Pence China Speech Takes Hard Stance on Hong Kong, Analysts Say
Pence China Speech Takes Hard Stance on Hong Kong, Analysts Say
(Bloomberg) --
Analysts are highlighting the strong support Mike Pence offered for protesters in Hong Kong during a long-anticipated speech delivered in Washington on Thursday. That may mean the Senate will move ahead with measures backing the demonstrators, they said, which might in turn spark countermeasures from China.
Earlier, China fired back at Pence’s criticism on human rights, calling his speech “lies” and chiding him for ignoring U.S. problems like racism and wealth disparity. Separately, China said that preventing U.S. investors from entering Chinese markets isn’t in the interest of the U.S.; those comments came after Senator Marco Rubio criticized MSCI Inc. for helping funnel Americans’ investment dollars into Chinese companies linked to human rights abuses and national security threats.
U.S. stocks rose in Friday trading amid news that the U.S. and China are close to finishing some sections of phase one of a trade agreement, according to a statement from trade representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. Trade official Peter Navarro also said U.S.-China talks were excellent, and spoke of a possible signing of the U.S.-China phase one deal in November.
Here’s a sample of some of the latest commentary on Pence’s speech:
Cowen, Chris Krueger
The speech gave a “green light” for Congress on Hong Kong, Krueger wrote in a note. “Pence was extremely strong in his defense of the Hong Kong protesters,” he said. That added to Cowen’s conviction that pending legislation will “clear the Senate by the end of the year.”
The speech also “served as a justification for what has happened over the last year,” since Pence’s first China speech. Cowen had expected Thursday’s address could launch a “new round of non-trade battles,” but instead it was “more platitudes and defensive in nature,” Krueger said. He added that there was “no mention of investment restrictions or capital controls or other areas where the narrative can spin from the current focus of rotting soybeans and getting back to par with agricultural purchases.”
RBC, Elsa Lignos
Pence “went a bit further than other U.S. officials so far in expressing support for the Hong Kong protest movement,” Lignos wrote. She also flagged remarks by Pence, including those that spoke of “engagement with China” rather than decoupling, criticism of China’s trade practices and “intellectual property theft,” as well as China’s construction of a “surveillance state.”
Height Capital Markets, Clayton Allen
The speech was “more aggressive than expected on Hong Kong, but struck an overall balance that we expect will preserve progress in trade talks,” Allen wrote.
“While the statement that the U.S. ‘stands with’ Hong Kong protesters was strikingly close to language which drew backlash from Chinese leadership, Pence moderated its impact with clear references to Chinese sovereignty and restraint,” he said. Allen sees Chinese push-back as unlikely to include limiting or pulling away from trade talks.
Allen also expects the remarks will “go quite a long way toward satisfying China hawks in Congress looking for a tougher stance toward Chinese authoritarianism.” That might make room for Senator Mitch McConnell to delay a vote on Hong Kong-related legislation opposed by the Chinese, Allen said.
Pangaea Policy, Terry Haines
Post-speech, Haines remains “optimistic about the U.S.-China phase one trade deal,” but he also underscored “caution, because the outcome of the current negotiations will become the major inflection point in how the U.S.-China trade dispute resolves.”
Everything now depends upon whether “China will agree to an enforceable deal,” which would “be a strong market positive,” he said.
On the other hand, if there’s no mutually enforceable deal on any issue addressed in phase one by mid-November, Haines doubts there will be a deal at all. “U.S.-China trade relations will revert to stagnation with no end to tariffs in sight, and likely another tariffs ramp-up from the U.S. side in December at the latest,” he said.
Raymond James, Ed Mills
“Negotiations on trade issues will stay on track as the Trump administration hopes a phase one deal will set a foundation for restructuring the broader U.S.-China relationship” per Pence’s speech, Mills wrote.
The remarks provided “some political cover on issues that the administration has been criticized on domestically by re-iterating President Trump will not back down in the face of China’s challenges to the U.S. on the economic, military, political, and technological fronts,” he said. At the same time, the administration will continue to “seek a better relationship” that it views as “essential” for both nations, he said.
Pence’s tone was more moderate compared to his remarks last year, which raised the question of whether the “U.S. and China were on a collision course for a ‘Cold War 2.0’ scenario,” Mills said. At the same time, he also noted that the vice president offered the “strongest vocal support for the Hong Kong protesters to date.”
--With assistance from Alyce Andres.
To contact the reporter on this story: Felice Maranz in New York at fmaranz@bloomberg.net
To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Jennifer Bissell-Linsk
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