Hostile Takeover
Fears Mount of Chinese Intervention in Hong Kong
Beijing is mobilizing troops at the border and the protest movement is hoping to attract thousands of demonstrators following the occupation of the airport this week. The threat of a military intervention appears to be growing in Hong Kong.
By Bernhard Zand in Hong Kong
Carrie Lam applied for high office herself, and Beijing ultimately granted her the appointment.
These days, though, it must be a kind of living hell.
It's Tuesday morning, and Lam, the chief executive of Hong Kong, walks out into the garden of her official residence dressed in a blue suit. The oleanders are in bloom and birdsong fills the air. An opposition group is there to give her a petition protesting police violence and she walks up to one of the men, who immediately grabs her hand and won't let go. "Hong Kong is being governed by lies!" he yells. "Corrupt police!" the others chant. Members of her security contingent rush up to free Lam from the man's grasp.
Unsettled, she returns to the air-conditioned government residence where the Hong Kong press corps is lying in wait. The journalists assail her with questions, some yelling at her without waiting for an answer. "Don't talk about 'the police' and 'the people.' What is your own responsibility?"
"Don't lecture reporters. Do your job and answer the questions!" "Are your hands tied by Beijing?" "Yes or no? Precise answers."
Lam offers evasive, formulaic responses and a rather weak performance. At one point, she fights back tears and the cameras begin clicking.
When she abruptly ends the press conference after half an hour and turns to leave the room, as the South China Morning Post newspaper has reported, a journalist asks: "Mrs. Lam, many residents are asking when you will die!"
Peering into the Abyss
The frustration and aggression that have built up in Hong Kong over the last 10 weeks have made their way into the civil rituals of daily public life. Demonstrations and counterdemonstrations have become an almost daily occurrence, along with bloody police operations and violent altercations. The city, which was long on par with Singapore as an Asian example of efficiency, discipline and cosmopolitanism finds itself facing the threat of societal and political disintegration. On Tuesday morning, Lam warned against allowing the city to fall "into an abyss where everything will perish."
Peering into that abyss is a terrifying experience -- and not just for Chief Executive Lam and the pro-Beijing business and financial elite, who have much to lose. Many critics of China have also begun to recognize the risks of these leaderless, decentralized demonstrations which have rocked the city -- risks highlighted by the increasing amount of rioting on the fringes, even though the protests have managed to attain some successes.
The abyss China's leadership has in mind became clear with the more aggressive language it has adopted since the occupation and temporary closure of Hong Kong's airport earlier this week. The protests are showing "the first signs of terrorism," a spokesman for the government's Hong Kong and Macau Affairs Office said on Monday, following up on Wednesday with a statement denouncing "quasi-terrorist" acts. It's the kind of language that was used just before the deadly crushing of the protests on Tiananmen Square 30 years ago.
Global Implications
That, in fact, is what Gary Locke, the former U.S. ambassador to China, is warning against: a second Tiananmen -- and he doesn't generally have the reputation of being a man prone to exaggeration. In contrast to U.S. President Donald Trump, who on Tuesday announced on Twitter the findings of American intelligence agencies that Beijing was amassing troops on the border to Hong Kong. Since then, the armada of vehicles has been documented by satellite images and even Chinese propaganda photos. It is enough to quell any remaining doubts that the crisis has global implications.
But what demands are the demonstrators pursuing and what tactics are they employing, 10 weeks after the protests began? How far are they willing to go to push through their demands and how far is Beijing willing to go to stop them? What might an agreement between the Hong Kong government and the opposition have to look like in order to prevent Chinese intervention? And what role, if any, might Chief Executive Lam play?
There is no doubt that Lam bears the lion's share of the blame for the current crisis. It was her government that needlessly introduced an extremely controversial law this spring that would allow Hong Kong to extradite crime suspects to China. She even refused to back down when millions of protesters took to the streets of the city in June. But it was Lam's masters in Beijing who, five years ago, had laid the foundations for the current massive uprising by rejecting demands for democratic elections from the Umbrella Movement without making the slightest concession.
