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U.S. likely impose sanctions against China over Hong Kong law

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Hong Kong Chief Executive Carrie Lam attends the opening session of the National People’s Congress (NPC) at the Great Hall of the People in Beijing on May 22, 2020.

Leo Ramirez | AFP | Getty Images

The U.S. government will likely impose sanctions on China if Beijing implements national security laws that would give it greater control over autonomous Hong Kong, White House National Security Advisor Robert O’Brien said Sunday. 

The draft legislation represents a takeover of Hong Kong, O’Brien said, and as a consequence U.S. Secretary of State Mike Pompeo would likely be unable to certify that the city maintains a “high degree” of autonomy. This would result in the imposition of sanctions against China under the Hong Kong Human Rights and Democracy Act of 2019, O’Brien said.  

Pompeo has already called the proposal a “death knell” for Hong Kong’s autonomy. O’Brien warned that Hong Kong could lose its status as a major hub for global finance. 

“It’s hard to see how Hong Kong could remain the Asian financial center that it’s become if China takes over,” O’Brien told NBC’s Chuck Todd on “Meet the Press.” He said financial services initially came to Hong Kong because of the rule of law that protected free enterprise and a capitalist system.

“If all those things go away, I’m not sure how the financial community can stay there. …They’re not going to stay in Hong Kong to be dominated by the People’s Republic of China, the communist party.” 

The legislation was announced during the annual session of China’s parliament, the National People’s Congress. The session had been delayed for months during the coronavirus pandemic. Hong Kong faced months of at times violent anti-government protests before the pandemic effectively shut China down.  

Hong Kong has been governed under the “one country, two systems” principle since the former British colony was returned to Chinese rule in 1997. The system gives Hong Kong a high degree of autonomy and a greater degree of freedom for the special administrative region than the rest of China. 

A draft decision on “establishing and improving the legal system and enforcement mechanisms” for Hong Kong was submitted to China’s parliament Friday, according to state news agency Xinhua. A document explaining the decision said the one-country two systems principle “has achieved unprecedented success in Hong Kong,” but the “increasingly notable national security risks” in the city “have become a prominent problem,” according to Xinhua.  

The document says activities “have seriously challenged the bottom line of the ‘one country, two systems’ principle, harmed the rule of law, and threatened national sovereignty, security and development interests,” according to Xinhua.

The move from China has incited strong opposition from pro-democracy activists and politicians. Thousands of protesters demonstrated for the first time since the introduction of the national security laws on Sunday. Hong Kong police fired tear gas and pepper spray to disperse the crowd.

Nearly 200 political figures from the U.K., Europe, Australia, North America and Asia condemned the laws in a joint statement. 

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Luxury brands turn from Hong Kong to mainland Chinese consumer

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Zhang Peng | LightRocket | Getty Images

Despite the economic shock of the coronavirus, analysts say China’s demand for luxury goods hasn’t waned much – and it’s drawing top brands from Hong Kong to the mainland.

Consulting firm Bain estimated Chinese consumers accounted for about 35% of 281 billion euros ($317 billion) last year in global luxury spending, most of which has typically occurred overseas or in Hong Kong.

Now that the coronavirus is keeping most Chinese from traveling, several analysts expect them to buy more luxury products at home.

“All luxury brands are moving in this direction,” Federica Levato, Milan-based partner at Bain, said in a phone interview. “This is accelerated by Covid-19, but it was already happening.”

In five years, the Chinese share of global luxury spending will rise to nearly half, split evenly between domestic and overseas markets, Bain predicted.

Combined with the impact of last year’s violent protests in Hong Kong and this year’s restrictions on cross-border travel, many luxury brands are closing stores in the city and looking at expanding into mainland China through physical locations and e-commerce.

“(Like) New York, Hong Kong is one of the most advanced cities in terms of the number of stores, and given the customer flows will move from Hong Kong, probably brands are going to … review their network,” Levato said, adding the brands may reduce stores there as a result. 

Supportive policies from Beijing

New measures by the central Chinese government also aim to support more mainland Chinese luxury shopping within its borders.

As of July 1, authorities more than tripled the tax-free shopping quota to 100,000 yuan ($14,285) from 30,000 yuan. They also removed an 8,000 yuan per item limit on goods bought in the duty-free shopping hub of Hainan. 

UBS Securities China tourism analyst Chen Xin expects spending on the tropical island to more than double from last year to 28 billion yuan this year. In a June 30 interview with CNBC, he said most of the increase in spending will likely come in the second half of this year, and grow to 38 billion yuan next year.

Even if China’s overall economy is hit, Chen said the country’s consumers still aspire to buy luxury products. For cosmetics, which must be bought as they are used up, Chen said that once shoppers have bought from European or American brands, they won’t return to Chinese or Asian ones.

A lot of travelers to Hong Kong are from lower-tier cities (who) don’t have access to luxury stores in their hometowns … Livestreaming is a way to reach them. Online is another way to reach them.

Even though the local economy contracted by 6.8% in the first quarter, Chinese are still willing to shop.  

“Luxury demand in China has recovered strongly in the last couple of months,” Morgan Stanley analysts wrote in a July 7 report titled “Consumers and China’s Stay-Home Economy.”

“Most established brands (LV, Gucci, Cartier, Chanel, Dior, etc.) saw sales increase by 40-90% in early June,” they said. 

