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QUEST MEANS BUSINESS

Chaos and Violence Erupt Inside Hong Kong Airport; Russia Calls Off Evacuation of Town Near Explosion Site; Argentina Peso Sells Off Against Dollar for a Second Day. Aired 3-4p ET

Aired August 13, 2019 - 15:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


ZAIN ASHER, CNN INTERNATIONAL HOST: All right, the best way it seems to handle this market is to expect the unexpected. The Dow is up actually 400

points after the Trump administration announced it is going to be delaying tariffs on certain goods, and also exempting others entirely.

Tech shares are the best of the day. Here's what investors are watching. Hong Kong on the brink of no return. Police and protesters clash at the

airport. We are covering this story from all angles, and as I mentioned tariffs delayed. President Trump responds to pressure from businesses and

shoppers. And together again, CBS and Viacom reach a merger deal.

Live from the world's financial capital here in New York City. It is Tuesday, August 13th. I'm Zain Asher, in for my colleague, Richard Quest

and this is QUEST MEANS BUSINESS.

All right. Good evening, everyone. I'm Zain Asher. There have been a violent clashes between riot police and pro-democracy protesters inside the

terminal of one of the world's busiest airports.

What you're seeing scenes earlier at Hong Kong International Airport as riot police clashed with protesters, it certainly turned violent, at one

point after this officer was beaten by his own baton. He pulled his gun and the protesters fled. Earlier, demonstrators tried barricading the

terminal entrances.

Meantime, President Trump tweeted that the Chinese government is moving troops to the border. Hong Kong Chief Executive Carrie Lam is warning

protesters not to push the city into the abyss.

(BEGIN VIDEO CLIP)

CARRIE LAM, CHIEF EXECUTIVE HONG KONG (through translator): Hong Kong society is not safe or stable. The rioters have pushed Hong Kong to the

brink of no return.

(END VIDEO CLIP)

ASHER: All right, Paula Hancocks is joining us live now at the airport where she's been pretty much all day. So, Paula, just walk us through the

day's events there.

PAULA HANCOCKS, CNN INTERNATIONAL CORRESPONDENT: Well, Zain, this was the second day that these protesters have managed to grind this airport to a

halt. They've managed to cancel a number of departures.

What we saw on this particular occasion as well is that there were certain protesters who said that they had found undercover policeman. They claimed

that they were agents from Mainland China. We have no way of independently confirming whether that is accurate.

But what we did see was that they did keep one of these individuals for a number of hours, and we understand that he was taken ill. He may have lost

consciousness. And so there was a police operation to try and extract that particular individual.

Now, when the police, they were unarmed, came into the international airport, there was a very dramatic response from the protesters, very loud

cheering. And then shortly afterwards, there was also some riot police who arrived at the entrance of Hong Kong International Airport, and there were

some clashes with some of the protesters.

We understand some of the protesters did have pepper spray, but it is something that shows that there is a level of escalation. It is a major

transport hub, Hong Kong International Airport. It's the eighth busiest airport in the world. And it's not somewhere where you would ordinarily

expect to see riot police at the entrance. And you also saw these protesters trying to barricade themselves in.

Now, it is a very different scene right now. It is three o'clock in the morning, and the protesters have gone home. Of course, the question is,

will they decide to come back here on Wednesday or will they decide to go somewhere else? It's really very difficult to try and predict what they

could decide to do -- Zain.

ASHER: And how are riot police preparing for the likely eventuality that they may indeed come back to the airport tomorrow.

HANCOCKS: Well, it is a very difficult task for the police to clear an airport where there are a number of passengers still inside. I mean, when

the riot police did come inside for that brief moment, there were still passengers that were sitting in amongst some of the protesters with their

luggage trying to figure out how they were going to leave the country.

Because remember, for the past couple of days, there have been severe disruptions to the running of this airport. There were also, at the same

time, some planes that have landed and there were people coming through just downstairs in the Arrivals Hall and it looked like everything was

actually completely, normal functioning airport there.

So it was a quite a surreal moment, but it's also very difficult to see how exactly the riot police or any kind of police would be able to disperse

protesters without any other passengers being caught up as well. They really did play it fairly carefully today.

[15:05:21] ASHER: And how does Hong Kong recover from something like this, Paula?

HANCOCKS: Well we did hear, just yesterday from the Hong Kong Transport Chief and he did point out this -- that reputation is very easy to lose.

It is extremely difficult to regain trying to appeal to protesters to think about what the international impact is of this.

Now, inevitably, there is going to be an impact. There's an impact on the airlines themselves, certainly that have to now scramble to try and figure

out how to get certain people to where they want to be.

We can see on the board that all the cancelled signs have now been replaced by severe delays for tomorrow morning's -- or this morning's, I should say,

flights. So there is going to inevitably be an impact.

The question is, where does the opinion -- the public opinion lie? Where do public sympathies lie? And they're pretty much divided. There are many

who believe that the rule of law should be -- should hold and that some of these protesters are crossing that line and should not be here.

But there are also others who believe that the police have crossed the line and that they have used excessive force against protesters, and that this

push to hold onto democracy, according to these protesters should continue. So there really is a very polarized view of what should happen going

forward here in Hong Kong.

