[ad_1]
Original title: The White House prohibits Americans from investing in companies related to the Chinese military. Will Trump hit with a heavy hammer when he leaves office?
Article | Jin Yan, special correspondent for Caijing, Washington
The Trump administration issued an executive order on November 12 local time, prohibiting Americans from investing in Chinese companies connected to the Chinese military. This order will go into effect on January 11 of next year. This is a new political initiative taken by Trump after the US elections. This executive order is based on a bill introduced by Republican Senator Marco Rubio in late October to prevent Chinese companies listed by Washington from entering the US capital market.
In this regard, some US investment experts told Caijing reporters that Trump’s team responsible for national security and the economy has been warning in recent months that the White House could take more severe measures. This regulation may affect China Telecom, China Mobile,HikvisionAnd 31 other Chinese companies. The move is aimed at preventing US investment companies, pension funds and other institutions from buying and selling the shares of these Chinese companies, which were recognized by the US Department of Defense as being backed by the Chinese military earlier. of this year.
The world’s largest asset management company, BlackRock, has four main business segments: real estate, private equity, hedge funds, credit, and insurance. A company spokesperson said BlackRock Group is still reviewing the details of this executive order.
White House officials said it’s unclear how many US entities have those securities and how many they have. The list includes renowned Chinese technology, manufacturing and infrastructure companies such as China Mobile Communications Group, China Telecom Group, Huawei, Sinochem Group, Hangzhou Hikvision Digital Technology Co., Ltd., China Railway Construction Group, Inspur Group and China. Aviation Industry Group.
This move was interpreted as the first step taken by the Trump administration to unlink finances between China and the United States. The founder and CEO of New Finance, LLC, John Mason (John Mason), told the Caijing reporter that the United States tends to use various means to interfere with competition from other countries and, in particular, views China as a competitor. .
While the federal government of the United States is trying to imprison investment ties with China, local governments of the United States have expressed a desire to see investments from China. Craig Richard, president and CEO of the Tampa Bay Economic Development Council in Florida, told the Caijing reporter that the epidemic has made us realize that the economy is diversifying through economic development. It will not depend so much on income from tourism. We want to see Chinese investments.
Financial decoupling is not supported
Since the signing of the first phase of the Sino-US trade agreement in January this year, the Trump administration has gradually turned to the use of executive orders to limit China’s financial and technological influence.
Americans are prohibited from investing in companies related to the Chinese military on the grounds that such investments pose risks to national security. After the US Department of Defense identified 31 Chinese companies that have ties to the Chinese military in June and August, the latest administrative order involves a list of recognized Chinese technology, manufacturing and infrastructure companies, such as China Mobile. Communications Group, China Telecom Group, Huawei, Sinochem Group, Hangzhou Hikvision Digital Technology Co., Ltd., China Railway Construction Group, Inspur Group, and China Aviation Industry Corporation.
Trump stated in order that US investment in these companies will provide funds for China’s military development. Trump said China is “increasingly using US capital to provide resources for the development and modernization of its military, intelligence and security agencies,” which “would pose a direct threat to US and foreign forces.”
According to statistics, in 2019, China’s acquisition of US companies fell to $ 1.86 billion, while the total amount of Chinese acquisitions in the US reached $ 61 billion in the peak period of 2016. According to data from PitchBook, China’s venture capital investment in the United States peaked at nearly US $ 15.7 billion in 2016 and just US $ 6.7 billion as of October 27 this year. Also, so far this year, China’s foreign direct investment in the United States has fallen by 90% compared to 2016, to $ 4.7 billion.
As the United States sets new barriers to investment in China, the capital of Chinese companies listed on the New York Stock Exchange and Nasdaq has risen sharply during 2019. From 2018 to October 2020, the number of Chinese companies traded in the United States is 31, 21 and 30, respectively. In terms of funding volume, they are US $ 7.9 billion, US $ 2.9 billion and US $ 12 billion. In 2020, they will go to the United States to fund an IPO. The scale reached a maximum of three years.
