry is asymptomatic cases – people who show no clinical signs of infection but spread the virus. The number of such cases is not known as they only appear on the radar of health authorities when they show up in tests.

In Beijing, where just 13 cases are still being treated, health authorities also warned against complacency.

“Even after the 13 patients have recovered and have been discharged from hospital, that does not mean there is zero risk afterwards,” Lei Haichao, head of the Beijing Health Commission, told a media briefing.

Beijing was among the few places in China that upheld strict rules on screening, testing and quarantine. It even stopped all international flights from landing in the city directly.

But now China has to strike a balance between maintaining a degree of public health control and easing restrictions where it is deemed safe to do so and returning society and the economy to some state of normalcy.

“The sealing of the city was once an extremely effective method for us in dealing with the epidemic, but now we need to find a balance between economic recovery and epidemic prevention and control,” Lei said.

The government has allowed cinemas, museums and other recreational venues across the country to gradually reopen, a move welcome by a virus-hit services sector.

But performance venues must keep their operating capacity at no more than 30%, the China Culture Administration Association said.

The operating capacity of internet bars and entertainment venues should be capped at less than 50%, it said.

Shanghai Disneyland reopened on Monday for the first time in three months, but restricted daily visitor numbers to 20% of capacity.

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China factory deflation deepens in April as recovery stalls

BEIJING (BLOOMBERG) – China’s factory deflation deepened in April and consumer price gains slowed, signaling ongoing weakness in the world’s second-largest economy.

The producer price index dropped 3.1 per cent in the month, versus a forecast 2.5 per cent decline. The consumer price index rose 3.3 per cent in April from a year earlier, the National Bureau of Statistics said Tuesday. That compares to the median estimate of a 3.7 per cent increase and a 4.3 per cent rise in March.

Pork prices, a key element in the country’s CPI basket and a source of inflation due to a previous swine fever outbreak, rose 96.9 per cent on year, moderating from March’s 116.4 per cent gain.

Core inflation, which removes the more volatile food and energy prices, slowed to 1.1 per cent from a year earlier after 1.2 per cent in March. Muted core inflation is the latest indication that domestic demand remains sluggish and will likely provide more impetus for Beijing to step up growth-boosting measures.

China’s economy has staged a steady but weak recovery, as virus control measures are being lifted. The government has so far kept stimulus policies at a subdued level. Some economists, including Nomura’s Lu Ting, are forecasting that a large, financial relief-centered stimulus package is around the corner

Factory deflation, however, is of a bigger concern for policy makers. Falling factory product prices, weighed on by the oil price decline, made it hard for companies to generate profits and expand businesses. Weaker external demand also bodes ill for exporters’ outlook.

“Corporate profits would be under pressure under deflation, just like what happened in 2015,” Larry Hu, Chief China Economist at Macquarie Group Ltd., wrote in a note before the data release. “The good news is that CPI inflation is moderating as well, leaving more room for lower rates.”

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Hong Kong protesters gather in shopping malls after Mother’s Day march denied

Riot police in Hong Kong grappled with pro-democracy protesters who gathered in shopping malls on Sunday to sing, chant slogans and flash hand signs after permission for a Mother’s Day march was denied.

The incident indicated a desire on the part of some in the pro-democracy camp to revive the protests against Hong Kong’s Beijing-backed government that paralyzed parts of the semi-autonomous Chinese territory for months last year.

With the coronavirus outbreak subsiding, more people in Hong Kong have responded to online calls for action, although in far smaller numbers than the hundreds of thousands who marched last year against proposed legislation that could have seen dissidents or criminal suspects extradited to mainland China to face unfair trials and possible torture.

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The legislation was eventually withdrawn, but the protests continued, growing increasingly violent as both police and demonstrators adopted hard-line tactics. Thousands, mainly young people, were arrested in the demonstrations for crimes including rioting and possessing weapons.

Hong Kong’s pro-Beijing and pro-democracy lawmakers have been caught in an impasse over the delayed election of a chairperson of the Legislative Council’s House Committee, which reads bills and determines when they can be put to a final vote. Among the bills under consideration is one that would criminalize disrespect of China’s national anthem.

The former British colony was handed back to China in 1997 under a “one country, two systems” framework in which Hong Kong was given freedoms not enjoyed on the mainland and promised a high degree of autonomy in its affairs for 50 years. Pro-democracy supporters say those rights are being eroded by Beijing as it tightens its grip on the territory through tough policing and increasingly restrictive legislation.

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North Korea lashes out at South Korean military drills, sends greetings to China

SEOUL (Reuters) – North Korea lashed out at South Korea over recent military drills, while leader Kim Jong Un sent a personal message to China’s Xi Jinping to congratulate him on that country’s success in controlling the coronavirus, state media reported on Friday.

A North Korean military representative said on Friday that recent South Korean military drills were a grave provocation that demanded a reaction, according to a statement carried by Korean Central News Agency (KCNA).

“The recent drill served as an opportunity which awakened us once again to the obvious fact that the enemies remain enemies all the time,” the statement said.

North Korea cited a military exercise by the Republic of Korea Air Force (ROKAF) Air Combat Command on Wednesday, and said the drills violated inter-Korean agreements aimed at reducing military tensions.

“Everything is now going back to the starting point before the north-south summit meeting in 2018,” the statement said.

On Sunday, South Korea said North Korean troops fired multiple shots toward a South Korean guard post at the Demilitarized Zone (DMZ), which separates the two countries.

South Korean troops responded by firing warning shots, but no casualties were reported.

U.S. Secretary of State Mike Pompeo had said the shots fired by North Korea were likely “accidental”.

In a separate dispatch, KCNA said Kim sent a verbal message to the Chinese president about the coronavirus, KCNA said.

“Kim Jong Un in his message extended his warm greetings to Xi Jinping and congratulated him, highly appreciating that he is seizing a chance of victory in the war against the unprecedented epidemic,” said KCNA.

Kim wished Xi good health and the KCNA report said the relations between Pyongyang and Beijing were “firmly consolidated.

Asked about Kim’s message to Xi during a daily briefing in Beijing on Friday, Chinese foreign ministry spokeswoman Hua Chunying said China and North Korea are friendly neighbours and in close communication on COVID-19 epidemic control. She said she had nothing to update with in response to a question on whether Xi will send a reply to Kim.

COVID-19 is the respiratory illness caused by the novel coronavirus.

North Korea has said it has no cases of the coronavirus, but previously reinforced border checks and anti-epidemic measures.

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