UNITED STATES (El Financiero) – New tensions between the two powers come just as the planet faces a pandemic that will create the worst crisis since the Great Depression for the world economy.
The rivalry between the United States and China is intensifying into new and unpredictable areas, ranging from a popular video application to Hong Kong’s position as a global financial center.
The new tensions are overshadowing the ‘phase one’ trade agreement signed in January, which was intended to end the trade war and boost business. Instead, the differences between the two powers deepen when the world economy is facing its worst crisis since the Great Depression.
This week, President Donald Trump said he is considering a ban on ByteDance’s TikTok videos in retaliation for China’s handling of the COVID-19. Some of his top advisers want the U.S. to undermine the Hong Kong dollar’s link to the U.S. dollar to punish China for recent moves to eliminate political freedoms in the former British colony. There are even concerns about visas for hundreds of thousands of Chinese students enrolling in American colleges and universities each year.
For its part, China has promised its response and has warned the U.S. and other countries to stop interfering in Hong Kong and other Chinese affairs.
The economic context could not be bleaker. The International Monetary Fund (IMF) estimates that by the end of this year, 170 countries, or nearly 90 percent of the world, will have lower per capita income. This is a change from January, when it predicted 160 countries would end the year with larger economies and positive per capita income growth.
The deepening divisions between the two countries are forcing global businesses to make difficult decisions. Facebook, Google, and Twitter, all banned in China, now face the same fate in Hong Kong.
Hours after Hong Kong announced radical new powers to control the Internet on Monday night, those companies and others like Microsoft and Zoom suspended all data requests from the Hong Kong government. It is still unclear how the authorities will respond to the failure to comply with local rules.
TikTok of Chinese-owned ByteDance announced that it would withdraw its viral video application from the territory’s mobile shops in the coming days. HSBC, which generates more than two-thirds of Hong Kong’s pre-tax income, plummeted in operations Wednesday on fears of the impact of the Trump administration moves forward with a plan to punish the city’s banks and destabilize the currency’s link to the dollar.
The expectation is that threats and counter-attacks will only increase before the U.S. presidential election in November, with little chance of a short-term restart. “I don’t see any immediate disruptions,” warned Fraser Howie, author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise. “Not in the sense that there’s going to be a restart where everyone says ‘what fools we were, let’s go back to being friends.’ I don’t see that happening anytime soon.
And it’s not just the two biggest economies in the world that are affected.
India reported that it would ban 59 of China’s most significant applications following a border clash in the Himalayas with Chinese troops in which 20 Indian soldiers were killed. China also warned the U.K. that it would face “consequences” if it chooses to be a “hostile partner” after it was revealed that the government is preparing to begin withdrawing the use of Huawei equipment from the country’s 5G telecommunications networks later this year.
