Xi’s Tough Choice Over Ending Hong Kong Unrest

(Bloomberg) --

China’s signaling it’s prepared to send in security forces to suppress the uprising in Hong Kong. The question now is what President Xi Jinping will do.

State-run media have posted videos of the People’s Armed Police assembling across the border in Shenzhen, while Chinese officials describe the protests as a “color revolution” and “terrorism” — a term used to justify the repression of minority Muslims in Xinjiang.

The demonstrators too have raised the stakes, with actions to inflict economic pain as they push for leader Carrie Lam’s resignation and other demands to loosen Beijing’s grip on the city.

Yet Xi has good reasons to sit tight and hope the unrest runs out of steam.

Hong Kong serves as a crucial center for Chinese state-run companies to raise funds and store the wealth of powerful figures on the mainland. Military action could not only wreck its reputation as a reliable commercial hub, it might invite international sanctions that would slow China’s economic growth at a time when Hong Kong’s economy is headed for a recession and a trade deal with U.S. President Donald Trump looks increasingly unlikely.

If Xi wanted, he could quickly do away with Hong Kong’s autonomy and send in troops overnight. But the price of doing so may be much higher than the unrest itself.

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Cutting off aid | The White House is intensifying efforts to block the distribution of several billion dollars in foreign assistance, imposing daily limits on spending until it can ask Congress to cancel the funds later this month, Nick Wadhams reports. The move is the latest development in Trump's multi-year battle to cut aid, even over the objections of Secretary of State Michael Pompeo, one of his most loyal cabinet members.

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What to Watch

• U.S. National Security Advisor John Bolton said Washington and London can negotiate a free trade deal sector by sector if a comprehensive agreement takes too long after the U.K. leaves the European Union.
• After several days of campaigning in Iowa, Bernie Sanders and Elizabeth Warren are shifting to New Hampshire, where the Democratic presidential primary next February is set to play a crucial in their bids for the party’s nomination.
• Thailand’s ruling coalition moved closer to losing its razor-thin majority after a party pulled its support less than a month after the cabinet was sworn in. The parliament is now almost equally divided between Prime Minister Prayuth Chan-Ocha’s supporters and the opposition.

And finally ... President Andres Manuel Lopez Obrador’s decision to abandon construction of a $13 billion airport for Mexico's capital is proving to be a little short sighted. Mexico City’s airport has recorded a 52% increase in aborted landings in the first five months of the year, while landings thwarted because other planes were still on the runway climbed even faster — by 84%. And now a key component to AMLO’s alternative plan — diverting some commercial air traffic to a nearby military base — is bogged down in Mexican courts.

--With assistance from Kathleen Hunter, Alan Crawford, Anthony Halpin and Robert Hutton.

To contact the editor responsible for this story: Ruth Pollard at rpollard2@bloomberg.net, Karl Maier

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