Hong Kong Stocks Longest Losing Streak in 6 Weeks


Right Now at NRN w/Daniel Lacalle: Latest Obstacles Challenge China’s Economy

Hong Kong stocks have continue to fall based on concerns that there will be more protests ahead of China’s National Day. This continues trends of China falling short, due to its governmental strain on its own economy. A movement of freedom among its citizens, mostly those that live in Hong Kong, are challenging the Chinese government, and effecting its economy worldwide. Daniel Lacalle, business man, a PhD, and economist, offered on NRN’s RIGHT NOW Podcast, his insight into the Chinese economy, and what’s happening. After close on Thursday, the Heng Seng Index dropped 1.1%, falling to 26,468.95, causing poor performance for businesses across the board. Business owners believe the civil unrest of the city will continue to hurt sales numbers. “The internal systemic risk facing the Hong Kong market is still there,” said Ken Chen Hao, a strategist at KGI Securities in Shanghai. “The market seems to be beginning to price in the political risk of more uprisings ahead of the National Day holiday.”

[/vc_column_text][/vc_column][/vc_row][vc_row column_type=”block” font_color=”light” background_type=”video” video_bg_url=”https://www.youtube.com/watch?v=s13px1hM6Y8″ video_bg_start_time=”139″ video_bg_end_time=”900″ video_bg_parallax=”true” add_overlay=”yes” overlay_opacity=”20″ bt_text=”ECONOMICS” bt_font_weight=”300″ bt_font_style=”italic” shift_y=”0″ z_index=”0″ add_bigtext=”true” min_height=”100″ bt_max_width=”300″][vc_column][wvc_video_opener caption_position=”bottom” video_url=”https://www.youtube.com/watch?v=s13px1hM6Y8″ caption=”Economist Spotlight | Interview with DANIEL LACALLE”][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]In duplicating the Federal Reserve’s 25 basis-point cut in the benchmark interest rate, Hong Kong failed to ease selling. Analysts said the move had been expected. The rate cut “was in line with the consensus forecast and market pricing ahead of the meeting,” said Daragh Maher, head of US forex tragedy at HSBC Holdings. “Expectations for the scale of easing had been pared back in recent weeks on the back of some Fed rhetoric which had downplayed the need for anything more aggressive.”

China’s Innovation Stifled

In his interview, Daniel tells NRN that he disagrees with Elon Musk in his belief that China is “the future.” Rather, Lacalle believes China is “the past.” “Unfortunately, in terms of the Chinese economic model, the one they are implementing currently, is actually from the past; supporting GDP with white elephant, big government spending, so it’s very similar to the models we saw in the late 30s and 40s. It has very little to do with the future in the overall economic model.”

In talking about China’s growth in technology compared to the US, Lacalle admitted it would be difficult for China to beat the US. “It’s very difficult for China to beat the United States, for very simple and subtle reasons. Innovation and technology in the United States is a meritocratic approach. The process in China is directed by the government, and unfortunately in the long-term, it loses a lot of opportunity…the fact that most of the technology giants out of China, some of them great companies, are directed by people whose common denominator was they belonged to the communist party and are very unlikely to be innovators and more likely to be central planners and engineers.”

When the US free trade movement opened to Chinese economy, even with higher growth and openness, China instead, has been “closing” the economy. “It’s the only economy in the large economies that maintains capital controls, the currency is fixed every morning by the central bank, and has no discernible difference between its judicial power and political power.”

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The China Challenge: Where Do We Go From Here

Last week we saw a very important moment in Sino-global relations, but it was lost in the idiocy of Deborah Messing, the Popeye’s/Chick-Fil-A debate and countless missteps by the denizens running for the Democratic nomination for President of the United States. In what amounted to little more than a scroll teaser at the bottom of most people’s TV screens, we saw the evolution of China toward becoming a full participant in the civilized global society, when they allowed the “Extradition Bill” to be withdrawn allowing the people of Hong Kong some modicum of self-determination. This is a paradigm shift from the normal actions of China, which include: putting people in “reeducation” camps, political disappearances and military massacres. China acted as a developed nation and gave the people of Hong Kong the ability to determine their future, if only in some small way, and this is something that China should be applauded for (even thought it took the protesting of millions of people to accomplish it).

