White House Weighs Limits on U.S. Portfolio Flows Into China

https://www.bloomberg.com/news/articles/2019-09-27/white-house-weighs-limits-on-u-s-portfolio-flows-into-china-k12ahk4g

by chenzhekl • 7 years ago

158 139 7 years ago

bloomberg.com

panpanna• 7 years ago

How would this affect foreign pension funds that invest in NYSE?

Would they just sell their Chineses stocks or move some investment to another country??

aritmo• 7 years ago

Looks like a proper shakedown.

kick3• 7 years ago

This seems reasonable, though the administration is likely doing it for the wrong reasons. Genuine question: Is sentiment more important than correctness, or is the opposite true?

AsyncAwait2• 7 years ago

This seems reasonable

Does it? The U.S went to wars, killing hundreds of thousands of civilians to force open markets to its products, it has been preaching the free market mantra for decades. Regardless of everything else about China, they're now starting to make some actually compelling products so the U.S is acting out.

I know the argument is that Chinese companies are just an extension of the state, but you could say the same in reverse about the U.S.

I just assumed it's going to be more subtle than this, as an EU citizen, this sends a clear signal to me that the EU is only an 'ally' as long as it keeps buying American products.

tolqen• 7 years ago

I know the argument is that Chinese companies are just an extension of the state, but you could say the same in reverse about the U.S

What

ekc• 7 years ago

They are running rival concentration camps, I can't imagine the competition is welcome.

DollarGuru4• 7 years ago

Since the US gained global dominance post WW2 with the Marshall plan I don't think the US has ever really been that subtle about maintaining capitalist free market dominance.

As you say, now that China is producing compelling products the US is flexing a bit more because it sees a serious non ally threat to US interests. The biggest shame of it is that it is so unfortunate that China isn't more politically and legally upstanding and morally respectable like Europe is.

_iyig5• 7 years ago

The U.S went to wars, killing hundreds of thousands of civilians to force open markets to its products

This is a standard Marxist explanation for U.S. overseas military intervention [0]. It is also largely wrong.

Let’s look at the data. After 16 years of obscenely expensive American intervention in Iraq, that country exports more to China than the U.S., and imports more from China and Turkey together than from all other trade partners combined [1]. Likewise, Afghanistan today imports almost nothing from the U.S., but relies heavily on exports from China and Iran - two major U.S. competitors [2]. This is, of course, geographical common sense. If anything, recent U.S. wars have opened new markets for China, their number one geopolitical competitor.

Looking further back, Germany, Japan, and South Korea have all developed into financially independent trading partners. Far from U.S. capital dominating Japan, Americans were afraid for quite some time that Japanese cars, electronics, and industrial equipment would completely displace their American equivalents.

[0] https://en.wikipedia.org/wiki/Marxist_explanations_of_warfar... [1] https://en.wikipedia.org/wiki/Economy_of_Iraq [2] http://stat.wto.org/CountryProfile/WSDBCountryPFView.aspx?La...

OscarCunningham3• 7 years ago

Why do you think it's reasonable?

kick3• 7 years ago

China as a country should be punished by the State. It has too many human rights abuses not to. However, I also think this applies to the US. The two punishing one another seems reasonable, but I cannot imagine one or the other cares about something as trivial as basic human rights.

basementcat• 7 years ago

Would that just mean the securities will just trade on pink sheets? Or would it be more likely that trading would migrate to a stock exchange in another country?

stefano• 7 years ago

The London stock exchange would be an obvious candidate.

schuke• 7 years ago

The Hong Kong Stock Exchange offered to buy LSE recently. I wonder if these are connected.

cyborgx7• 7 years ago

I heard people were moving away from doing stocks in London with Brexit looming. Is this no longer the case?

ackbar03• 7 years ago

Im sorry but just reading this almost feels like an April Fools joke, except sadly its September

tanilama• 7 years ago

Emmmm, this is crazy. Capital will find its way just not through US exchange

azurezyq• 7 years ago

Ok, now WH is exploring all creative (and unprecedented) ways to fight against China. I have to say this seems to have crossed a lot of boundaries, either clear or vague ones.