ASHER: All right. Paula Hancocks live for us there. Thank you so much. The protests began more than two months ago in response to a very

controversial Extradition Bill. Now Carrie Lam is evading question about who is in charge of it.

(BEGIN VIDEO CLIP)

QUESTION: Do you have the autonomy or not to withdraw the Extradition Bill, please?

LAM: The second point I want to make ...

QUESTION: Could you answer that specific question?

LAM: ... is in response to the various demands that we have heard. We have considered all factors and came up with the response that we have

rehearsed time and again over the last two months. Thank you very much.

QUESTION: Do you have the autonomy or not to withdraw the Extradition Bill?

UNIDENTIFIED MALE: She has answered your question.

QUESTION: You have not answered the question. You have evaded the question.

(END VIDEO CLIP)

ASHER: Victor Gao of the Center for China and Globalization joins us live now from Beijing. So Victor, why don't you help us answer the question

that Carrie Lam was just asked there? Does she indeed have the authority to withdraw the Extradition Bill? Or is Beijing totally 100 percent in

charge? I'm assuming the answer is yes.

VICTOR GAO, VIE PRESIDENT, CENTER FOR CHINA AND GLOBALIZATION: Thank you very much for having me. I've seen the central government in Beijing has

given full support to Carrie Lam and her government in Hong Kong, as well as the police force in Hong Kong, and has been calling on every one of all

walks of life in Hong Kong to respect the rule of law, to restore civil order, and condemned the violence and rioting, and more recently, the

tendency of terrorism amongst some of the writers in Hong Kong.

For the Extradition Bill, I think this is a non-issue right now. The protests, many of them illegal protests have spilled beyond the scope of

Extradition. They are now calling for change of government or even return to the British rule or bring back the United States, for example, or

calling on President Donald Trump to liberate Hong Kong. All of these are very dangerous elements in the demonstrations.

And I think between the Hong Kong government and the central government in Beijing, something needs to be done very soon to restore law and order in

Hong Kong.

Hong Kong is an international hub, and no one can afford the siege of the airport and the disruption of all major traffic in the city. Something

needs to be done. We are reaching a tipping point.

ASHER: A lot of the protesters there, Victor, really believe that the freedoms that they've come to enjoy before and since 1997, after the

handover are now under threat. Isn't that a fair concern given the images we are seeing?

GAO: No, I don't think so. In 1997, I was in Hong Kong, when the British left, they didn't leave behind much democracy, but they left behind a very

deeply entrenched tradition of rule of law. Now, there are people in Hong Kong who don't care about destroying rule of law to promote so-called the

greater democracy. This will be a false hope to start with.

You cannot destroy rule of law to promote democracy, and the better way is to stick strictly to the rule of law and promote whatever greater amount of

democracy you can find.

[15:10:09] GAO: So I think the writers in Hong Kong are caught up in this very dangerous, self-fulfilling hearsay. They cannot promote greater

democracy by committing all of these crimes.

Now, what happened at the Hong Kong Airport is involving massive amount of criminal activities. Attacking police is a crime in Hong Kong, holding

innocent passengers in Hong Kong without any legal permission is a very serious crime in Hong Kong. The whole Hong Kong Airport is now turned into

a massive crime scene. Something needs to be done. Justice needs to be served.

ASHER: Regardless of which side you are on, whether you're on the protesters' side or Beijing's side, I mean, I think it's clear that nobody

wants to see more violence. Nobody wants this to escalate even more than it already has. So what is the best way -- what is the best way for

Beijing to help try and resolve this in a way that doesn't lead to even more violence?

GAO: Thank you very much. I think what you mentioned is absolutely very important to avoid bloodshed, to avoid loss of life, to avoid more

destruction is crucial. And to achieve that, are several things. One is respect the rule of law, respect the basic law and respect the one Country

Two Systems.

I think that Hong Kong's government and the central government in Beijing will strictly abide by the basic law that whatever that will be done to

restore order and law to Hong Kong will be strictly in accordance with the provisions of the basic law.

And I think the writers should also wake up to the realities. Their claim to be independent from Mainland China is a fallacy. Their claim that Hong

Kong should be a free Hong Kong away from China is never going to be achieved. So they need to be realistic in what exactly they want.

If they want to have greater freedom, that's fine. I also want to have greater freedom and greater democracy for Hong Kong. But you need to do

that in the rule of law manner, rather than violating rule of law.

So I think people in Hong Kong are faced with a major choice. What exactly do you want to have? You want to have rule of law? You want to have

greater democracy? Or you want to have loss of rule of law and loss of whatever level of democracy people in Hong Kong have? This will be the

question. This will be the choice for the people in Hong Kong.

ASHER: They want more autonomy politically, and as you mentioned, more democracy under the One Country Two Systems that they were promised since

1997. All right, Victor Gao, live for us there. Thank you so much.

Hong Kong business leaders are calling for an end to the protests. Swire Pacific, the largest shareholder in airline, Cathay Pacific issued a

statement offering full support to Carrie Lam and police to restore law and order.

Swire Pacific also owns hotels, office towers and malls, all of which could be less business. The protest took another toll on stocks in Hong Kong.

The Hang Seng Index closed down two percent on Tuesday.