US stocks closed on November 12, and the three major US stock indices collectively closed lower. The Dow Jones fell 1.08%, the Nasdaq fell 0.65% and the S&P 500 Index fell 1%. Most popular Chinese concept stocks closed higher, with new energy car stocks and e-commerce stocks leading the gains. Among them, Xiaopeng Motors was up 33.40%, Ideal Motors was up 27.27%, Weilai was up 12.12%, Pinduoduo was up 20.41% and its share prices hit all-time highs. Jingdong was up 4.27%, Vipshop was up 5.98% and Bilibili was up 3.85%. Recently, due to frequent announcements of financial reports and delivery data of new energy vehicles, China’s new car manufacturing forces have been favored by foreign-funded institutions and a large amount of money.
Affected by this news, China Mobile and China Unicom fell once more than 6%, China Telecom fell more than 9%; continental monitoring equipment maker Hikvision also fell more than 4%.
Can step-by-step pressing be effective?
The US Federal Retirement Savings and Investment Commission decided in 2017 to hedge the international investment fund index of the Thrift Savings Plan (TSP, the so-called I Fund), of Morgan Stanley Capital International Europe, Oceania and Far East Index (MSCI EAFE), Transferred to the broader MSCI Global Investment Market Index (MSCI ACWI ex USA IMI), which includes a small number of Chinese companies. Its purpose is to correct the lack of exposure to emerging markets in I funds, which is an anomaly among large pension funds.
TSP’s international investments include approximately US $ 50 billion in international stocks. Beginning in mid-2020, the fund plans to switch to a broader index and will invest approximately 8% of its funds (approximately US $ 4.5 billion) in the Chinese stock market.
In May of this year, under pressure from the president and members of Congress, this decision was suspended. The market had no choice but to reconsider after the White House cult.
Although the exclusion of Chinese stocks from TSP’s I funds has attracted a lot of attention, it is largely symbolic in the context of TSP and US investment in Chinese stocks. Compared to the TSP fund’s assets of US $ 560 billion at the end of 2019, the US $ 4.5 billion that TSP can invest in Chinese stocks is just a rounding error. This figure is also very small compared to the roughly US $ 260 billion in Chinese securities held by US residents.
In August this year, a panel of government experts recommended that Chinese companies be forced to withdraw from US stock exchanges unless they allow US regulators to obtain more financial records. However, many trade experts pointed out to the Caijing reporter that a large part of the funds raised by Chinese companies listed in the United States comes from international investors, not American residents. The delisting will not deprive Chinese companies of access to US capital. In fact, the trend of returning to China’s conceptual stocks has never stopped. Many Chinese companies are listed in Hong Kong, and US residents and international investors can continue to invest. The global nature of the capital market allows for US capital to be raised without having to enter the United States.
Trump’s executive order is based on the International Emergency Economic Powers Act and the National Emergency Act. In terms of preventing Chinese investment, the United States has implemented extensive export controls on sensitive technologies and has also reviewed Chinese mergers and acquisitions through the Committee on Foreign Investment in the United States (CFIUS). The committee may recommend that the president block Chinese investments that pose a threat to national security.
The “International Emergency Economic Power Act” gives the president broad trade regulatory powers, and the Trump administration extends this power to any type of investment, regardless of whether it constitutes a security risk, and allows the federal government to prevent the use of assets. Cfius resources Unable to cope with large volumes of Chinese transactions.
Trump used this law to try to block Chinese social media services TikTok and WeChat, which also face legal challenges and was temporarily suspended by the US court. On November 12, the US Department of Commerce decided. Failure to enforce the TikTok ban to comply with the ruling issued by the Pennsylvania Federal Court and await further legal progress. Previously, three TikTok creators filed a lawsuit against the Trump administration’s ban. The Pennsylvania District Court ruled on this lawsuit on October 30, stopping the US government’s ban on providing technical services to TikTok. The US Department of Justice stated on the 12th that it had appealed the court order.
Massive information, accurate interpretation, all in the Sina Finance APP
Editor in Charge: Xue Yongwei
