Rumors have been swirling around for several months that the Trump Administration is considering a two-pronged strategy to further push China to the bargaining table, regarding the current “trade war.”
According to a report on Tuesday by Bloomberg News, the White House is discussing the possibility of blocking government pension funds from investing in China, and even more drastic weighing the possibility of “delisting” Chinese companies from the American stock exchanges.
The latter was also first reported by Bloomberg last month that officials within the Trump Administration had been weighing delisting Chinese companies from American stock exchanges. At the time the Treasury Department denied the report.
White House adviser Peter Navarro then told CNBC the reports were “fake news;” however, people familiar with the matter told Bloomberg News that Trump officials had indeed been deliberating on how to proceed.
Moreover, aside from perhaps prodding China to come to the bargaining table, the move is also seen as protecting American investors from China’s dubious trading practices. In that Chinese firms appearing on the American Stock Market, are not subject to the same regulatory supervision mandated by other firms. Thus restricting investments in Chinese entities would also protect U.S. investors from excessive risk.
That acknowledgment came from National Economic Council director Larry Kudlow last week during a policy meeting with officials from the National Security Council and the Treasury Department.
However, the question as to why Chinese firms trading in the U.S. Stock Market are exempt from being scrutinized like other firms should be a cause of great concern for investors, moreover calling into question the integrity of the market in general.
Trade talks between the U.S. and China are set to resume on Thursday, with second-tier officials on both sides setting the preliminary groundwork in Washington to hopefully discuss and resume trade talks, which have been stalled lately. Thus far the Trump Administration has slapped China with billions of dollars of additional tariffs on goods coming into the United States.
However, the biggest threat to the United States aside from China’s unfair trade practices, along with denying access to their industries, is China’s notorious theft of intellectual property (IP), the United States has made a concerted effort in preventing Chinese companies from gaining entry into the U.S.’s strategic industries and has cracked down on China’s IP theft.
Delisting Chinese companies would affect billions of dollars in investment pegged to major indexes, just as the Chinese government is taking steps to increase foreign access to its markets.
In response to the reports, Nasdaq said, “One critical quality of our capital markets is that we provide non-discriminatory and fair access to all eligible companies. The statutory obligation of all U.S. equity exchanges to do so creates a vibrant market that provides diverse investment opportunities for U.S. investors.”
The exact details of “if” and “when” the President will pull-the-trigger has yet to be decided, however a source close to the White House familiar with the matter has said the President had already “green-lighted” the decision to move forward.
The rumors concerning delisting Chinese stocks along with blocking government pension funds from investing in China sent Chinese stock plummeting on Friday.
Alibaba shares dropped 5% while two other popular Chinese stocks Baidu and JD.com fell 3.6% and 6% respectively. Those stocks all trade on the Nasdag.
The President also signed a limited trade-deal with Japan on Monday, which helped win back benefits American farmers lost when Trump pulled out of a broader Asia-Pacific pact his first week in office.
The deal also puts added pressure on China to once again negotiate a far trade deal, in that Japan is the third leading world economy behind the United Sates and China,