CNN's John Defterios is joining us live now in London. So John, we know that Hong Kong actually posted the worst growth in about a decade, 0.6

percent. Just walk us through what the economic consequences are going to be of the images we've just been seeing.

JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Yes, Zain, no one should harbor any doubts about whether this is going to undermine growth.

As you suggested, this comes at a very tricky period for Hong Kong, because growth is dropping and expected to drop even more in the third quarter.

Let's take a look at that tally you were talking about here, 0.6% in the latest quarter, which is Q1, which is half the level we saw at the close of

2018. But the protests ratcheted up the intensity on some of the valuations on the Hong Kong economy.

DBS, the Singapore-based bank now is suggesting they will have no growth in 2019, despite the government saying they could see two to three percent.

That's a cut from 2.5 percent from DBS. But this is a double barrel of trouble, if you will.

There's a domestic uncertainty, of course, and whether Beijing intervenes or not, and if it does, at what sort of strength -- but we're seeing an

economy suffering from the U.S.-China trade dispute.

Hong Kong is very dependent on its port activities, financial services, and trade. And foremost, it's dependent on its reputation. We have to

remember that this is ranked as the freest economy anywhere in the world for nearly a quarter of century.

If it carries on and it's been 11 weeks right now, it has to dent the reputation as a transit hub going forward, as well. It is a big question

mark all the way through, depending on where this ends up.

ASHER: And it's a massive just sort of regional hub for a lot of international multinational companies. I mean, just walk us through -- are

we going to see more capital flight, more people moving their money out of Hong Kong as a result these protests?

[15:15:04] DEFTERIOS: That's a great point you bring up, Zain, this has been a magnet for foreign direct investment. It is home to seven of the

Fortune 500. It's not too surprising that Hong Kong billionaires would be suggesting we want to see the restoration of law and order, but I've been

surprised personally by some of the global brands who have weighed in to the debate.

We've had Prada, the Italian luxury goods maker of course, suggesting this will hurt their earnings. Ditto for Swatch; Disney's Bob Iger said it is

going to show up in their results because Hong Kong Disneyland is not doing too well.

But again, often overlooked beyond a transit hub, this is also a magnet for tourism. This is a population of just 7.5 million people. It pulls in 65

million people a year. It's extraordinary. For shopping, tourism, financial services, and trade and business, of course.

It was up 11 percent in 2018 and we see the tour operators complaining about the cancellations -- August, September and October. Is that

reputational damage? The images we're watching every day clearly undermining growth as we see it.

ASHER: All right, John Defterios, live for us there. Thank you so much. All right, just in, CBS and Viacom have finally reached a merger deal. The

media giants will reunite after they were split in 2006 combining brands like Paramount Studios, MTV, Comedy Central, and CBS's broadcast network

and streaming services.

Current Viacom Chief Executive Bob Bakish will become CEO of the new company. Shares of both companies now up on the news. We've got Frank

Pallotta following this all.

Frank, just walk us through the terms of this deal. These two companies are reunited.

FRANK PALLOTTA, CNN MEDIA REPORTER: So it's really all about scale. Think about this. We have these legacy companies trying to figure out -- legacy

media companies -- trying to figure out how to compete with these digital newcomers? Your Netflix's, your Amazon's, even social media like Facebook,

and the way that Viacom is really doing this is reuniting with CBS.

So it's been about 13 years. They're coming back together. You named some of those big brands, maybe we'll see the library of Paramount movies go

over to CBS All Access, which is the streaming service for CBS. Maybe we'll see Nickelodeon go over there. Maybe we'll see MTV.

It's almost kind of funny to think about that it takes you all the way through your life if you went All Access. You start out in Nickelodeon,

move on to MTV, when you're a teenager. And when you're kind of older at CBS or Showtime. And it's interesting to see, and this is going on through

all of media, we have Disney doing this buying Fox. We have our parent company AT&T buying Warner Media. So this is just the next step in these

big merger and acquisitions.

ASHER: And so with the combined company, what does it mean in terms of -- I mean assuming that their goal is to try and sort of -- be a sort of not

necessarily a threat because they're not big enough, but to really challenge the status quo? What does it mean for the likes of Disney or the

likes of Netflix that these two companies are combining?

PALLOTTA: Well, with these two companies combining, it has more to do with Viacom and CBS than it does with their competitors. They're trying to get

themselves more into the race.

I think there's still a lot to be done. There might -- they might go out and buy more. They might go out and buy Stars or Discovery or MGM or more

libraries that are out there, or they might end up getting bought by something even bigger, you know, Apple has a ton of cash, maybe they

suddenly become interested in this combined company.

So if the tale is still to be told, but right now by combining, they've gotten bigger, and they allow themselves more scale and more opportunity to

compete.

ASHER: What is their competitive advantage? Because at least with Netflix, you know, they were the first sort of major streaming service in

the game. With Disney, no one can touch them when it comes to content. When you combine CBS and Viacom, what is their competitive advantage?

PALLOTTA: It's funny you should say that because Shari Redstone who is going to be the Chairman of the new company said, her father, Sumner, who

started all of this, used to say content is king. It's really about the content.

