MNI INTERVIEW: US May Use Narrow Hong Kong Sanctions: Scissors

By Ryan Hauser

     WASHINGTON (MNI) - The U.S. is unlikely to completely strip Hong Kong's

special trade status amid China's effort to control the city, Derek Scissors,

chief economist at China Beige Book and an American Enterprise Institute

scholar, told MNI.

     Policy makers will seek deterrence over quick punishment, likely including

the new Toomey-Van Hollen legislation calling for targeted sanctions, Scissors

said in an interview Thursday. 

     The U.S. will "seek to remove specific protections in order to allow

sanctions against Chinese entities based and/or acting in Hong Kong," he said. 

     China's recent security law "is another log on the fire, not gasoline,"

Scissors said. "Gasoline would be visible detentions by Chinese security."

Chinese Premier Li Keqiang said Thursday in his annual address to the media that

"One Country, Two Systems" is China's basic state policy, and the security law

is to ensure long-term prosperity and stability. Those comments came hours after

Secretary of State Mike Pompeo advised Congress the city is no longer autonomous

and should be treated differently under U.S. law.

     --CHINA WON'T ESCALATE

     President Xi Jinping "will weigh the gains from terrifying Hong Kong

protest leaders against a crisis that could harm his prospects for indefinite

rule," Scissors said. China will "talk up its own sovereignty as an absolute"

but will also look to keep pace with U.S. moves, rather than escalate the

dispute, he said.

     If China uses the law to make heavy-handed arrests, then for the U.S. "the

long-term endgame could be the biggest disruption of the relationship since

Tiananmen," Scissors said.

--MNI Washington Bureau; +1 202 371 2121; email: ryan.hauser@marketnews.com

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