To say that the U.S. has a strained relationship with China would be the understatement of the century.
You have the trade war. You have the tensions in the South China Sea. You have the accusations of corporate espionage. You have the continued treatment of the Uyghur muslims. Most recently, you have accusations of meddling in the ongoing crisis in Hong Kong.
Earlier this week, the United States Senate passed legislation that has the potential for political action against the government of Hong Kong.
The first bill, the Hong Kong Human Rights and Democracy Act, would allow for the U.S. to put sanctions on any country responsible for human rights violations in Hong Kong.
The second bill is called the Protect Hong Kong Act. It prohibits issuing licenses to export defense items and services to various law enforcement agencies in Hong Kong.
This all comes just a month after the House passed similar legislation. It also, of course, comes just as the crisis in Hong Kong escalates. As protests continue and the world watches and waits to see just how far Beijing and the protestors will go, the call for other countries to do something will only get louder. As of writing, both bills have gone to the President’s desk. Many are confident that he will sign them into law.
And it’s there that continued economic uncertainty will rear its ugly head.
International Relations on the Edge of a Knife
When word that the Senate passed these bills got out, Beijing acted right away, saying:
“We call on the US side to take a clear look at the situation and take steps to stop the act from becoming a law, and stop meddling in the internal affairs of China and Hong Kong, to avoid setting a fire that would only burn itself.
If the US sticks to its course, China will surely take forceful measures to resolutely oppose it to safeguard national sovereignty, security and development interests.”
The Hong Kong crisis brings into question not just the region’s sovereignty, but the reputation of the mainland’s government as a whole. It’s very much a “with us or against us” situation. Beijing views anyone who speaks out in support of the protestors as being against the mainland’s government. In that same regard, Chinese officials view laws being passed by foreign governments as interference in domestic affairs. That wouldn’t just muddy any potential resolution with Hong Kong, but foreign relations with China as it makes its mark on the world stage.
We already have stalled trade negotiations between the U.S. and China. Then there’s the detaining of a Huawei executive in Vancouver. She potentially faces extradition to the U.S. Likewise, we have the often unreported arms race between the two countries.
All of this is on top of China’s sometimes unfriendly relationships with other countries. As I said in the beginning, Beijing continues testing its neighbors with disputes in the South China Sea. Europe, despite its close economic ties with China, is growing suspicious of technology giants like Huawei. It’s believed the company’s 5G technology can be used for spying. In Australia, there is growing concern among lawmakers that universities are being targeted by government-backed cyberattacks and influencing campaigns. Expression of the concern got one Austrailian senator, James Paterson, banned from China just before a scheduled trip to Beijing in December.
Slowly but surely, governments all over the world are realizing just how ingrained China has become in the world economy. That realization comes at a time when those governments are benefiting from that economic influence while being forced to address the country’s growing, and often maligned, social behavior.
And that dilemma has added another obstacle to the health of the world economy.
How it Affects You and What You Can Do
Economies all over, just like the foreign relations between China and many of its trading partners, are on shaky ground. The fact that China is standing firm in the face of the criticism being thrown at it from all sides plays a role in making that situation that much more delicate.
As an investor, this is something you will want to pay close attention to as news continues to develop. It doesn’t really matter whether or not your portfolio has any direct ties to China. Its influence is widespread enough that it will have some effect on your holdings either way.
With that in mind, it’s up to you to diversify enough that you can weather any storm that comes along, no matter what China does. The Chinese government, like many others, figured out how to do that through storing gold. As it grows those gold stores, it defends itself against economic downturns we’re overdue for. This gives it freedom to increasingly act in its own interests.
You can do the same. With a gold bull market all but inevitable at this point, you should do everything you can to get your share and gain more control over your personal finances.
And you can learn how to do that by clicking here.
Keep your eyes open,
Ryan Stancil
Contributing Editor, Outsider Club