As much as Disney is the king of content, as much as Netflix is this big disruptor, Paramount and Nickelodeon and MTV and CBS are no slouches when

it comes to content. We're talking "Mission Impossible." We're talking "Star Trek." We're talking every -- maybe they have all the shows in MTV's

history. Maybe they have all the Nickelodeon shows. Paramount's long, long history of great films such as "The Godfather" and things of that

nature.

So content matters, and by being able to combine these two companies just gives them more of a foothold in this great streaming war race.

ASHER: All right. Frank Pallotta live for us there. Thank you so much.

Christmas is coming early with a bit of a trade reprieve. Donald Trump delays, tariffs and market are loving it. That story, next.

(COMMERCIAL BREAK)

[15:22:08] ASHER: The Trump administration says it will delay some tariffs on Chinese goods, that's sending the Dow to its best gain in two months.

You see the Dow there is up almost 400 points. Tech stocks are actually the best performers. Keep in mind, this is not a stand down when it comes

to the trade war. The U.S. Trade Representative have said certain tariffs will be delayed to September 1st, some to December 15th. Some products are

being removed in the list altogether.

President Donald Trump says that he is delaying tariffs to help people specifically the vast number of holiday consumers that would have been

impacted. Take a listen..

(BEGIN VIDEO CLIP)

DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: We're doing this for Christmas season just in case some of the tariffs would have impact on U.S.

customers, which so far they've had virtually none.

But just in case they might have an impact on people, we we've done is we've delayed it, so that they won't be relevant for the Christmas shopping

season.

(END VIDEO CLIP)

ASHER: All right, joining me now is Matt McCall, President of Penn Financial and Clare Sebastian. So Clare, you heard him there saying, you

know, we're delaying the tariffs because we're worried about holiday shoppers? What's the real reason?

CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Well, I mean, I think that's part of it. But it's interesting for a President who has long described

the tariffs as a windfall for the U.S. economy that this is essentially a tacit admission now that they are paid by Americans that they will trickle

down to American companies and then to American consumers.

But I think, you know, there are probably more things behind this. We saw the talks between the U.S. and Chinese negotiators broke down at the end of

July without much progress really. And that was supposed to happen in September, there was some doubt, the President said maybe they won't

happen.

Now, I think that that probably increases the probability that it will happen and that the Chinese will come to the table. We know they spoke on

the phone today. They are going to speak again in two weeks' time. So I think you know, this is a positive sign for the trade talks, certainly.

MATT MCCALL, PRESIDENT, PENN FINANCIAL GROUP: It's all political posturing as well, because I mean, it sounds very good to say people at home could

say, you know, President Trump today he took away the tariffs so we can buy you more Christmas presents. I mean, they are getting in the minds of

people.

So it is good for the market, and I think it is a step in the right direction. However, this was definitely telegraphed.

ASHER: Is the market really buying it? Knowing that we've seen so many sort of positive steps in one direction? It's sort of one step forward,

two steps back, you know, whether there's a potential of a trade truce, then the next day announcing more tariffs? I mean, is the market really

going to buy this?

MCCALL: See, I don't think you should look at day-to-day like this, but most people do. Because, you know, they look at the market every day.

They were down yesterday because things are negative. We are up today because it is positive. August is typically a very volatile month every

year anyway.

So we shouldn't be looking at day-to-day. I think we are making progress, and I think it is political suicide if he does not get a deal done before

the election, so I -- you know, for our firm we're buying on every pullback in anticipation that a deal will get done at some point.

ASHER: Clare, do you think that there's going to be some kind of announcement when the Chinese delegation comes to D.C.?

SEBASTIAN: I mean, precedent would suggest probably not. That this is going to take a little longer. Of course, we've seen a lot of tariffs

imposed over the last 18 months or so. None of them have been taken back and we've seen this tactic before, you know, announce a big set of tariffs,

then delay, then start -- restart some talks. And then we've seen talks break down and tariffs being re-imposed, anyway.

So this has been part of the playbook from the beginning, so I think there's certainly, you know, reason to be pretty cautious about this going

forward.

ASHER: So how do investors navigate just the extreme level of volatility we're seeing in the markets? How do you play? I mean, is gold the name of

the game right now?

MCCALL: No, I'm not -- I'm not a big gold fan. But you have to look at it. The big picture is, we're only five percent from an all-time high.

So as volatile as it is felt, we've had such big run ups and big pullbacks, so day-to-day stuff, but really, if you're a long term investor, you're

five percent from the highest level we've ever seen in the U.S. stock market. So things are still good to me.

So you keep putting money in the market on all these pullbacks, and eventually, I think when a deal does get done, you see how much the market

moves on just a Christmas comment. Imagine when a deal gets done, what's going to happen to these stocks. I mean, they're going to go up 10 percent

to 15 percent in a matter of a month. So you need to be in the market because you don't know when that's going to happen.

ASHER: Speaking of which, it's all about retail stocks. They had a very good day today. But the environment for them, especially with this trade

war has been pretty dire.

CHATTERLEY: Right. And we see the industry groups coming out today, they are definitely not as optimistic as investors are. You know, comments like

for example, the Retail Industry Leaders Association saying this will mitigate some pain, but it does not eliminate the threat and uncertainty.

