Bloomberg: Next China

Beijing’s shift to a more forceful strategy on Hong Kong happened long before this week’s passage of a national security bill. The first sign was in early January, when Beijing named Luo Huining the new director of the Hong Kong Liaison Office, installing the Communist Party stalwart known for fighting corruption as the central government’s most-senior official in the city. Then in mid-February, Beijing shuffled the leadership of the cabinet-level Hong Kong and Macau Affairs Office. Appointed as the new head of China’s top agency for overseeing the former British colony was Xia Baolong, a former close aide to President Xi Jinping. And if not for Covid-19, the national security bill might well have come just weeks after that in early March. That’s when the full body of China’s parliament, which must approve the resolution, usually has its annual sessions. The pandemic delayed its start  to last week, which is also when the bill against secession, sedition, foreign interference and terrorism was made public. So if the virus hadn’t delayed the National People’s Congress, China might have replaced its top officials overseeing Hong Kong and unveiled the national security bill all in the span of two months. That would have left little doubt about Beijing’s intentions. Riot police raise a blue flag warning demonstrators in Hong Kong to disperse during a protest on Wednesday, May 27, 2020. Photographer: Lam Yik/Bloomberg U.S. Retaliation Following passage of the national security bill, U.S. President Donald Trump told reporters at the White House that he planned to announce new policies involving China on Friday in Washington. While what steps those might be remains unclear, Secretary of State Michael Pompeo has already announced that the U.S. would no longer certify Hong Kong as being politically autonomous from China. That opens the door for a number of sanctions. One measure the White House could take would be to levy the same trade tariffs on Hong Kong that now apply to mainland China. Some of the more extreme members of Hong Kong's pro-democracy movement are hoping Trump will do exactly that, thereby hammering the city's economy and potentially forcing Beijing to reconsider. The danger of course is that instead of backing down, China retaliates, thereby begetting another round of tit-for-tat between the world's biggest economies. What Superman Thinks Li Ka-shing, the 91-year old tycoon who is Hong Kong’s richest person and whom locals long-ago nicknamed “Superman,” called for calm in the city this week. With the threat of the security bill sparking a fresh round of violent street protests, Li argued that every sovereign country has the right to address national security concerns and asked residents not to “over-interpret it.” His eldest son and heir to his vast business empire, Victor Li, was slightly more supportive. The younger Li said he hoped the bill could help Hong Kong escape the turmoil and uncertainties that have wracked the city. It’s a sentiment shared by many of Hong Kong’s richest families. But being home to one of the world’s widest wealth gaps does throw into question how representative the view of Li and Hong Kong’s other tycoons is of the broader population. Dividing the Empire Stanley Ho, the billionaire who built Macau into the world’s largest gambling hub, passed away this week at 98. Surviving him are more than a dozen children he fathered with four women and a sprawling $15 billion empire. So far, all signs point to Pansy Ho, his eldest daughter with his second wife, taking the reins of the business. But there are concerns that disputes will arise; they have before. A multitude of internal interests is one reason analysts cite for why SJM, Ho’s company, has been slow to act. It was the last among Macau’s six operators to build a casino on the city’s swanky Cotai strip, for example. The result has been a shrinking share of the market. Fixing that slide will be a priority for whomever takes over. Shanghai Composite Shanghai’s stock exchange is thinking about doing something it hasn’t done in three decades. The Shanghai Composite Index, which tracks 1,555 stocks traded on the city’s bourse, has been one of the most-watched benchmarks for the Chinese market since its launch in 1991. Its makeup of companies has also remained largely unchanged. But pushed by the growing economic importance of technology, the exchange is now considering tweaks that would result in a smaller index weighting for companies in finance and energy and a greater representation for those in the tech and so-called new economy sectors. That comes of course as Washington mulls rules that would make it harder for Chinese companies to list in the U.S. If the index is tweaked and America does start turning listings away, it’s not inconceivable to think more Chinese companies will start going public in Shanghai. What We’re Reading: And finally, a few other things that got our attention: Why China’s “Bat Woman” worries about new outbreaks. Huawei's CFO stumbles in her bid to block U.S. extradition. What makes the South China Sea so dangerous. TikTok's parent company is growing at a brisk pace. These are China's five most-advanced Covid-19 vaccines.   The best in-depth reporting from Asia and beyond. Sign up here to get our weekly roundup in your inbox.