Hong Kong Chief Executive Carrie Lam at a press conference on Tuesday at which she warned against falling "further into the abyss."
Now, the opposition is even more insistent on pushing through the Umbrella Movement's demands. They are also insisting that the chief executive step down, though that stipulation, like the demand for the complete revocation of the extradition law, has largely taken a backseat to the central aim of the demonstrations: universal suffrage. Only half of the Hong Kong parliament is elected democratically, and the chief executive is chosen by a group dominated by Beijing loyalists.
"From the very beginning, I haven't understood what is driving Carrie in this crisis," says a person who has been closely monitoring Lam's rise over the course of several years. "Yes, she has always been determined and ambitious. But she was also smart." Her prudence, that person says, seems to have abandoned her this year.
"A month ago, her resignation could still have had an effect," says the opposition politician Avery Ng, 42. "Either way," says protest leader Wong Yik-mo, 33, "she no longer has enough political energy to push anything through."
For people like Ng and Wong, another question has become more important: How can the protest movement remain visible and relevant globally without scaring away the citizens of Hong Kong or provoking an intervention from the central government in Beijing? Ng is the leader of the League of Social Democrats party and took part in the Umbrella Movement protests in 2014. His role models are classic resistance figures like Gandhi, Martin Luther King and Nelson Mandela. "We continue to believe in non-violent resistance," he says, adding that the movement should curb the influence of "fringe elements" that seem to prefer violence -- both to protect the young radicals themselves and to avoid endangering their overarching goals.
Wong, who is a member of the organization Civil Human Rights Front is one of the organizers of the recent protests and says: "We need both, the peaceful ones and the radicals."
'We Make Mistakes, But We Learn from Them'
The 2019 movement has drawn on the lessons of the 2014 failures, says Wong, and is leaderless and decentralized, more mobile and more innovative. "We vote on our positions in anonymous online forums," he says. "What matters is how many 'likes' an individual proposal receives, not the name of the member who made it." The demonstrators of today are also technically savvier than their 2014 predecessors. For communication, they rely on a constantly changing slew of apps and issue warnings to each other of police operations and looming offensives. "We make mistakes, but we learn from them," he says -- such as deciding on Wednesday to issue a public apology to airport employees and travelers for the inconveniences they encountered as a result of the occupation.
Such methods, of course, don't allow for the precise control of the movement, as Wong himself admits. According to the principle of swarm intelligence, the number of possible decisions is just as large as the number of members in a certain chat group, with the corresponding consequences.
Avery Ng believes that this structure represents a danger, particularly given that many of the demonstrators are young and, he believes, underestimate the risk of violence. Shortly after the most recent wave of protests began, Ng was arrested and locked away for several weeks, thus missing the largest of the demonstrations. In jail, he says he met student leader Joshua Wong, the icon of the 2014 Umbrella Movement. Condemned to inactivity, the two eagerly followed the events on television, with Ng saying that he became increasingly uneasy the more he observed "our techniques" and "incoherent strategies."
Calls for Restraint
Even Edward Leung, the founder of the radical independence movement who is currently serving a six-year prison sentence, recently issued a call for restraint. In recent weeks, his motto has become something of a battle-cry for the young demonstrators: "Liberate Hong Kong. Revolution of our times!" In his open letter from prison, Leung called for moderation: "I earnestly call on you not to be dominated by hatred -- one should always stay vigilant and keep thinking when in peril."
The protest movement's relationship to violence has not been completely established. Positions run the gamut from strict non-violence to the so-called Marginal Violence Theory, which holds that certain provocations of the police are acceptable. Nobody, though, is supporting any kind of "terrorism," as the movement has been accused of by Beijing propaganda.
On the contrary, two incidents in recent days have strengthened those calling for restraint. Last weekend, a young woman on the fringe of a demonstration was struck by a projectile and apparently lost her right eye. At the same time, a video began making the rounds of a protester being brutally pinned to the ground for several minutes despite bleeding heavily from his mouth and begging for help.
