The U.S.-China-Hong Kong tensions are ‘just starting to play out’: Beige Book CEO

The relationship between the United States and China has come under more strain as the CPP recently passed the Hong Kong Security Act. Leland Miller, China Beige Book CEO, joins The Final Round to break down the latest news about China and Hong Kong.

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SEANA SMITH: Well, for more on this, I want to bring in the China Beige Book CEO Leland Miller. And Leland, we were just listening to what Jess had to say about the latest measures or the latest details, I should say, that we are getting from the Trump administration. But I'm just curious what your reaction is to what we heard from President Trump today, going after China, rolling back some of the special policies for Hong Kong. How should we be reading through these potentially new risks?

LELAND MILLER: Well, I think the actions today, which were mostly talk but laying out a plan for the future, actually make a lot of sense if you understand the strategy. So take a step back. A few weeks ago, it became clear that Article 23 was being pushed forward from Beijing to change one country, two systems, changing Hong Kong forever. The State Department, just earlier this week, then moved in to decertify Hong Kong as an autonomous entity.

This basically set the stage for the United States to watch the Article 23 process and see how it looks in reality to see how much there-- or how intense and how fast they're going to start rolling back Hong Kong's privileges. So the president said that they're going to move on customs and-- and-- and-- and export controls and other things like that. If the Chinese end up making extremely provocative acts before Tiananmen Square's anniversary next week or into the coming months, then the United States can ramp this up and be much more aggressive in how much they apply Chinese treatment to Hong Kong.

But this holds out the opportunity where they can affect the way that the Article 23 secession law is put into play. They will be able to affect this simply by holding off on some of the repercussions until they see how it looks in practice.

AKIKO FUJITA: Leland, we've heard the argument before that, you know, Hong Kong just isn't as important to China anymore from an economic standpoint when you consider to how significant it was back in '97 or during the handover. And I'm wondering, you know, now that China sees what the US is potentially going to do, there can't be any real surprises here, right? If there is a rollback in that trading status, how significant is that to the overall Chinese economy and how they see their growth prospects?

LELAND MILLER: Well, there will be an effect. But it's clearly not so much that they didn't think that they were going to move forward on it based on the pros and cons of the situation. I think Xi Jinping looked at the-- he looked at the situation in Hong Kong and saw legislative council elections in September that pro-Beijing forces were going to get massacred in. And he either needed to do something about those elections, or he needed to hurry up within a certain window and put an Article 23-type legislation in order for Beijing not to lose its hold on Hong Kong as has-- as has been [GARBLED AUDIO] the last couple of years.

So this is something in which Beijing was presented with a couple of bad options. They clearly thought that stepping in and making sure that their control over Hong Kong was important than the international program they'll receive and the economic hit they're going to receive from losing some degree of Hong Kong as the world's financial center in Asia.

RICK NEWMAN: Hey, Leland, Rick Newman here. So if this happens, if Hong Kong becomes a de facto part of China, one country, one system, can it remain a legitimate financial center, or will that activity go someplace else like Singapore?

LELAND MILLER: I think it has to-- to, for the most part, go somewhere else. I mean, you will still see a role for Hong Kong. This isn't going to change overnight. But keep in mind, we're still seeing how this is playing out on the ground. We don't know whether Beijing is going to be extremely provocative. We don't know whether the law is going to apply retroactively. So people that had protested, say, for the last two years in Hong Kong are overnight-- they become criminals. [AUDIO OUT] --hard-hitting this is going to be.

And what Congress and the president could decide to do is take sort of a one-year approach. And special privileges in whole or in part will be revoked. But we'll see how well you behave. And this is not a done deal going into-- into next year or into the future. So this situation is just starting to play out. This press conference was not in any way the end of the back and forth on US-- US and China on Hong Kong. [AUDIO OUT] --very beginning. And this is going to continue to ramp up through the summer and into the fall.

SEANA SMITH: All right, Leland Miller, CEO of the China Beige Book, thanks so much for coming on the show. Really appreciate the time.

LELAND MILLER: My pleasure.