And we've also seen WH is doing similar things (though at a different degree) to close partners like Mexico.

So let's extrapolate, if there're some conflicts in interests between US and major NATO countries, will WH do the same thing? Make America great again even no one wants to talk to US?

greatpatton2• 7 years ago

Seems that the easy war with China is not that easy. So now the WH is resorting to other means to put pressure on China. This will backfire as the WH is trying really hard to make US less relevant. By actively using weapon that were previously seen as a huge deterrent, you make them a short term problem for China, but they will find a way around them and make them ineffective. The WH is fighting will almost all major economies (apart SA, Israel, and brexit Britain), and it's going to end pretty badly. I will be very surprised if we don't get a market crack before end of next year.

Fjolsvith2• 7 years ago

What'll really surprise you is when the central banking system is shut down.

ulfw3• 7 years ago

Most of this Trump idiocy will backfire on the US.

Tiny example of today: https://www.cnet.com/news/huawei-is-apparently-already-makin...

How does having no US parts benefit America here exactly? Having one day a non-Android competitor that the largest Android manufacturers of the world (Huawei, Oppo, Vivo, Oneplus, Xiaomi) might use will benefit the US how? Having Chinese homegrown chips one day will benefit the US how? etc etc

I get that something might have to be done. This certainly isn't the way.

detritus• 7 years ago

The WH is fighting will almost all major economies (apart SA, Israel, and brexit Britain),

I suspect us mugs here in Brexit Britain are simply being buttered up so we can get properly buggered against our wishes, and it won't be on some artsy Parisian floor, it'll be on the world stage with our pants down.

nraynaud2• 7 years ago

The Chinese Exclusion Act passed in 1882, it's not like anything is new here, it's just the return of an old wave.

unclesams-uncle• 7 years ago

I don't think the current White House is capable of dealing with a multilateral world. The actions taken up to this point -- tariffs and market restrictions -- are a relic of last century (even then, they never worked that well).

A lot of Obama's foreign policy focused on containment and strength in numbers.

Both the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) were as much about developing business as they were about Chinese containment.

TTP in particular grouped many of China's adversaries in the region into one large, free moving bloc. Combined with an IP protection mechanism, this group offered global manufacturers a strong alternative to China, reducing the rest of the world's dependence on the PRC.

Second, Obama realigned the military to contain China.

Unfortunately, 2016 happened and Trump, out of his principles and reasons unknown, scuttled these efforts.

I don't see the Trump administration making an about-face any time soon since it would go against their world-view.

cat199• 7 years ago

a multilateral world.
Obama's foreign policy focused on containment and strength in numbers.

... and enforcing a WTO/Bretton-woods unilateral world by placating China and containing Russia/Iran to keep the BRICS bloc from gaining equal footing.

cft• 7 years ago

Are there US companies that are listed on mainland Chinese exchanges?

keiferski3• 7 years ago

The growing confrontation between the West and China seems to me to boil down to a philosophical problem:

- Should free markets/societies/cultural entities allow participation by all actors, even those which (in their own spaces) obviously don't play by the rules of the entered market/society/culture?

- Or, should entry into the entity be restricted to those that themselves (in their own space) follow the rules of the entered culture?

It seems to me that there are definite advantages and disadvantages to both approaches and it's probably something that game theorists have addressed. To use a convoluted, over-simplified metaphor of a playground:

- If we allow kids (that have different rules in their own playground) into our playground, we run the risk of their rules overcoming or having a negative effect on ours. We also enable them to play with us while having "bad" rules on their own playground - some of which might give them an (unfair) advantage over us on our own playground. However, we get the benefits of having more kids and toys to play with. And, maybe the kids will choose our rules (which we perceive as better) over their own.