The American Apparel and Footwear Association, the administration they say is still persisting with a destructive plan to impose tariffs on consumer

goods used by every American, so there's kind of a, "Yes, this is slightly positive." But there's still a lot of uncertainty hanging over these --

MCCALL: But you have this consumer that is so strong. We're making more money than ever made. Unemployment rate is so low, so consumers have more

money than they've ever had. And what do we do when we feel good? What do we do when we feel bad? We spend money.

I mean, I just walked through the mall here, ritzy -- like this Canadian store of women's clothes. There's people in there every time I walk by.

We actually own that stock for that reason. There are people spending money at certain retailers. But there's other retailers that are going to

use the excuse of the tariffs just because their business is not doing well.

ASHER: I see.

SEBASTIAN: But I think that's part of the impetus behind this decision from the Trump administration. They have all along tried to insulate the

U.S. consumer and with this next round of tariffs, it was apparent that they weren't going to be able to do that.

Hence, take the big ticket items, the cell phones, the toys, the clothes and shoes and take them off and give them a bit of a delay to try and avoid

the kind of own goal effect of the tariffs.

ASHER: All right, Clare Sebastian, Matt McCall, thank you guys so much.

Okay, so Hong Kong's economy is being damaged as pro-democracy, protests turned violent. The former U.S. Ambassador to China coming to you live

after the break.

(COMMERCIAL BREAK)

[15:30:00] ASHER: Hello, everyone, I'm Zain Asher, there's more QUEST MEANS BUSINESS in a moment. When protesters and police clash in Hong Kong,

the question now will be how will Beijing respond? The former U.S. ambassador to China joins us live. And Argentina's peso slides for a

second day.

We'll look at what an Alberto Fernandez presidency would bring to the economy. Before that though, these are the headlines for you at this hour.

Police and protesters clash inside Hong Kong's international airport again Tuesday. The demonstrators disrupted flights for a second day after more

than ten weeks of protests. Leader Carrie Lam warns the territory is on the brink of no return.

In Russia, villages are being told they don't have to leave their homes following a mysterious explosion. Authorities say military drills planned

for the area were called off. Last week's blast at a nearby military test site killed five scientists. Local authorities say radiation spiked

afterwards.

A U.S. official tells CNN President Donald Trump and British Prime Minister Boris Johnson could sign a joint statement on trade when they meet in

France at the G-7 later this month. And the statement would serve as a road map for potential bilateral trade agreement.

All right, let's return now to Hong Kong. The big question is how is Beijing going to respond? The extraordinary scenes that we have seen today

at Hong Kong airport are really quite something. Former Senator Max Baucus served as U.S. ambassador to China, he joins us live now. So, Max, as you

know, Carrie Lam has said that we are on the brink of no return when it comes to Hong Kong. What do you make of that statement?

MAX BAUCUS, FORMER U.S. AMBASSADOR TO CHINA: Well, I've been in Hong Kong twice in the last eight weeks. I've spoken with a lot of people in Hong

Kong, the men and women on the street with tycoons, I've spoken with Carrie Lam, for example, and it's very clear to me that people I talked to,

waiters, cab drivers, quite upset with the extradition statute that was proposed, they're quite upset with Carrie Lam, frankly, they think she's a

little tone deaf, she doesn't listen.

So, that's -- I think if she, Carrie Lam, were to show that she really understands, show that she's sensitive, repel that extradition statute, not

just suspend it, and begin a police investigation that would really help. On the other hand, they promised to -- they're going to have to show it

too, they're not going to move the goal post.

They've really got a bet in their mouth now, they think they've got a little momentum, and if they're not careful, they're going to -- it's going

to be self-defeating.

ASHER: How much pressure is Xi Jinping under right now to show his assertiveness when it comes to sort of tamping down on these protests?

BAUCUS: Well, he's the strong man. He likes to convey strength. The Chinese understands strength more I think to any of their people in the

world. But he also wants to avoid bloodshed in Hong Kong. He does not want to send in an appeal, I don't think he will, rather I think that he

will -- if you will, boost up the presence of the police in Hong Kong, try to quell up the demonstrators if they go that much further.

I mean, if there were airports closed down a third or fourth or fifth day, that's a whole different matter than closed down a couple of times. And

the businessmen too at Hong Kong are beginning to start to step in because it's very important that obviously, the fights are able to land and take

off. But also I talked to businessmen in Hong Kong, they tell me that they're having a hard time recruiting people to come to work in Hong Kong.

People who want to bring their families and don't like the situation there. It's having a deleterious effect, all of these demonstrations.

ASHER: So ambassador, when you have Beijing authorities saying that such violence that they're seeing should be severely punished without leniency,

without mercy. What is the intended effect of that? Because it's unlikely to scare the protesters away. Let's be honest.

[15:35:00] BAUCUS: Well, I think they're obviously trying to convey a strength. I think it's a little wooden there, it's a little not very

sensitive. You've got to show strength I think another way, that is by listening and also being strong at the same time. Not just being strong

and threatening some action if the terrorists don't back down. And I think that frankly, that a lot of what we read about Beijing saying is

propaganda.