Please note that this does not mean that China should be put on the UN Human Rights Council (which as of 2019 has mostly legitimate members); however, this does indicate a marked policy change which seems to be fore the better. The middle kingdom has never been known for its human rights policies, and maybe, just maybe, the Global spotlight on Hong Kong has made China realize that in the modern era crushing resistance and public discourse is not acceptable. If China joins with the Western Democracies in a basic understanding of Human Rights, the rest of the world could be put on notice that we are entering an unprecedented phase in human history, a time when the value of all innocent life is recognized.

One of the key issues in this matter is how the world has treated Hong Kong. When the British “gave” the Island of Hong Kong back to the Chinese, they were agreeing to a treaty that was signed in the age of slavery. Millions of people were “given” to another nation, even though we have accepted in civilized society that people are not a commodity for almost 150 years. While the land transaction was “legal,” the trading of the people diminished the value of all people in the world. Now 21 years later, we have a situation where the people of Hong Kong should be given some modicum of self-determination. The current policy is not working, and it is time for the World to take notice.

While we should not jump to conclusions, this move is very important. The people of Hong Kong will still likely protest as they appear to have caught wind of what it is like to be free. How China reacts in theses coming weeks will be telling of what kind of nation they area becoming. Are they going to join the United States, Canada, the UK, India, Australia and other civilized nations in understanding that all people are endowed with certain unalienable rights, or will they tack towards the model of Iran, North Korea and other societies that long for the days of “divine right” to rule, placing the government’s interests over the interests of the people. Only time will tell, but as the sun dawns over the Middle Kingdom, it is not the only light of hope for the people in the region. Only time will tell if this light is a “false dawn” or if China is truly ready to take its place as a mature world power.

Protesters Warned End is Near

This past weekend marks the 15th consecutive weekend of demonstrations by anti-government protesters, having evolved from protesting an extradition bill to calling for an end to China’s legal and political encroachment on Hong Kong. Chinese government began to impose controls on the freedoms that those in Hong Kong did have in 2014.

Chinese controlled media put out a warning to “the rioters and their behind-the-scenes supporters,” reported by the Daily Wire, to inform readers that their time is running out as China plans to put an end to those demanding freedom. “The end is coming for those attempting to disrupt Hong Kong and antagonize China,” China’s Xinhua News Agency wrote The Nikkei Asian Review reported that the Xinhua piece was to tell readers that no one should attempt to undermine or challenge China’s sovereignty or the Chinese authorities. This threat comes after thousands of protesters pushing back swarmed Hong Kong’s airport Sunday in an effort to shut it down to bring attention to their demands.

The protesters want basic human rights, democracy and freedom, and have taken to the streets with the American flag, and signs saying, “We need the 2nd Amendment and President Trump, please liberate Hong Kong.” The Hong Kong police force was once respected for showing restraint and was trusted by citizens, but that is no longer the case, with recent protests, sometimes escalating into dangerous circumstances.

America, Stay Out of This

In recent weeks, consulates of the US and UK have become a center for demonstrations, and some activists and even pop singers in the movement have reached out to to Washington and US lawmakers. Beijing warned the US not to get involved.

“Hong Kong affairs are purely China’s internal affairs. We urge the U.S. and other relevant parties not to meddle in China’s internal matters or interfere in China’s internal affairs,” said foreign ministry spokesman, Geng Shuang, at a daily briefing in Beijing. “At the same time, we have to warn certain people who engage in anti-China activities to disrupt Hong Kong with foreign support that all their efforts are doomed to be futile and destined to fail.”

An annual fireworks display in Hong Kong marking China’s National Day on Oct. 1 was cancelled, as the demonstrations show no signs of stopping.

China Responsible for America’s Opioid Crisis: Thousands of Dead Americans

How would the United States react if a foreign country killed nearly 30,000 Americans? In 2017, synthetic opioid Fentanyl killed more than 29,000. Big US pharmaceutical companies didn’t make those drugs, China did.

In the US more people die from drug overdose than die from gun violence or automobile accidents. In 2017, drug overdoses killed nearly 200 people each day. Fentanyl, which can be up to 100 times stronger than morphine, is a leading cause of overdose deaths.

