[ad_1]
If there is one thing that Republicans and Democrats can agree on, then China is the biggest long-term threat to America. And yet US financial companies could not do well in the Middle Kingdom. Banks like Citigroup, Goldman Sachs and JPMorgan Chase are growing their business there, as well as asset managers like BlackRock. But what will happen when the Wall Street ambitions to invest in China will meet the political realities of Main Street America?
That is the question posed by the annual report of the US-China Economic and Security Review Commission, presented to Congress last week, which strengthened new trade barriers between the two countries, not only in goods and labor, but also in the capital market.
The Commission, whose members are elected by the youngest and most elected leaders in Congress, has a good reputation for predicting legislative and regulatory developments. It was the first to awaken Huawei as a story (in 2004), highlighting the dangers that are within the realm of essential drugs such as pharmaceuticals in early 2010, and placing the issue of coercion in Xinjiang on the political map.
As a recent report states, China is not using the Chinese Communist Party to use economic pressure and power regimes to advance politics, . a vehicle for CCP expertise and other legal purposes. ”
Thirty-two new strategies to address this include: reducing the cost of purchasing in VIEs affiliated with Chinese corporations; empowering the Securities and Exchange Commission to ask companies to disclose whether they are from companies that use forced labor in Xinjiang or is on the List of Commerce’s Entity List or Treasury’s Military-Industrial Complex Complex Complex; and order U.S. state-owned enterprises to determine if there is a Chinese Communist Party committee anywhere in their work. There are also proposals to ban the use of cloud computing and data services services of Chinese companies.
The market effects if these rules become legal are numerous. Just imagine the idea of forcing “US public companies with a Chinese base” to report annually “if there is a Chinese Communist Party committee in their activities and briefly describe what these committees did with them.” This may seem like a dangerous move, but the connection between the private sector and the Communist Party in China has grown significantly in recent years.
Citing figures used by the CCP department (and also cited by Western experts), the report states that in 1998, only 0.9 percent of private companies owned CCP committees, a figure that rose to 16 percent by 2008.. By 2013, the presence of committees in the private sector grew by 58 percent, and by 2017 it reached 73 percent, representing 1.9 million companies. ” Assuming these figures are accurate, it is hard to imagine a western company or financial institution doing business in China that would not be a problem.It is also difficult to imagine that Western financial institutions seeking to prioritize ESG would not be pressured to report fraud by working with an independent government.
On the other hand, the Commission also promotes security for US investors in Chinese affairs. In particular, report flags VIEs, which are used by Chinese companies to comply with laws prohibiting foreign exchange. Such vehicles include a large amount of Chinese goods at a price sold on the US market. But they are obvious; regulators such as the SEC have raised anxiety about the risks it poses to investors, who often do not get the same information as the companies mentioned, and have no control over them.
When that happens, a combination of VIE controls, index providers that have had a significant impact on China’s financial system, is approaching US-China headquarters if the ESG crisis could move the market. Honestly, I wish the capital were at the forefront of US-China economic downturns.
Some would argue that this would intensify international conflicts and ruin the global economy. That may be true. But while Wall Street seeks to use the largest pool of new retailers in the world, and Beijing needs funding to address its housing debt crisis, it is difficult not to see China’s financial institutions’ explicit misrepresentation of the “one country, two systems” paradigm.
It is important to note that the US China Economic and Security Review Commission was established by Congress in 2000 as a way to monitor changes in relations between the two countries, even though China was on its way to the World Trade Organization. There were high hopes – and doubts, even then – that China would be free as it grew. Doubts have proved to be well-founded.
Anyone who feels that there will be no trade barriers between the two countries would do well to read the report carefully.
[ad_2]
Source link
