Hong Kong Crisis Leaves US-China Trade Deal Floundering
The well-publicised events in Hong Kong have led to a deterioration in the prospects of a Sino-American trade deal being signed. Hong Kong has been in the grip of massive protests since June, the main cause of which has been discontent over a proposed extradition bill to the People’s Republic of China. Recently the protests have morphed into a protest against the Hong Kong Administration, and the demonstrations have taken a violent turn with accusations of brutality being levied against the Hong Kong Police Force and protestors being charged with increasingly riotous behaviour.
Hong Kong is the third biggest financial centre in the world and is now in recession due to this unrest. Local elections were held in the province over the weekend, and results have shown a landslide for the anti-government coalition, with all but one local council now in opposition control. These victories for the anti-government opposition are certain to infuriate the communist government in Peking.
In response to this instability, The Senate of the United States has passed The Hong Kong Human Rights and Democracy Act, which would subject the territory to annual reviews over its special treatment under US law and sanction officials who have committed human rights abuses. This has further angered the Chinese Government, with Chinese Foreign Ministry spokesman Geng Shuang remarking;
“The US should immediately stop interfering in Hong Kong affairs and China's other internal affairs, or the negative consequences will boomerang on itself. China will have to take strong countermeasures to defend our national sovereignty, security and development interests if the US insists on making the wrong decisions.”
These developments have dampened the optimism that progress on the US-China trade deal could be made. It now looks increasingly likely that phase one of this deal will not be signed until well into 2020. Despite this turmoil in one of the leading financial centres of the world, gold has been fairly stable over the last seven days and is currently trading at $1457.20 per troy ounce, which is a slight fall of 0.53% over the week. It would be wise to keep a careful eye on Hong Kong as events there could lead to a major flashpoint between the West and China, which may affect gold considerably.
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