Fentanyl is legal in the US. Patients in severe pain consume most of our prescribed Fentanyl. Several large US pharmaceutical companies make the legal version. China is the world’s leading manufacturer of the illegal versions. That’s not an accusation, that’s a fact.  President Trump called them out publicly.

“If China cracks down on this ‘horror drug,’ using the Death Penalty for distributors and pushers, the results will be incredible!” President Trump tweeted. Yu Haibin of China’s National Narcotics Control Commission countered: there is “no proof” and described Trump’s comments as “unacceptable and irresponsible.” Bull crap.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][wvc_audio_embed link=”https://open.spotify.com/episode/7KRrlen6t4HfsPiNzZdcCl?nd=1″][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

One Kilogram Can Kill 500,000

Exact numbers for Chinese Fentanyl exports and related drugs are unknown. Illegal operations are notoriously bad at reporting. However, in a 2016 letter to the United Nations, the Obama administration listed 257 suppliers of two key precursor drugs used in Fentanyl production. More than half those suppliers were located in China. The evidence is clear.

Synthetic Fentanyl drugs are cheap to make, openly sold online and shipped on common carriers, including USPS. In top destinations US and Mexico, drug dealers add tiny amounts of Fentanyl to other drugs, especially heroin, to supercharge potency. China and their drug dealer partners are gambling with American lives. The risks are huge.

One kilogram of Fentanyl can kill 500,000 people. Fentanyl can be fatal even in tiny doses. “Fentanyl is potentially lethal, even at very low levels. Ingestion of doses as small as 0.25mg can be fatal,” states the US Drug Enforcement Agency (DEA). It is also easy to alter the drugs chemical composition to create variant drugs, known as Fentanyl analogues.

An International Problem

Kirsten Madison, Assistant Secretary of State, said the situation is the most “severe drug crisis” the US has ever faced. According to the UN Office for Drugs and Crime, “The countless possibilities to create new compounds by small changes in chemical structures pose a growing challenge to international control of the opioid trade,” The US must attack this problem at the source.

In October 2017, US authorities announced the first ever indictments of two Chinese individuals for conspiracy “to distribute large quantities” of synthetic Fentanyl as well as other opioids. “Fentanyl and its analogues are the number one killer drug in America today, and most of them come from China,” Attorney General Jeff Sessions said flatly.

Katherine Pfaff, spokesperson for the US Drug Enforcement Agency, said that interceptions from the US postal system, information from people on the ground, and tracking cyber footprints, leads them to believe a “significant amount” comes from China. The Canadians also pointed the finger at China.

Europe is also feeling the effects of China’s drug trafficking. “It appears that most shipments of new Fentanyls (sic) coming into Europe originate from companies based in China,” according to the European drug monitoring agency report. Production of the drug in small illegal laboratories in Europe is also a problem but, as in the US, the primary culprit is China.

States Can’t Take China to Court

Chinese authorities don’t officially acknowledge that most Fentanyl is produced in China. However, they have taken some action to stem the tide. Martin Raithelhuber, an expert on synthetic drugs with the UN, says China has put new restrictions on over 150 chemicals commonly used to create synthetic drugs.

Bryce Pardo, drugs policy expert at the Rand Corporation, has doubts. He described China’s regulatory capacity as “limited.” Pardo noted, “The division of responsibility between provincial and central governments, and lack of oversight and government and corporate accountability, increase opportunities for corruption.”

Johnson & Johnson was just fined $572 million by an Oklahoma judge for their role in the opioid crisis. The truth is Johnson & Johnson supplies less than 1% of the Fentanyl used in Oklahoma and in the US, the legal variety. Experts believe China provides about 55% of the illegal variety, the deadly street stuff. Too bad states can’t take China to court.[/vc_column_text][/vc_column][/vc_row]

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Author Profile

Dr. Christopher W. Smithmyer
Dr. Christopher W. Smithmyer
Dr. Christopher Smithmyer is a writer for NRN, the Vice President of International Affairs at Brav Online Conflict Management, and an Adjunct Professor of MBA Business at Doane University. He is also part of the founding team at BlackWalletLTD, one of the leaders in stable coin 2.0 ecosystem maintenance. Dr. Smithmyer’s focus is international business and finance, along with reviews of board games, weapons platforms, and survival items.