"Images like that frighten many people," says activist Wong Yik-mo. "They now need to see a peaceful demonstration." It's a point on which both Wong and Avery Ng agree.
After weeks of one-off actions that often escalated into street battles, a major protest is now planned for Sunday of the kind seen at the beginning of the movement in June, when hundreds of thousands of protesters took to the streets. Both Ng and Wong are hoping that the rally will end peacefully and send a clear message to the governments in Hong Kong and Beijing that the majority still supports opposition demands. And that the opposition does not condone violence.
Medics assist a woman who suffered a facial injury during the police deployment: "Images like that frighten many people," says activist Wong Yik-mo.
Such a message would be much more difficult for Beijing to counter than the riots of the past few days. Particularly damaging to the protesters' image is the fact that some of them beat up an alleged spy at the airport on Tuesday who then turned out to be a journalist with the Global Times, a nationalist Chinese tabloid. Even before that, images of an attack on the Liaison Office of the Central People's Government in Hong Kong stirred up considerable anger in mainland China.
Creeping Integration
Even the leadership in Beijing would need a valid, obvious pretext to justify a military intervention in Hong Kong to its own people. Images of angry, masked demonstrators would clearly be better suited for such a justification than those of hundreds of thousands of silent marchers or protesters singing church hymns.
At the moment, it is impossible to tell whether China will intervene in Hong Kong. Willy Lam, 67, a professor at the Chinese University of Hong Kong and a leading China expert who lived and worked in Beijing until the Tiananmen uprising, considers a military assault unlikely. "They won't use the garrison," he says. "Deploying the People's Liberation Army would antagonize the United States too much."
Still, this assessment should not be seen as an all-clear. Lam sees a Chinese plan unfolding in Hong Kong that began before the recent protest movement and is likely to last for some time to come. He says Beijing is pursuing a strategy in Hong Kong that is similar to its approach in the Tibet and Xinjiang autonomous regions -- creeping integration that is taking place at many levels, including the political realm, the economy and the police.
"We have, for example, strong evidence that police officers from the neighboring Chinese province of Guangdong have already crossed the border and changed uniforms," he says. "This will be the pattern of the future," he says -- police and intelligence service activity along with the arrests of hundreds of protesters. "By September or October, you will see Beijing installing tighter control, and even more so in the years to come," he says.
Strong Controls
Beijing already exercises tight control over local politics, the media, the police and security services through its Hong Kong Liaison Office. Lam says the Chinese infiltrated the protest movement some time ago. "We have evidence that police have camouflaged themselves as demonstrators," he says. Such a thing is more difficult to prove when it comes to intelligence agents, "but even among the protesters, some wonder whether it was agents provocateurs who may have radicalized the movement."
That alone, though, wouldn't be enough to explain the escalation of violence in recent weeks. The activists themselves crossed the threshold of "marginal violence," he argues. But the agents' actions also played an important role. "In principle, the protesters are responsible for their own actions, but the agents are exacerbating the situation," Lam says.
It seems doubtful at the moment that a protest movement guided by digital networks is much of a match for China's tightly organized security services. The Communist Party, which itself began as a conspiratorial movement, has a long tradition of infiltrating opposition organizations -- and it undoubtedly now has a high level of digital literacy.
The influence of Beijing's secret services in Hong Kong also seems to extend to criminal networks. There have been three attacks on protesters in recent weeks, but also attacks on bystanders who were completely uninvolved. They have been attributed to the "triads," organized crime groups with some mafia-like characteristics. At times, the police took suspiciously long before intervening in fighting in the Yuen Long, North Point and Tsuen Wan districts, some of which resulted in serious injuries.
China expert Lam doesn't want to dole out advice to any of the parties involved, but he does say that he personally doesn't think the occupation of the airport for days on end was a good idea. On the other hand, he believes Hong Kong Chief Executive Carrie Lam could deescalate the situation significantly, even at this point, by allowing an independent inquiry into police violence, as the protest movement has demanded.
