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China’s Hong Kong move adds to a stew of tensions

May 28, 2020, 10:38 AM UTC

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Good morning. David Meyer here in Berlin, covering for Alan.

This is not the geopolitical worst of times, but neither is it the best. Right now there are a number of reasons to be looking in China’s direction with a degree of unease.

The most urgent issue is the approval by Chinese lawmakers of an expansion of the country’s national security law to Hong Kong. U.S. Secretary of State Mike Pompeo has already claimed that Hong Kong no longer merits its special trade status as far as the U.S. is concerned. The new law is likely to trigger more official pushback from the Trump administration, and the question now is whether multinationals will continue to use Hong Kong as a regional base. The Hang Seng fell around 1% on the news.

This all spells further trouble for U.S.-China diplomatic and trade relations—the commitments made in the two countries’ “phase one” trade deal are already looking rickety to say the least, and accusations about the origins of COVID-19 are festering on both sides.

But we can also add into the mix the ongoing Huawei brouhaha. Huawei CFO Meng Wanzhou yesterday failed in a legal challenge to her Vancouver house arrest and pending extradition to the U.S. The Chinese embassy in Canada reacted by saying Canada is an “accomplice to United States efforts to bring down Huawei and Chinese high-tech companies.”

And then there’s the issue of Indian and Chinese troops scuffling at the two countries’ Himalayan border. There have been quite a few skirmishes on the border over the years, but analysts fear this standoff, which relates to disputed territories, could escalate. Thousands of Chinese troops are on what India claims is its soil. The Chinese side says India has been building defense facilities on Chinese land. And each country has a fervently nationalistic government right now.

None of this is to say that disaster is imminent—none of these issues just popped up out of nowhere. But tensions are running high, and with them risk.

More news below.

David Meyer
@superglaze

david.meyer@fortune.com

TOP NEWS

American Airlines cuts

American Airlines will lay off around 30% of its management and admin staff. Although the carrier says it is starting to see demand pick up again, it sees a few lean years ahead before the industry recovers. "We must plan for operating a smaller airline for the foreseeable future," American's People VP Elise Eberwein wrote to employees. Wall Street Journal

Easyjet cuts

Easyjet is also to cut its workforce by around 30%, due to the pandemic. The British budget airline says it will launch a consultation with its workers in the coming days. Cost-cutting measures will also take place in areas such as marketing, and Easyjet will also lease its aircraft to raise cash. CNBC

Trump vs Twitter

President Trump is expected to sign an executive order today that would make it easier for federal regulators to stop social media firms from curbing users' speech. The move comes after Twitter enraged Trump by providing a fact-check for an erroneous tweet of his. The order, if it materializes as anticipated, is likely to spark a court challenge. Washington Post

Fact checks

Twitter isn't just fact-checking Trump's erroneous statements now—it's done the same to at least two posts from China's Foreign Ministry Spokesman, Zhao Lijian. The tweets in question referred to the, ahem, counterintuitive idea that the U.S. army brought COVID-19 to China. Twitter now directs viewers of those tweets to a note saying the virus appears to have originated in animals, not some lab. Fortune

AROUND THE WATER COOLER

Google suit

The state of Arizona has filed a consumer fraud lawsuit against Google over its collection of users' location data. Arizona AG Mark Brnovich said Google often collected this data—which it uses to target advertising—without users' consent or knowledge. Google claims Arizona has "mischaracterized" its services. Reuters

MedMen saga

What happened to MedMen, which was a couple years ago going to become the Apple of the legal pot industry? This Politico piece looks back at the slew of lawsuits—from employees, from investors, from the former CFO—that brought down CEO Adam Biermann and turned MedMen into… and this is cruel… the "WeWork of weed." (Also check out Fortune's take on the saga from a few months back.) Politico

Death rate

The U.K. has the world's highest COVID-19 death rate, according to a Financial Times analysis. The U.S. may have more deaths—now over 100,000—but the FT (which looks at excess deaths rather than official death tolls) puts the U.K. death rate at 891 people per million. The U.S., by comparison, appears to have a death rate of around 200 people per million. Close behind the U.K. are Italy, Belgium, Spain and the Netherlands. FT

SpaceX launch

Due to lightning near the launchpad, SpaceX and Nasa yesterday called off (for a few days) the U.S.'s first crewed spaceflight since the retirement of the space shuttle fleet some nine years ago. As Aaron Pressman writes, the mission will "kick off a major phase of the privatization of space. Planned missions to follow include the launch of private astronauts, a private space station, and possibly private missions beyond Earth." Fortune

This edition of CEO Daily was edited by David Meyer.