Trump Plans New Curbs on China Investment

The Trump administration issued a partial but fully qualified statement denying that it is discussing restrictions on China’s commitment to US companies investing in Chinese companies and financial markets. China vows to open its markets to foreign investment. On Friday, Bloomberg reported that Larry Kudlow, president of the National Economic Council of President Donald Trump was leading deliberations within the White House. Some hawks marked it as a potential “financial decoupling” for the world’s two major economies. People familiar with the matter and participated in the discussion said that the options discussed included forcing Chinese companies to withdraw from the US exchange. Also, limiting US government pension funds’ investment in the Chinese market. Moreover, capping the value of Chinese companies included in the US company-managed index.

In a statement sent to Bloomberg by email last week, Ms. Monica Crowley, a spokeswoman for US Treasury Secretary Mr. Steven Mnuchin, said there were no plans to prevent Chinese companies from listing shares on the US stock exchange, currently. She did not address other reporting options and therefore declined to provide more details of the discussion. The response was with respect to the initial report published by Bloomberg. This was followed by the New York Times, the Financial Times, and other news organizations. The US market was uncomfortable and led to a sharp fall in the share price of Chinese companies listed in the US. On Friday, the S&P 500 Index shut down around 0.5%. This was due to the US shares of companies like Baidu Inc., and Alibaba Group Holding were dropping. China’s stock market dropped before the week-long National Day holiday.

The Trump administration is also preparing to host Chinese Vice Premier Liu He and other senior officials who are expected to hold trade talks between October 10 and 11. Also, a threat to raise the US tariffs on imports from China is due to take effect. Although both sides are eager to begin at least a temporary truce in the 18-month trade war, this has instigated to drag down the global economy. But the national security hawks within the administration of Trump continue to push the conflict. Inside the White House, there are hopes for new controls on capital inflows into China. This reflects the desire of some Trump consultants to launch multidimensional economic wars with rising economic rivals. In addition to tariffs on Chinese imports from about $360 billion since last year, the Trump administration has imposed strict new controls on technology exports and has taken a skeptical attitude toward Chinese-backed investments in the US.