Final Subjugation
But Lam says it will be difficult to get Chinese President Xi Jinping on board, because he considers the events in Hong Kong to be a "color revolution" -- a term used by Beijing for the uprisings in the former Soviet bloc and the Middle East, which the Chinese regime believes are the influences of "Western forces," meaning the United States. "The problem," says Willy Lam, "is that China's leadership may believe their own conspiracy theory."
On Wednesday, U.S. President Donald Trump surprised his Chinese counterpart with a strange tweet. He praised Xi Jinping as a "great leader" and wrote: "I have ZERO doubt that if President Xi wants to quickly and humanely solve the Hong Kong problem, he can do it. Personal meeting?" Later, he added that Xi should meet with the protesters.
Trump appears to be as flippant in his approach to the situation in Hong Kong as he has been in his dealings with North Korean dictator Kim Jong Un. In contrast to his predecessors, Trump has so far shown little interest in the human rights situation and "humane solutions" in China.
But this also underscores a misunderstanding: Trump views the situation in Hong Kong as an opportunity to link, at least in the near term, the current crisis with another China problem -- the trade war between the world's two largest economies, even alluding to that notion in a tweet directed at China's president. It's the only subject that really seems to interest him in this context.
For Xi, on the other hand, Hong Kong is the setting for the realization of a long-term plan: the final subjugation of a city that remains rebellious today.
But for the people of the city, Hong Kong is their home. And they fear for its future and for its identity.
HOSTILE TAKEOVER: FEARS MOUNT OF CHINESE INTERVENTION IN HONG KONG / DER SPIEGEL
THE NEW COMMONPLACE: SIX CHARTS THAT EXPLAIN THE STATE OF THE MARKETS / THE ECONOMIST
The new commonplace
Six charts that explain the state of markets
Making sense of investors’ mood
IN THE AUTUMN of 2008, strange and novel things happened in financial markets, such as the emergence of negative yields on Treasury bills.
In times of fear, the safest assets are at a premium.
What was once strange is now ordinary.
Negative yields are a familiar feature of European bond markets. But such is the anxiety about the world economy that they are spreading.
In Germany, interest rates are negative all the way from cash to 30-year bonds (chart 1).
In America yields are still positive. But the curve is inverted: interest rates on ten-year bonds are below those on three-month bills (chart 2).
The last seven recessions in America have been preceded by an inverted yield curve.
Nervous investors are reaching for the safety of the dollar. The yen and Swiss franc, habitual sanctuaries, are among the few currencies that have risen against it (chart 3).
The price of gold, another haven, is at a six-year high. That of copper, a barometer of global industry, is down from its recent peak (chart 4).
Faced with uncertainty, the go-to market for equity investors is America’s. It has left others in the dust (chart 5). MSCI’s emerging-market share index leans heavily towards “Factory Asia” (China, South Korea and Taiwan), which is in the eye of the trade-war storm. Europe’s markets lean towards banks and carmakers, which suffer in downturns.
Investors fret that the rich world is slowly becoming Japanese, with economies that are too feeble to generate inflation. Forecasts of inflation in the swaps market have fallen sharply (chart 6).
A fear in 2008 was that deflation might take root. The fear remains.
OH YES! THE RECESSION IS COMING / SEEKING ALPHA
Oh Yes! The Recession Is Coming
by: Victor Dergunov
- Unfortunately, investors may not have to wait much longer, as the S&P 500 and stocks in general are likely in the early stages of a bear market already.
- Inverting yields, worsening economic data, U.S./China trade tensions, high stock valuations, increased demand for safe-haven assets, and bearish sector rotation are clear red flags that a recession is approaching.
- Moreover, the S&P 500's technical image appears to be deteriorating, and if the SPX goes below 2,725 we are likely in a bear market already.
.
Weakening Economic Data
In fact, we saw a large QoQ decline in Q1, and while Q2 may provide slight YoY growth, corporate profits are likely to slide further due to China/U.S. trade tensions, and an overall economic slowdown around the globe.