- If we don't allow them into our playground, we have less kids and toys to play with. We also have no real direct influence on them - they can't see that our rules are better in person, and we can't threaten to kick them out of our playground if they aren't in it to begin with. However, we avoid the risk of having their rules overwhelm ours and we worry less about them having unfair advantages over us on our own playground.

speedplane3• 7 years ago

The growing confrontation between the West and China seems to me to boil down to a philosophical problem ... Should free markets/societies/cultural entities allow participation by all actors, even those which (in their own spaces) obviously don't play by the rules of the entered market/society culture?

You're missing one of the major points: freedom. The issue is not just weighing the utilitarian pros/cons of allowing diversity of thought. In the U.S. (and generally the west), the ability to think and do what you want is valued as an important individual right that each person is entitled to, regardless of whether it's good or bad for society as whole.

keiferski3• 7 years ago

I'm specifically talking about the issue of allowing non-agreeable actors into your own space, or in the case of this article, stock exchanges.

scottlocklin• 7 years ago

the ability to think and do what you want is valued as an important individual right that each person is entitled to, regardless of whether it's good or bad for society as whole.

At one point in life I'd have agreed with you. Now I can't agree with this at all. Usually the West wants very specific kinds of freedom; the kinds which are useful for social control. The first amendment may remain in the US as a sort of residual idea from classical liberalism, but it seems not too many people actually want this.

RobertRoberts• 7 years ago

I think that you should play by the rules of the playground.

If you think its ok to try and change other peoples rules to suit yourself instead of adampting to the rules of the area you enter then you are simply a bully.

mytailorisrich• 7 years ago

The West bulldozed its way through the whole world and imposed rules that benefit it.

The issue here is much less cultural that you might think.

China has been weak in the past couple of centuries and was thus on the receiving end. But as they grow stronger the rules will have to change to take them and their interests into account.

This obviously does not mean that we should cave in to everything. It means that they should have an equal say in the rules.

At the moment it's the US fighting China more than the West as a whole. It makes sense because it's US dominance that is under threat. The question is whether the US want to fight a losing battle or work constructively for the long term.

asabjorn4• 7 years ago

Let us look at the facts from [1]:

- China require companies to transfer all intellectual property to a venture owned 51% by Chinese before getting access to market

- people running joint ventures like clockwork open competing companies cutting western partners out

- China is a developed country that declare themselves as developing to skirt economic and environmental controls

- China has state owned companies that compete with western companies that they regularly subsidize to beat competition

Also on a softer end China is trying to spread its way of ruling their people to the west [2]. How long do you think you’d last under such a system before being “re-educated” like the Muslim Uighur or Confucian Falun Gong?

[1] https://ustr.gov/sites/default/files/2018-USTR-Report-to-Con... [2] Deceiving the Sky: Inside Communist China's Drive for Global Supremacy https://www.amazon.com/dp/1641770546/ref=cm_sw_r_cp_api_i_Da...

pas7• 7 years ago

Equal say is nice, but I want equal treatment too. (Both when it comes to trading [MFN rules], and when it comes to law, courts, administration. They are extremely far in both regards from healthy/sane.)

All the amazing gain and growth given to us by the free market worths nothing if it fuels oppression, if it raises barriers to entry to markets, if it pushes the whole economy toward monopolies and monopsonies, toward fragile centralization, and toward worse lives for the participants.

And no, it should be more cultural, not less. There are clever and efficient policy tools to manage healthy free markets. Allowing China, the US or anyone to make people forget/ignore these cultural foundations and all the achievements of good policy (as in political cooperation and economic competition; from the forming of the US itself from the individual original states to the contemporary EEA integration such as traditional/geographical origin protection and indication, Schengen border control union, emission quotas, common food and drug inspection standardization, etc.), just because some country is strong would be a folly of the greatest magnitude.

snagglegaggle• 7 years ago

But as they grow stronger the rules will have to change to take them and their interests into account.

