The trade conflict between the U.S. and China was until now restricted to slapping tariffs on imports. However, industry experts believe that it could spill out into the financial markets very soon.
The Wall Street battle
According to reports, experts are asking the Trump administration to limit Chinese access to Wall Street. They argue that Chinese companies have raised billions of dollars from American financial markets even though most of these firms have very low transparency as to their activities. A group of lawmakers, including Senator Marco Rubio, have requested the Trump administration to set up stringent disclosure requirements for Chinese businesses listed in the U.S. that are potentially a security threat to the country.
Some of these Chinese companies are also known to be involved in human rights violations back home. For instance, Hikvision is a manufacturer of surveillance tech. It is a part of the MSCI stock index and has raised money from investors like JP Morgan, UBS, and even pension funds of American teachers. The company is known to have supplied the tech that is used to monitor and persecute Uyghur Muslims in the Xinjiang region.
“This is going to be a blind spot that is no longer afforded them… American people would be outraged to learn that their retirement and investment dollars are being invested in companies that are so bereft of sensitivities to human rights concerns, that are aiding and abetting repression, that are participating in endangering our country,” Roger Robinson, a former member of President Ronald Reagan’s National Security Council and CEO of RWR Advisory Group, said in a statement (The Epoch Times).
On the other side, Chinese companies are also said to be considering pulling out from U.S. stock markets. The U.S.-China trade war seems to have made many of them rethink their long-term strategy of listing shares in American stock exchanges. For instance, Alibaba, which has its stock listed on the NYSE, is mulling selling shares in Hong Kong or China. Semiconductor Manufacturing International Corporation (SMIC), the biggest semiconductor manufacturer in China, has already applied to delist from the NYSE.
“There are growing calls on the U.S. side for complete decoupling, which is causing Chinese enterprises to re-evaluate their reliance not just on U.S. technology, but also on other U.S. resources, including financial markets,” Andy Mok, a senior fellow at the Center for China and Globalization, said to The New York Times.
Waiting for elections
Former White House strategist Steve Bannon has lashed out at Wall Street firms, accusing them of colluding with Chinese elites to create a system that puts American workers at a disadvantage. He also warned Beijing that the U.S. is going to come down hard on its trade policies no matter which party comes into power in the upcoming elections.
“The China relationship is going to be the central theme of this election of 2020… The person who’s going to be elected in 2020 is going to be Donald Trump, but if it’s not, the person who wins the election, be it a Democrat or not, will be as big or a bigger hawk than Donald Trump… In the 2020 campaign, the central issue will be America’s economic relationship with China. The Democrats are just as hard on this as the Republicans,” he said in a statement (South China Morning Post).
President Trump and Xi Jinping are expected to meet in Japan at the Osaka G20 summit on June 28-29 to discuss a deal to end the trade conflict between the two nations. Though many look forward to hearing some sort of good news emerge out of the meeting, industry experts are warning investors not to get their hopes up.