- Inverting yields in the U.S.
- Record negative yielding debt around the globe.
- Longer-term treasuries at or near all-time lows.
- Increased demand for “safe-haven” assets (gold, treasuries/bonds, defensive sectors, etc.).
- Bearish sector performance/rotation.
- Significant underperformance in small-caps (Russell 2000).
- Worsening economic data; especially in housing, manufacturing, fright/trucking/railroad sectors.
- Record low, but rising unemployment rate.
- Worsening consumer confidence.
- Worsening corporate profits.
- Extreme amounts of consumer, government, and corporate debt.
- Prolonged Trade War tensions that will likely cause corporate profits to decline further and will make Chinese made goods more expensive for U.S. consumers.
- Signs of higher inflation.
- The Fed may be behind the curve.
- Expensive valuations in the SPX and in most stocks/sectors in general.
- A very troubling technical image.
WHEN LENINISTS OVERREACH / PROJECT SYNDICATE
When Leninists Overreach
Russian President Vladimir Putin and Chinese President Xi Jinping have for years flexed their foreign-policy muscles and consolidated power at home. But Russia and China now appear increasingly isolated on the world stage, and the question now is whether they have finally gone – or soon will go – too far.
Nina L. Khrushcheva
MOSCOW – Ongoing street protests in Hong Kong and Moscow have no doubt spooked the authoritarian duo of Chinese President Xi Jinping and Russian President Vladimir Putin. The Moscow protests, the largest in many years, must be keeping Putin up at night, or they wouldn’t be dispersed with such unabated brutality. Yet rather than hold a dialogue with the people, Putin has been demonstrating that he is in control, even preening for photos in a tight leather outfit with his favorite motorcycle gang.
Nonetheless, the demonstrations have become a poignant sign of Putin’s declining popularity, including among Russian elites, whose views matter in ways that other forms of public opinion do not. For two decades, the Russian elite’s rival factions have generally seen Putin as the ultimate guarantor of their interests – particularly their financial interests. But as Russia’s economy has sunk into sanctions-induced stagnation, Putin’s leadership has started to look like more of a roadblock than a guardrail. Fewer and fewer Russians still accept that “Putin is Russia and Russia is Putin,” a mantra that one heard regularly just five years ago, following the Kremlin’s annexation of Crimea.
Moreover, Putin’s hope that US President Donald Trump would improve relations with Russia has begun to look short-sighted, if not downright delusional. Although Trump has weakened American institutions and undermined Western alliances, which has played into Putin’s hands, the White House has also rendered US foreign policy utterly unpredictable. Worse, the Trump administration is now systematically unwinding the arms-control accords that long brought some degree of certainty to nuclear affairs.
Russian elites know that their country is as ill-prepared to win a nuclear-arms race with the United States now as the Soviet Union was in previous decades. The recent explosion of a nuclear-missile engine at a test site on Russia’s northern Arctic coast is a grim reminder of a deep-seated incompetence. And unlike Putin, Russian elites are deeply worried that alienating the US will make Russia a de facto vassal state vis-à-vis China.
The protests in Hong Kong, which show no sign of abating, are likewise the product of authoritarian overreach. They began with a proposed law that would allow Hong Kong citizens and residents to be extradited to the Chinese mainland. Given how clumsily the legislation was presented by Hong Kong’s Beijing-backed leader, Carrie Lam, it is possible that the Chinese leadership was only dimly aware of it and its potential political impact. Nonetheless, the Chinese government’s response to the protests has been increasingly self-defeating.
For starters, the People’s Liberation Army has been openly threatening to intervene to shut down the protests against Lam’s government. And in cases where pro-government “triad” thugs, most likely based on the mainland, have shown up to assail protesters, the police have been conveniently absent. As everyone in Hong Kong knows, these extrajudicial beatings had to have been sanctioned by Xi’s government.