They mean that, but it's also a propaganda. Behind the scenes, they're trying to figure out a way to deal with Carrie Lam. You know, if she were

to resign, that would help, but of course, that begs the question, who would replace her? Now, there's got to be a meeting of the minds on both

sides here because if Beijing thinks that they can just jam a solution down the protesters' throats, that's not going to work.

And I think they know that and they're trying to figure a way out. Don't forget, China is very conservative. It's hard for China to deal with

matters like this, they're used to having its own way, so this has been difficult for them. They're not nimble. They don't have a big diplomatic

core like the United States does for example, this is tough for them.

ASHER: All right, Ambassador Baucus, thank you so much, appreciate that. The CNN fear and greed index is on cost of extreme fear tonight, despite

the rise of the Dow, it's most definitely risk on around the world. All eyes are on Hong Kong. Now, in the 11th week of protests, tensions are

only escalating, and there is no end in sight.

The vital business hub is effectively paralyzed. A natural alternative is Singapore, but economic activity there is plunging and a recession is

looking more and more likely. Singapore is heavily reliant on China, which is growing at its slowest pace in a generation. Of course, the globe's

fears of contagion are re-emerging in South America.

The polls suggests Argentina's market-friendly president might be replaced by a populist. The peso is falling for a second day after historic market

route. And in the United States, a sudden about-face from Donald Trump, Washington is delaying new tariffs on China, it's a reminder of just how

unpredictable the situation remains.

Of course, a short list of other lurking concerns as well. Brexit and U.K. for example, Iran's activity in the Persian Gulf, India and Pakistan's

dispute over Kashmir, North Korea and nuclear missiles and the crisis in Venezuela. These are primed to flare at any moment. Rana Faroohar is the

associate editor of the "Financial Times" and CNN's global economic analyst. She joins us live now. So, Rana, for international investors,

just giving out -- there are so many global economic head winds, what's the best way to handle it?

RANA FOROOHAR, ASSOCIATE EDITOR, FINANCIAL TIMES: Well, you know, I see a lot of people going to cash. I see a lot of people going to short-term

fixed income. Gold is going up and I expect it will continue to go up. Anything that is a hard asset, that is perhaps a little less likely to be

affected by the short-term winds of President Trump, of Xi Jinping, of what might be happening in the emerging markets is I think going to be in

demand.

But you know, you just sketched a really long list of risks and I think one of the things I'm really seeing is investors looking around and saying,

we're in a paradigm shift. I mean, we really are. Even if we get through, say, to the end of the year without another major episode in the U.S.-China

trade war.

We're at the end of the ability of say, central bankers to manage the economy, we're seeing that even the rate cut in the U.S. was greeted with

kind of lackluster reaction by the markets. People know that things are changing and they're probably going to be changing in a big way by the end

of the year.

ASHER: So investors shouldn't be looking to central banks to try and mitigate risks at this point?

FOROOHAR: I really think and I've been saying this for some time that central banks are out of ammunition. Now, that's not to say that they're

not going to continue trying to cut rates and possibly even start another round of quantitative easing. But just look at the last few attempts, each

one gets a little more -- excuse me, a little less juice out of the market.

Each time companies try and buy a few more of their shares back at low rates, it has a little less effect than it did before. So, what that says

to me is that the markets are really out of juice with easy money, with monetary policy.

We need an underlying growth story, and that's where the problems of the trade war comes in, because I think a lot of smart investors -- even if

Donald Trump is saying, oh, we're going to hold off on tariffs to help U.S. businesses and consumers, they know that this is a president who has thus

far being constitutionally unable to cut an equal trade deal with China.

Now, the Chinese have made it very clear, they're not going to accept anything that isn't being done on equal terms, and that to me spells a real

road block that I think is going to have a significant market impact by the end of the year.

ASHER: You know, normally, when there's issues when it comes to growth, there are certain levers that governments can use. For example, when it

comes to the central bank, we talked about monetary policy, there's also fiscal stimulus as well, fiscal policy as well. But it's a little bit

different when the problem stems from a political crisis like what we're seeing in Hong Kong.

FOROOHAR: Well, that's very true, and you know, you're saying something really important here. What underlies it is the fact that we have one

world, but two systems. We have the U.S. system of free market capitalism, the way that western economies have worked and some emerging markets

economies have worked for many decades now.

[15:40:00] And we have the Chinese system, which is a state-run system, a managed system, those two systems are now colliding. That's at the heart

of everything that's been happening in the markets for the next year and I expect it will be for some time to come.

ASHER: Just in terms of what all of this means for global growth prospects, what's your take on that?

FOROOHAR: I think we're already in a downturn, particularly in the U.S., you know, it's interesting, one of the previous guests was talking about

the U.S. consumer remaining robust. That's true if you look just at the headline figures, but if you start to dig in a little bit deeper, you see

some worrying signs.

Consumers in the U.S. are starting to cut the credit card balances. They're paring back on gasoline spending in the middle of a holiday season.

I mean, these are not things that you do when you feel really confident and secure. So, I think it's going to be really important to dig into the

numbers going forward.

ASHER: Is there sort of economic silver-lining? I mean, is there -- is there something that is positive on the horizon that investors should be

looking towards or forward to?