You're asking me to give up QoL/future income/whatever based on what? Their threat of violence? That's ridiculous, threaten them back and follow up on it if necessary.

xxxpupugo2• 7 years ago

The growing confrontation between the West and China seems to me to boil down to a philosophical problem

It is not West VS China, it is mainly US VS China. EU and other Asian developed economies might disdain China ideologically, but I don't think they have the appetite to break the status quo this eagerly.

And it is nothing philosophical about it. It is geopolitical, and it is human nature. What you are saying are just intellectual seasoning, it may be necessary to intrigue the audience, but not for action.

China is a new world power that competes with US both militarily and economically. Post WWII, US had fought with Soviet/Japan on those fronts separately, but China looks like a combination of both, makes it even more threatening and hard to tolerate.

factsaresacred• 7 years ago

but I don't think they have the appetite to break the status quo this eagerly.

Mainly they don't have the strength to break the status quo. Plus they don't want to jeopardise access to such a large market. It's a Faustian bargain they're beginning to regret.

China is going to rise, this cannot and should not be prevented. But allowing them to rise at your own country's expense is folly. America gets this.

tomComb• 7 years ago

The other Asian countries were quite willing and ready to join with the US in action against China, eg. the TPP, but Trump seemed to have no interest in enlisting allies in this battle.

Imagine how much faster this trade war would be over if all of China's top trading partners were involved rather than just the US.

primroot2• 7 years ago

The so-called free market game is naturally rigged in favor of those who have more access to capital. And this includes capital of restricted intellectual property, however free one thinks restricting that capital is. However, even with the advantage of capital, a rich country like the US can find reasons, such as national security, to go against the rules. Agricultural subsidies and the military industrial complex go against the free market. Furthermore the US has a history of close relationships with countries which are in theory its philosophical opposite (Romania under Ceausescu, Saudi Arabia, and more recently Myanmar). Philosophical conflict is just an intellectually weak way of making a geopolitical conflict seem less cynical.

input_sh2• 7 years ago

What other country from the West has a beef with China?

This is purely US vs China. Leave the rest of us out of your own mess please.

ng12• 7 years ago

So what's the message, the EU is only interested in combating oppression when there's no money on the table?

aianus2• 7 years ago

Canada, for one. China continues to imprison random Canadians as retaliation for the arrest of Huawei’s CFO in Vancouver.

pas7• 7 years ago

The mentioned market access inequality is a problem for every other WTO member too.

perl4ever2• 7 years ago

I was just reading an article in the South China Morning Post (from a year ago) that was making the case that it is not in fact just the US.

"In recent months, Germany, France, Britain, the European Union, Australia, Japan and Canada have all joined an unprecedented global backlash against Chinese capital, citing national security concerns. Dealmakers now wonder whether this dynamic will run its course or should be taken as a new normal."

https://www.scmp.com/business/banking-finance/article/216397...

jakeogh• 7 years ago

People catching a hint of the real power they have is an existential threat to traditional myth structures; not just China's.

OscarCunningham3• 7 years ago

Alternative hypothesis: Trump is bullying China to make himself appear strong to US voters. He has no objective other than that.

ulfw3• 7 years ago

It's not the 'West'. It's US America. And to be even more precise: it's GOP-led US America.

yogthos• 7 years ago

People seem to forget the basic fact that markets are run by greedy psychopaths. And I don't mean this as a hyperbole. Capitalism directly selects for psychopathic behavior because it's a system of Darwinian competition. The system efficiently selects for this behavior. If you want to have capitalism then the only sane approach is heavy government regulation.

the_resistence• 7 years ago

Think Anti-Vaxxers

fouc• 7 years ago

I'm guessing that Chinese companies are somewhat similar to statutory companies. I've heard that large Chinese companies have strong CCP oversight, with a party member involved that the CEO/founder has to defer to.

