Hong Kong Is Just One of Xi’s Mounting Crises

(Bloomberg) --

As Chinese President Xi Jinping gears up for this month’s Group of 20 summit, he’s facing multiple fires that strike at the Communist Party’s legitimacy.

Mass protests in Hong Kong — a semi-autonomous city under Chinese rule — threaten to scuttle a bill that would allow extraditions to the mainland for the first time. Many residents fear passage would spell the end of the financial hub's independent legal system, putting those who criticize Xi or the party at risk.

U.K. Prime Minister Theresa May and U.S. lawmakers have publicly backed the protesters. President Donald Trump, who's threatened Xi with more tariffs if he doesn’t meet at the G-20, has said he thinks China and Hong Kong can resolve the issue. Leaders of both parties say Congress should reassess Hong Kong’s special trading status if the bill passes.

Trump’s trade war is starting to hurt China's economy. That's a worry for Xi, given years of growth and falling poverty levels have underpinned the party’s grip on the nation of 1.4 billion people.

If Xi backs down on trade or Hong Kong, he risks looking weak. Yet a hard-line approach could backfire. Either way, having amassed power unseen in China for decades, Xi has no one to blame but himself if things go awry.

Global Headlines

Firing on all cylinders | Trump told reporters yesterday he has no deadline for China to return to trade talks other than the one in his head, and warned that Mexico faces “a much tougher phase” of tariffs if it doesn’t curb illegal migration to the U.S. He also threatened sanctions over German Chancellor Angela Merkel’s support for a gas pipeline from Russia and warned he could shift troops away from the NATO ally over its defense spending, which Trump asserts should be higher. 

Decision time | Boris Johnson will learn today if he's still the favorite to be Britain's next prime minister, with Conservative lawmakers starting to whittle down the candidates in a secret ballot. He's tried to appeal to moderates by saying he wants to remain friends with Europe but also maintained the U.K. should be ready to leave the European Union without a deal in October. That idea, as Dara Doyle and Rodney Edwards report, is causing unease along the Irish border — the U.K.'s post-Brexit frontier with the bloc.

Damaged tankers | The U.S. Navy confirmed two tankers that were attacked near the Strait of Hormuz, the maritime choke point between the Persian Gulf and the Indian Ocean. While no one has claimed responsibility for the incidents, oil prices surged. The development will inflame political tensions in the region weeks after four vessels, including two Saudi oil tankers, were sabotaged in what the U.S. said was an Iranian attack using naval mines. Tehran denied the charge.

In the red | The Democratic National Committee has a money problem that could hurt its nominee’s chances of ousting Trump. In the first four months of 2019, the party spent more than it raised and added $3 million in new debt. In the same period, its Republican counterpart was stockpiling cash. Party officials and fundraisers blamed the deficiency in part on competition from the 23 Democrats in the race vacuuming up contributors’ cash.

• In comments that evoked some of the conduct at the heart of Special Counsel Robert Mueller’s Russia investigation, Trump said he’d want to hear damaging information about a political opponent in the 2020 election even if it were provided by a foreigner.

Town by town | President Emmanuel Macron wants to deal a knock-out blow to France's traditional parties, with associates telling opposition mayors to join his centrist movement if they want to avoid defeat in next year's municipal elections. As Gregory Viscusi reports, many are quitting the center-right Republicans, tired of leadership and ideological battles, and backing Macron.

• Click here for more about how competition for the top job at the European Central Bank has become a proxy battle between Macron and Merkel.

What to Watch

• Trump is set to host Canadian Prime Minister Justin Trudeau next week as the American president’s tariff threats continue to cloud the outlook for the countries’ trade deal with Mexico.
• Taiwanese President Tsai Ing-Wen claimed victory in her party’s primary, something of a reprieve in the face of waning public support as she looks to elections in January.
• Former White House Communications Director Hope Hicks has agreed to be interviewed next week by the House Judiciary Committee to answer questions about Mueller’s probe and the panel’s investigation of Trump.

And finally... Fort Trump will have to wait. The president agreed to deploy 1,000 more troops to Poland yesterday — even though talk of naming a possible new base in the Eastern European country after him didn't materialize. The announcement came as House Democrats chipped away at Trump’s plans for a revised paint scheme for Air Force One and for a sixth military branch dedicated to outer space, endorsing proposals that would stymie both efforts

--With assistance from Roxana Tiron, Kathleen Hunter, Stuart Biggs, Karen Leigh, Gregory Viscusi and Alaa Shahine.

To contact the editor responsible for this story: Karl Maier at kmaier2@bloomberg.net

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