FOROOHAR: Well, I think that that's a great question, and I would say that the silver-lining, although it's not a short-term one, it's that we've gone

too far in one direction, we've gone too far in terms of market-led growth, in terms of everyone looking at the stock market to keep going up, housing

prices to keep going up.

And it's been a long time since we've heard, hey, let's come up with a new way to increase incomes, productivity, invest in education, human capital,

infrastructure. You're going to hear a lot more about that on both sides of the Atlantic and probably in many emerging markets in the years to come

because that is the only way that you're really going to increase underlying growth in the real economy.

ASHER: Right, Rana Foroohar live for us there, thank you so much.

FOROOHAR: Thank you.

ASHER: The peso is selling off for a second day in Argentina. The candidate favored to be the country's next president is trying to calm the

markets desperately. That story next.

(COMMERCIAL BREAK)

ASHER: The man who could be Argentina's next president insists he does not want to default on the country's massive debt. Alberto Fernandez won

decisively in a primary vote over the weekend, signaling a possible return to populist policies. He could replace President Mauricio Macri in

upcoming elections, Mr. Macri made spending cuts, eliminated subsidies and took on loans from the IMF to help attract foreign investment.

[15:45:00] What has investors nervous is Fernandez's running mate, former President Cristina de Kirchner. Her administrations was marred by

protectionism, high spending on social programs and ultimately, an economy on the brink of collapse. Fernandez's comments on the debt have not

stopped the currency sell-off, the dollar is jumping against the peso for a second day. The mobile index in Buenos Aires is up some 5 percent a day

after the bottom fell out and it lost about a third of its value.

Benjamin Gedan is the director of the Argentina Project at the Wilson Center, he is joining us live now from Washington. So, Benjamin, thank you

so much for being with us.

What is the biggest risk when it comes to contagion at this point, when you see what happened to the merval and also the peso as well?

BENJAMIN GEDAN, SENIOR ADVISER, LATIN AMERICA PROGRAM, WILSON CENTER: I mean, the problems in Argentina, it is idiosyncratic to some degree. And

so, it's not clear what kind of contagion it'll be in emerging markets, though countries like Uruguay certainly would be affected if Argentina's

economy truly crashes.

ASHER: Just walk us through what the state right now is of Argentina's economy when it comes to the unemployment rate, when it comes to inflation

hovering at around 50 percent, the economy is clearly in a recession, just walk us through that.

GEDAN: Sure. The current president of Argentina pro-market multimillionaire Mauricio Macri inherited an economy really in dire straits

from an overspending populous administration that had left the central bank with limited reserves, had a very high deficit that had handed over to its

successors. Lots of distortions in the economy and it's been very difficult to try to correct these problems.

And the result has been three or four years of recession, they've been massively reducing unsustainable public subsidies for trains, for energy in

your homes, for electricity, but the result has been extremely high inflation, one of the highest rates in the world, unemployment over 10

percent, poverty over 30 percent and, you know, an economy that essentially has lost all support and confidence of voters.

ASHER: So, when you think about how well Alberto Fernandez did in the primaries, what does that tell you about just how unpopular some of these

austerity measures by Macri's government have been?

GEDAN: Yes, these have been political kryptonite. These was known from the beginning, and I think the current government felt that it could take a

slow approach to addressing these -- I mean, inheritances from the last government. And it did so for years until finally, it wasn't able to

cheaply borrow to continue financing this unsustainable spending.

It ultimately ended up with the largest-ever bailout from the International Monetary Fund, $56 billion program, that required a lot of austerity in a

very short period of time, and that period of time was leading directly up to the elections.

ASHER: The people in Argentina believe at this point they were actually better off under Cristina de Kirchner?

GEDAN: It's often like that with populists. Until the whole system collapses, you get massive increases in government spending, it juices the

economy in the short-term, it provides lots of increases in public employment, below market costs for everything you face in your daily life.

You know, price controls, currency controls, everything was unstable, everything was unsustainable, but there was no crisis right before the

election.

It was just a sense of things were on the wrong track and the economy was slowing. The problem is that it was near a crash and the corrective

measures have taken place under the next government that hasn't had enough time to show the benefits of it. And so, yes, these austerity programs are

deeply unpopular they're happening in the political cycle at exactly the wrong time.

ASHER: So, what is Macri going to do at this point to really up his game and up his chances of winning in the elections, October?

GEDAN: Yes, there's very little that he can do. I mean, usually, what are the advantages an incumbent has in any system? Government spending, right?

And in this case, the IMF has strict conditions on Argentina to maintain a zero deficit. Money emission, right? They could print pesos, but that's

also prohibited right now.

So, very limited tools and advantages of incumbency. What he has to run on is a very difficult economic record, memories that are still pretty stark

of how corrupt and poorly managed Argentina was under the last government, precisely the movement that's now competing with him for the presidency.

But he has very few tools and what he's offering the Argentines, frankly, is you know, a vote of confidence in his program and the idea that it's

eventually about to bear fruit, just give me a bit more time and it doesn't seem like voters are willing to do so.

ASHER: Benjamin Gedan, thank you so much, appreciate it --

GEDAN: My pleasure.

ASHER: After the break, hackers do their worst, electronic voting machines to prove just how vulnerable they are ahead of the 2020 U.S. elections.