So the question is - does it make sense for not-actually-public-companies from other countries to be listed on the U.S. stock exchange? It could be potentially misleading otherwise.

nraynaud2• 7 years ago

Boeing is listed in more or less the same conditions. Google is listed and they have strong links with political parties.

edit: the more direct answer is that the shares that are listed are free and publicly tradable, there exist other shares that are not available on the marketplace, like Facebook. But those shares are owned by state entities.

dragonwriter• 7 years ago

All it means for a company to be a public company is that it has publicly traded equity. A company that is listed on a stock exchange is, ipso facto, a public company.

thephyber• 7 years ago

The Alibaba listing in the US isn't even for stock in the Chinese company. It's "stock" in a Cayman Islands holding company that doesn't have any guarantee for stockholders to have any rights in the Chinese parent company.[1]

When the US president uses the bully pulpit to insult and threaten American-based multinational companies to suit his political / personal needs at the threat of a DoJ / SEC investigation or FAA license threat, how is that much different than a CCP official doing the same? I would argue it's not nearly as far as my fellow Americans would like to think it is.

[1] https://www.marketwatch.com/story/beware-alibaba-ipo-isnt-re...

hos234• 7 years ago

True but American don't like being pushed around while the Chinese are used to it. Which means the Bully is usually tolerated for much shorter durations than Chinese Bullies are. Churchill's rise and fall is a good example.

pas7• 7 years ago

The threat by Trump about let's say a SEC, DoJ, FAA investigation is less credible due to the US still seen as having a sort of functional/independent justice system, rules for these investigations, and clearer appeals processes than in China.

ainiriand2• 7 years ago

Lockheed Martin is in a similar situation.

iscrewyou• 7 years ago

Oh boy, this thread needs to be locked down. All the conversation has turned into political short outbursts and I only see one comment actually remotely talking about the topic.

Even the thread title is not what the article headline is. Maybe the title is at fault for off-topic conversations.

nabla9• 7 years ago

Normally the US government has extraordinary power over China in financial sector.

But Trump has alienated all traditional allies. Threat to exclude China turns into opportunity for others to exploit the situation. Euronext, London, Toronto, Tokyo and Hong Kong are in the position to gain relative to NASDAQ and NYSE.

ps. I think the change of delisting happening is less than 5%.

ainiriand2• 7 years ago

I do not understand why this comment is being downvoted. The OP is absolutely right about this.

aianus2• 7 years ago

China hates Canada, no way these tech stocks are being listed in Toronto, it’s nonsense.

wruza• 7 years ago

How would it change costs of chinese goods (esp. hardware) for a third world, if implemented?

Edit: added chinese

RaceWon• 7 years ago

More trade leverage and it will also destroy Biden. Brilliant.

tibbydudeza• 7 years ago

Time to bring out the duck and cover PSA videos ... US/UK vs China-Eurasian hegemony ... sounds like 1984 all over again.

asdf333• 7 years ago

i would recommend the documentary "the china hustle"

i was skeptical of the documentary before watching, but it is very good

iron0013• 7 years ago

Thread title does not match link title or content.

riffraff2• 7 years ago

while the title is a bit more inflammatory than the article, it does say that delisting is being considered amongst other options.

Fjolsvith2• 7 years ago

Good.

The CCP pretty much owns every Chinese big company. And, they don't let people examine their books. Who's to say that all that American investment money isn't going into grossly or even fraudulently overvalued stock?

Traster• 7 years ago

The SEC. If your concern is that companies listed on US stock exchanges aren't correctly reporting their financials thats an issue for the SEC. It's not an issue for a blanket ban on Chinese companies being listed. Preventing Americans from being able to trade their investments easily on a reputable exchange isn't going to help them.

makomk• 7 years ago

Running undercover espionage operations in China - which is what it would probably take to work out what's going on, given that the government there is in on it and extremely hostile to whistleblowers - is well outside the scope of what the SEC is capable of. Even the CIA has trouble with it.