Luxury brands move online

The demand is also pushing luxury brands to expand into China’s quickly growing online shopping channels, which some analysts note are more popular in the country’s less developed, or “lower-tier,” cities outside of major metropolises like Beijing and Shanghai.

“A lot of travelers to Hong Kong are from lower-tier cities (who) don’t have access to luxury stores in their hometowns,” Imke Wouters, partner of retail and consumer goods practice at management consulting firm, Oliver Wyman, said in a phone interview. “Livestreaming is a way to reach them. Online is another way to reach them.”

Wouters still expects overall luxury spending by Chinese consumers to be negatively hit this year, but the domestic market will likely see growth, primarily because of the low level of previous years.

In one sign of the Chinese demand, Chinese short video and streaming app Kuaishou said that a luxury goods livestreaming session with online luxury retailer Secoo on June 7 sold 105 million yuan of products in five hours. The most popular items for the heavily subsidized livestreaming sales session included LV bags, Prada bags and Armani watches, according to Kuaishou.

“Gradually, we’ve seen foreign luxury brands open their official shops (on) Tmall, Douyin, WeChat,” said Jialu Shan, economist and scholar in Asian and Emerging Markets at the International Institute for Management Development. She was referring to online stores on some of China’s most-used platforms backed respectively by technology giants Alibaba, Bytedance and Tencent

“I think the message is clear,” she said. “The way that luxury brand(s are) engaging with clients is changing. So livestreaming does not only serve as a sale(s) channel, but also an important part (of the) customer experience journey.”

That interaction, she added, ranges from story-telling marketing to a communication channel with clients.

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North Korean leader’s sister says another summit with the U.S. is unlikely

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Kim Yo Jong, sister of North Korea’s leader Kim Jong Un.

Jorge Silva | Reuters

Kim Yo Jong, the sister of North Korea’s leader, said another summit with the United States would only be useful for Washington at this point, adding her country had no intention of “threatening the U.S.,” according to state media.

Kim said in her personal opinion, there is unlikely to be another summit between leader Kim Jong Un and U.S. President Donald Trump this year but “a surprise thing may still happen,” news agency KCNA reported on Friday.

U.S. Secretary of State Mike Pompeo said on Thursday he was “very hopeful” about resuming talks with North Korea about denuclearization and appeared to leave open the possibility of another summit between the countries’ leaders.

Kim Yo Jong’s comments came a day after the U.S. point man for North Korea, Deputy Secretary of State Stephen Biegun, wrapped up a three-day visit to Seoul where he rejected speculation he was seeking to meet North Korean officials during his trip, but said the United States was open to talks.

Recent North Korean statements have rejected the idea of new talks, and Kim reiterated Pyongyang’s objections to what it sees as hostile and self-serving policies of the United States.

“We would like to make it clear that it does not necessarily mean the denuclearization is not possible,” Kim Yo Jong said. “But what we mean is that it is not possible at this point of time.”

Her comments were couched in a somewhat softer tone than previous statements, and she even noted she had received special permission to view recordings of the recent Fourth of July Independence Day celebrations in the United States.

“We do not have the slightest intention to pose a threat to the U.S…. Everything will go smoothly if they leave us alone and make no provocation on us,” she said.

Kim said it was unclear if mixed messages of engagement and pressure from Trump and his aides are an “intentional scheme or a result of the President’s loose grip of power.”

She said her brother had instructed her to pass on greetings to Trump and send him wishes for success in his work.

But even if the relationship between the leaders is good, Washington will return to being hostile and North Korea needs to shape its policies in preparation for leaders other than Trump, Kim said.

Kim Jong Un and Trump exchanged threats and insults in 2017 as North Korea rapidly advanced its missile and nuclear weapons technology, before ties warmed in early 2018.

The two leaders have met three times, but failed to find a compromise over the North’s nuclear weapons program, or the international sanctions imposed on Pyongyang.

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Barbados is planning to let people stay and work remotely for a year

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Working from home could be about to get a major upgrade, as Barbados Prime Minister Mia Mottley has said her government is considering letting visitors stay and work remotely from the island for a year. 

Mottley said lawmakers were looking at introducing the 12-month “Barbados Welcome Stamp,” noting that restrictions due to the coronavirus pandemic had made short-term travel more difficult because of the testing now required.

“You don’t need to work in Europe, or the U.S. or Latin America if you can come here and work for a couple months at a time; go back and come back,” she said in a speech last week, according to the Barbados Government Information Service website. She added that it would allow “persons to come and work from here overseas, digitally so, so that persons don’t need to remain in the countries in which they are.”

A sign at Bathsheba Park, Barbados.

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Barbados is set to start welcoming travelers from July 12. Mottley said in the speech that in order to attract visitors, what Barbados had to offer “has to be world-class and what we continue to offer is world-class.” 

Tourism directly accounts for 12% of Barbados’ gross domestic product, and indirectly for 40% of its economic activity, according to data compiled by the Barbados Hotel & Tourism Association. It is also said to be the largest source of jobs in the island’s private sector.   

Barbados has relaxed certain coronavirus restrictions and lifted curfews. It has introduced physical distancing of three feet and is allowing social events with up to 500 patrons as well as spectators at sporting events. 

There have been 98 confirmed cases of Covid-19 in Barbados and seven deaths from the virus, according to figures compiled by Johns Hopkins University.

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