We'll hear from a senator who says the risks are real.

[15:50:00] (COMMERCIAL BREAK)

ASHER: At a convention in Las Vegas over the weekend, hackers found themselves rubbing shoulders with members of Congress and the U.S.

intelligence community. The lawmakers are doing it because they're worried what might happen ahead of the 2020 presidential election. They came

together at a hacking conference called Def Con, and one major concern is how electronic voting machines might be compromised.

Donie O'Sullivan was there, he joins us live now. So, just how vulnerable are America's voting machines when it comes to hacking, Donie?

DONIE O'SULLIVAN, CNN BUSINESS REPORTER: Yes, so they had a room at this conference full of voting machines or voting equipments that's used across

the United States, and they showed us just how easy it was to break into them. Have a look.

(BEGIN VIDEO CLIP)

RACHEL TOBAC, CHIEF EXECUTIVE OFFICER, SOCIALPROOF SECURITY: This is the active vote, TSX, it's used in 18 different states, eight of which are

swing states. It's going to start rebooting and you're going to see that it's having trouble rebooting because there's no card reader. And now, you

have full admin access on this machine. So you can disrupt the election, you can just start to put this confidence in the election, when you think

about admin access, you can think about like keys to the castle.

When you have admin access, you own the machine, you can get it to do what you want it to do. So, you can imagine that being very nefarious.

O'SULLIVAN: If there was just one thing that could be done that could really help improve security before next year's election, what would be

that one thing?

SEN. RON WYDEN (D-OR): I think it ought to be a no brainer to say that you're not going to allow voting machines to be connected to the internet.

On the new report is something like 35 voting systems still have an open connection to the internet. I will tell your viewers what this means in

English.

This is basically like putting American ballot boxes on the streets of Moscow.

(END VIDEO CLIP)

ASHER: Wow, quite a statement. So, Donie, we know that these voting machines can be hacked, but is it likely that they're going to be hacked?

O'SULLIVAN: Sure, I think one thing that's important to point out is that the voting machine manufacturers and some on the government tool say, why

is this happening in Vegas is a not totally realistic scenario whereby hackers sort of have unlimited access to machines. So, it is certainly,

probably, definitely the extreme end of what's going on.

But what the hackers are trying to do is to show that these vulnerabilities are there. As you heard Senator Wyden there, he said, you know, the one

thing he sort of took away from the conference is these machines should be nowhere near the internet.

And as you can see in that video, I mean, a lot of this hardware is pretty old. This is sort of almost pretty -- you know, this is -- we have more --

ASHER: Pretty historic, yes --

O'SULLIVAN: Sophisticated technology in our pockets with our iPhones than a lot of these machines.

ASHER: So, one of those standing there you spoke to actually said that it shouldn't be connected to the internet, fine, but is there anything else

that can be done to make sure that these vulnerabilities are taken care of?

O'SULLIVAN: Yes, Democrats here in the U.S. are trying to do a number of things. One being a paper trail, so to make sure that you have machines,

but also put a printout that you can compare it and see, you know, can you -- can we verify that these votes are real? A lot of states here in the

U.S. still are using systems which are only electronic.

[15:55:00] So, there is no paper trail, and so it can be difficult then to have, I guess, full trust in the vote, especially when you consider what

happened in 2016 on all the attempted attacks on voting systems here in the U.S. from Russia. And so there's that, not connecting to the internet and

also just hundreds of millions of dollars that are needed to really firm off America's voting infrastructure.

And if you think about how it's spread across different states, each state here in the U.S. is responsible for elections in that state. So, it's

different types of software, different types of hardware, different types of standards, and that is a challenge, and they're trying to bring

everybody up to the same bar. It's a long way to go, but not a lot of time until 2020.

ASHER: But misinformation is still the ultimate problem in America, given what happened in 2016.

O'SULLIVAN: Yes, I mean, and I think we saw more of that, actually, at the same hacking conference. There was quite a lot of people talking about

that, talking about deep fakes, talking about the trolls and box and everything like that. So, there's two parts to this, yes, there's the more

conventional cyber hacking, what you see of hacking into a voting machine or hacking into a tabulation machine where the votes are counted and then

the whole undermining of American democracy, whether it be from actors here in the U.S. or in Russia or elsewhere.

And also, a lot of what they are trying to do is undermine the integrity of the vote. So to say, to tell people, you know, you can't trust America's

voting infrastructure any way. And what's sort of interesting about the hackers who were there this weekend, as they were still demonstrating that,

you know, these machines are vulnerable, they had a message to say you should still go out and vote, don't lose hope, we're trying to help.

ASHER: All right, Donie O'Sullivan, thank you, appreciate it. OK, so there are just moments left to trade on Wall Street. We'll have our -- the

final numbers and the closing bell right after this.

(COMMERCIAL BREAK)

ASHER: All right, there are just moments left to trade on Wall Street. The Dow is actually off session highs, but we are still up over 350 points.

Tech stocks, best performers for the day, and that's thanks to the Trump administration decisions to delay tariffs on China until after the

Christmas shopping season. And that is QUEST MEANS BUSINESS, I'm Zain Asher in New York, the news continues right here on CNN.

(BELL RINGING)

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