_iyig5• 7 years ago

The SEC has already failed miserably once in this exact role. What reason do we have to believe that even a fully-funded, well-staffed SEC could get the necessary _accurate_ figures out of China, and Chinese companies, to adequately perform this duty? Many Chinese companies have grossly exaggerated assets and earnings to the SEC before.

https://en.wikipedia.org/wiki/The_China_Hustle

atr_gz• 7 years ago

Except the SEC has given Chinese companies an exemption from normal oversight. I agree that there shouldn't be a blanket ban - but the companies should have to follow the same rules as everyone else.

https://www.chinalawblog.com/2019/06/china-and-the-u-s-stock...

longcat• 7 years ago

sadly the CCP don't play by any rules

jarym• 7 years ago

On the one hand - I feel it is totally legitimate that the US take the view that they want a symmetrical arrangement in so far as 'if Chinese firms can access US investors then US firms should be able to access Chinese ones'.

On the other hand, this has the feel of trying to bully China into a trade deal that is good for Trump but not for the Chinese. It could also hurt investor confidence in the US.

Ultimately, its a tough one and while I think its a horrible path for the US to be pursuing, I understand why they are thinking about it.

ulfw3• 7 years ago

US Propaganda and sentiment as instigated by this administration against China resembles cold war anti-Soviet sentiment in the 1970s and 80s.

arisAlexis• 7 years ago

This is typical tactics from Trump. Whenever there is a meeting he inflicts maximum leverage and stress to the opponent. I wouldn't read much into this honestly. It's a game.

krapp• 7 years ago

I wonder when Trump will realize he's trying to play checkers on a chess board?

robomartin• 7 years ago

The China problem is of our own doing, of course. Up until Trump nobody had any interest in addressing it. I'll just say nobody before him took this on because of the potential for political suicide. Love or hate him (I'm +/- around neutral, hate how he presents the presidency, like most of what he is actually doing when he is not busy saying stupid things) forcing a realignment of China is a good idea.

This had to be done 25 years ago, when it would have been far easier to accomplish. Attempting this today is equivalent to not detecting cancer early enough for a simple operation to extract it fully with minimal consequences. Instead, we wait until it has metastasized and nearly have to kill the patient in an attempt to cure him. Notice my use of the word "attempt"...because there are no guarantees.

The China problem, I think, can be boiled down to a few important line items:

    - Intellectual property theft
    - Currency manipulation
    - Terrible disregard of the environment
    - Objectionable labor practices
    - Predatory practices with foreign entities operating in China
    - Fraud in regulatory testing and standards 
      (UL/CE/TUV mark from China testing means nothing)
    - Lackluster of participation in foreign aid 
      (for the second largest economy it is embarrassing)
    - Asymmetric property ownership laws
    - Abuse of the global postal system 
     (free shipping from China because the US taxpayers subsidize
      their packages within the us to the tune of US $500 million per year)

There's probably more, though I think these are some of the main points. If any other economy behaved this way they would be universally scolded in around the world. If the US, Germany, France or the UK behaved this way we would have massive marches all over the world. China does this and more and people, for the most part, are either oblivious to it or don't care. The problem with this is that they are sacrificing their own jobs and their kid's futures for their inaction.

I think the value of playing with reasonably similar rules is that one entity can't destroy other players by using out of the norm methods to destroy them and then gain supremacy. This is why we have such things as antitrust and monopoly laws. This is why such methods as price fixing and bribery are illegal in the US and Europe. This is why we respect intellectual property, fight for humane labor practices, respect safety testing of the products we use and help less fortunate nations to the tune of hundreds of billions of dollars and generally speaking.

China is almost the diametric opposite of this. And for that they likely deserve a bit of a reality check today.

Non an easy problem to fix. Others have allowed this cancer to metastasize for decades. To fix it today you have to be a complete a--hole and go for broke. It looks like the job fits the guy in the White House. Not sure if he will succeed. The other problem is that, in western democracies, leaders and some policies tend to only survive term limits and election cycles, while in China they know they can stay the course for decades.

djohnston• 7 years ago

Not my VEMAX!!!

White House Weighs Limits on U.S. Portfolio Flows Into China

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