More ominously, Xi may have already decided that the time for “one country, two systems” has passed. China, he might argue, can no longer tolerate a functioning quasi-democracy within its territory, despite the agreement it accepted as a condition of Hong Kong’s return to Chinese sovereignty in 1997. Concerned about Taiwan and its political drift ever further from the mainland, Xi may be thinking that a harsh Hong Kong policy will scare the Taiwanese into line. If so, he has forgotten that bullying Taiwan has only ever yielded the opposite of what China intended.
Then again, Xi may be contemplating something even worse. If he has concluded that Trump’s “America First” administration would do nothing to protect Taiwan, he could be considering a lightning military strike on the island to bring it back under the mainland’s control. But this, too, would be a mistake. Given the broader context of Sino-American relations, even the Trump administration would likely respond to Chinese military adventurism in Taiwan. Besides, the US need not engage in an open military confrontation with China to make aggression toward Taiwan more trouble than it is worth. The US Navy still has the capacity to cut off the sea lanes supplying energy and minerals to China, regardless of whether it is actively engaged in the South China Sea.
As with Putin, overreach seems to be Xi’s default position nowadays, judging by his handling of the trade war and aggressive behavior toward China’s neighbors. In fact, Xi’s muscle-flexing has been so heedless that China now finds itself increasingly isolated diplomatically. Almost all the world’s leading military and economic powers – the European Union, India, Japan, Brazil – maintained pragmatic relations with Xi’s predecessors. But they have since grown increasingly wary of China, with some even moving closer to the US (in the age of Trump, no less).
As in Russia’s case, China’s elite will no doubt have noticed that Xi is turning the country into an international pariah. The outside world may assume that China’s senior leadership is as subservient to Xi as the Kremlin is to Putin. But that is also what many thought about the Soviet politburo and Nikita Khrushchev back in 1964. Khrushchev was ousted before the end of the year.
There is an old joke in which the long-serving Soviet foreign minister, Andrei Gromyko, quips, “We had to remove Khrushchev. He was so reckless a gambler, we would be lucky to hang on to Moscow if he continued.” Khrushchev was indeed impulsive when he precipitated the Cuban Missile Crisis. But he was motivated by a desire to maintain military parity with the US. He did not share the Stalinesque delusions of grandeur that seem to be driving Putin and Xi to wager their own countries’ futures.
Today, no one should assume that either leader will be spared Khrushchev’s fate, or even Stalin’s grim death, which was long rumored to have been perpetrated by his own entourage, whose members had tired of his despotic overreach.
Nina L. Khrushcheva is Professor of International Affairs at The New School. Her latest book (with Jeffrey Tayler) is In Putin’s Footsteps: Searching for the Soul of an Empire Across Russia’s Eleven Time Zones.
Bienvenida
Les doy cordialmente la bienvenida a este Blog informativo con artículos, análisis y comentarios de publicaciones especializadas y especialmente seleccionadas, principalmente sobre temas económicos, financieros y políticos de actualidad, que esperamos y deseamos, sean de su máximo interés, utilidad y conveniencia.
Pensamos que solo comprendiendo cabalmente el presente, es que podemos proyectarnos acertadamente hacia el futuro.
Gonzalo Raffo de Lavalle
Friedrich Nietzsche
Quien conoce su ignorancia revela la mas profunda sabiduría. Quien ignora su ignorancia vive en la mas profunda ilusión.
Lao Tse
“There are decades when nothing happens and there are weeks when decades happen.”
Vladimir Ilyich Lenin
You only find out who is swimming naked when the tide goes out.
Warren Buffett
No soy alguien que sabe, sino alguien que busca.
FOZ
Only Gold is money. Everything else is debt.
J.P. Morgan
Las grandes almas tienen voluntades; las débiles tan solo deseos.
Proverbio Chino
Quien no lo ha dado todo no ha dado nada.
Helenio Herrera
History repeats itself, first as tragedy, second as farce.
Karl Marx
If you know the other and know yourself, you need not fear the result of a hundred battles.
Sun Tzu
Paulo Coelho

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