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China Protests U.S. Law Supporting Hong Kong but Signals Hope for Trade Deal -- 2nd update

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11/28/2019 | 06:42pm EDT

By Lingling Wei, Philip Wen and Chao Deng

BEIJING -- China held off from retaliating against the U.S. after President Trump signed a bill supporting Hong Kong's anti-Beijing protesters, as both sides remained confident they can sign a partial trade deal in the coming weeks, officials in the U.S. and China said.

Wednesday's bill signing by Mr. Trump, which China considers interference in its domestic affairs, came and went without any significant reaction, at least for now, from the country's leaders.

Instead, Chinese officials involved in economic policy-making stressed that the trade negotiations are still on track and as long as the U.S. president doesn't implement any of the law's measures, Beijing still has strong incentives to move ahead with the trade deal, which could help alleviate pressure on the country's fast-weakening economy.

The officials seized on a sentence in Mr. Trump's signing statement that emphasized his "constitutional authorities with respect to foreign relations." For Beijing, that is a clear signal the U.S. leader has given himself plenty of wiggle room to back off.

The developments over the Hong Kong protests came as the two nations cited optimism over a trade deal, and experts said China's limited response leaves the door open for a deal.

"It does spoil the mood, but it shouldn't interfere with the trade talks, " said Wang Yong, a professor of international relations at Peking University, of Mr. Trump's move. "Both sides have enough reasons to keep trade, Hong Kong and political issues on separate tracks."

Beijing has been trying to keep geopolitical issues separate from trade negotiations, as has Washington. Some of Mr. Trump's most hawkish advisers argue that political and trade issues should be considered separately. Beijing will cut a trade deal, they say, if it believes that is in its interest, even when the two sides disagree elsewhere.

Mr. Trump chose the evening before Thanksgiving to sign the measure, a time guaranteed to get little attention in the U.S. His timing suggests he was trying to play down the political impact at home.

Mr. Trump has long put trade and economics at the heart of the U.S. relationship with China, and has been willing to subordinate other policy goals to get a deal. For instance, he helped save ZTE Corp. from crippling sanctions despite complaints from his national-security advisers that the company's equipment was a security risk and that the firm violated U.S. sanctions laws and lied about it.

After the U.S. Senate passed the Hong Kong Human Rights and Democracy Act last week, Beijing had warned about unspecified countermeasures if Mr. Trump signed it. That fueled concerns President Xi Jinping would scuttle the trade talks to appear tough on the U.S.

Still, as the trade war with Washington has exacerbated the economic slowdown in China, causing industrial output to drop and businesses to slow hiring, Mr. Xi also faces an urgent task of stabilizing growth to avoid a bigger challenge to the Communist leadership's rule.

Mr. Trump, meanwhile, had said this week that trade talks were nearly complete. It also appears that China is hoping to keep trade talks on track.

Asked whether the bill's signing would affect trade talks, Chinese Foreign Ministry spokesman Geng Shuang didn't answer directly. He instead demanded the U.S. not implement the law because it would risk "undermining our bilateral relations and cooperation in important areas."

Beijing, while loudly proclaiming its opposition, hasn't given up on the U.S. president, who has been far less outspoken in supporting Hong Kong's protesters than members of Congress have been.

While the new U.S. law could make it politically more difficult for Mr. Xi to sign a so-called phase-one trade deal with Mr. Trump, Chinese officials said, the White House statement indicated the U.S. president could choose not to implement the law if he wanted to, for example, seal a China trade deal.

Chinese officials were also encouraged by Mr. Trump's efforts to emphasize his respect for Mr. Xi. "I signed these bills out of respect for President Xi, China, and the people of Hong Kong," Mr. Trump said.

The legislation, passed by the House of Representatives and the Senate with near-unanimous support, reaffirms and amends a 1992 law. It requires the State Department to certify annually that Hong Kong is autonomous enough from Beijing to retain its favorable-trading terms with the U.S. -- a designation that has helped the former British colony maintain its status as a global financial center.

The measure once again clearly linked China trade issues -- Hong Kong's independent trade status -- with U.S. concerns about Beijing's political and human-rights policies. The two issues were delinked in the early 1990s under President Clinton.

Some outside experts agree with Beijing's interpretation that while the U.S. law gives the president broad powers to impose sanctions and travel curbs on individuals who commit human-rights violations in Hong Kong, the president already had many of those powers -- and still has the discretion to not apply them.

"My reading of D.C. is there's a lot of appetite for talking tough on China, but not that much in terms of actually being tough," said Andrew Polk, founder of Trivium, a Beijing-based economics- and policy-consulting firm.

Beijing is counting on that, and it offered ramped-up rhetoric. Shortly after the bill was signed, China's Foreign Ministry summoned U.S. Ambassador Terry Branstad for the second time this week.

It issued a terse statement criticizing the U.S. for having "seriously interfered with Hong Kong affairs, seriously interfered with China's internal affairs and seriously violated international law and basic norms of international relations." It repeated warnings that it would take firm countermeasures if the U.S. didn't change course.

It isn't known what countermeasures China is considering. Hu Xijin, editor in chief of the state-run Global Times, said on Twitter that China was considering barring those responsible for drafting the legislation from entering mainland China, Hong Kong and Macau. Mimicking Mr. Trump's turn of phrase, he said this was "out of respect for President Trump, the U.S. and its people."

U.S.-China trade negotiations have been stop-and-go, but the two sides have pushed for progress after calling a truce at the White House in October. China raised hopes for a limited deal this week by suggesting a phone call on Tuesday between negotiators had gone smoothly. "Both sides are finalizing the text of the phase-one deal right now," a person with knowledge of the matter said.

U.S. officials concur that the two sides are closing in on a deal.

Still, China's attempts to keep Hong Kong issues and the trade talks on separate tracks might not be universally popular, some analysts said. Shi Yinhong, a professor of international relations at Renmin University, said it could be embarrassing for a phase-one trade deal to move forward in light of the Hong Kong law.

Mr. Shi, who is also an adviser to China's cabinet, said the Foreign Ministry's threats of countermeasures if the U.S. "continued going down the wrong path" were ambiguous and that the U.S. had already done its worst by signing the bill into law.

--Bob Davis contributed to this article.

Write to Lingling Wei at lingling.wei@wsj.com, Philip Wen at philip.wen@wsj.com and Chao Deng at Chao.Deng@wsj.com

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