Mike Pence’s Speech on China May Soothe Critics, Analysts Say

(Bloomberg) --

U.S. Vice President Mike Pence may try to strike a balance between taking a tough stand on China and triggering a rupture between the nations in a speech due 11 a.m. in Washington. Pence may offer just enough criticism, perhaps framed in religious terms, to circumvent a Hong Kong bill in the Senate, analysts say.

The vice president’s speech, which was delayed for months, began drawing attention in recent days. Analysts have speculated Pence could play “bad cop,” with a focus on human rights, which may clear the way for President Donald Trump to play “good cop” with a trade deal.

Read More: Pence to Speak on China as Partial Trade Deal Hangs in Balance

On Thursday, stocks were partially boosted by developments in the U.S.-China trade dispute, as China was said to aim to buy at least $20 billion of agricultural products in a year, if it signs a partial trade deal with the U.S. The S&P 500 opened 0.3% higher.

Here’s a sample of some of the latest commentary:

Height Capital Markets, Clayton Allen

Pence’s remarks will likely be “more aggressive than recent progress in trade talks would suggest as the Trump administration looks to preempt any claims that they are soft on China,” Height’s Allen wrote in a note.

The speech is “vital,” Allen said, as Pence must reduce pressure for a Senate vote on Hong Kong-related legislation, a version of which has already passed the House. The vote poses the “most immediate threat to trade talk progress,” he said, while Senate “members’ willingness to allow a delay depends heavily on their perception of the Trump administration’s stance toward China.”

Pence faces limitations as a “hard line on Hong Kong seems likely to go too far and risk upsetting the Chinese, while a milquetoast speech offering only the same platitudes on countering China is unlikely to satisfy U.S. hawks.” Allen expects Pence will focus on religious persecution as a way to criticize Chinese behavior while “staying just below the line of blowing up trade talks.”

Beacon Policy Advisors

Pence had been expected to give a speech on human rights in China in June, which was delayed amid concerns that President Xi Jinping wouldn’t meet Trump if the speech were given, Beacon wrote. The speech can go ahead now in part because it won’t “pack the same punch without the sanctions that were meant to go alongside it,” with the Department of Commerce already having announced restrictions.

Pressure from Congress is another factor prompting the speech, Beacon added. The talk may have been “pitched by the vice president’s camp as an opportunity for him to finally give this speech, which we expect will appeal to his evangelical base, to provide political cover for Trump from Congress.”

Compass Point, Isaac Boltansky

“The Pence speech was a major topic of client conversations during the summer given the breakdown in negotiations, but it appears to be a second-tier topic at this point,” Boltansky said via email. He senses this speech may be “slightly less significant for markets as recent investor questions are focused on the potential for a mid-November handshake agreement, the likelihood of mid-December tariffs on Chinese goods, and gauging how the issue will play on the campaign trail.”

In recent days, Boltansky had said Pence’s previous address on China last year set a “hawkish tone.” This one was expected to be similarly framed, he said. And he noted it’s coming as “tensions between China and the U.S. have expanded beyond the tariff tit-for-tat in recent weeks,” including a tech blacklist decision, visa restrictions, and the administration’s consideration of capital flow limits.

Veda, Henrietta Treyz

Treyz in recent days had written that “Pence is widely understood to prioritize religious freedom and has had strong words for China in the past on these issues.”

Treyz views the remarks as “unlikely to be intended to escalate tensions with China.” Instead, the speech is more likely to offer an “opportunity to let some air out of the balloon” of U.S. domestic attention. “One of the best ways to stave off a formal Senate vote on the Hong Kong bill would be for Vice President Pence or Secretary of State Pompeo or some other senior White House official to make a statement acknowledging the concerns of the NBA, the Uighurs, the Hong Kong protesters and the House votes,” she said.

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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