Sunday, September 29, 2019

White House Considering Block or Restrictions on U.S. Investments in China


There are two aspects to this recent story: the visible surface issue; and the unspoken issue below the surface.  In essence, there’s more here than most will recognize at first blush.

The surface level aspect is the Trump administration is considering a block on U.S. investments into the opaque financial system that is China.

The U.S. financial media view the proposal through the prism of the White House looking for leverage over Beijing during negotiations:
(Via CNBC) […] Restricting financial investments in Chinese entities would be meant to protect U.S. investors from excessive risk due to lack of regulatory supervision, the source said.
The deliberations come as the U.S. looks for additional levers of influence in trade talks, which resume on Oct. 10 in Washington. Both countries slapped tariffs on billions of dollars worth of each other’s goods. The discussions also come as the Chinese government is taking steps to increase foreign access to its markets. 
Bloomberg News first reported earlier on Friday that Trump administration officials are considering ways to limit U.S. investors’ portfolio flows into China, including delisting Chinese companies from American stock exchanges and preventing U.S. government pension funds from investing in the Chinese market. (read more)
The below-the-surface issues are not widely discussed.

First, here’s an interview that just might make your jaw drop.  Listen to Michael Bloomberg become an apologist for the communist regime in China, simply because Beijing is holding his financial assets hostage.  Seriously, this is alarming. WATCH:





Could you even imagine that guy being President? With that outlook toward China?  Bloomberg is known in U.S. left-wing social circles as an “environmentalist”, yet did you hear him say China moving the coal plants to just outside the city is a solution?  …. As if smog and pollution is best solved through relocated geographics’.  That’s how financial engagement with China turns people into pretzels… hostage pretzels to their financial self-interests.

 Moving on… Despite the Wall Street pundits proclamations, it is clear by now that President Trump is methodically decoupling the U.S. from China.  President Trump has been subtle at times with hints, and then not so subtle at other times with warnings to U.S. companies.

A good example of the dynamic is found in President Trumps discussions with Apple CEO Tim Cook.  It is clear that President Trump doesn’t want to harm U.S. companies, but simultaneously he needs them to accept there is almost no possibility of a U.S-China trade agreement.  Therefore the administration is in somewhat of a strategic influence-game with U.S. multinationals.

If you begin looking at the U.S-Chinese investment situation from Trump’s position; and  you realize/accept there is not going to be a trade agreement; then you can see POTUS trying to protect U.S. investments from the fallout.

China needs dollars; everyone who follows trade and China’s economic position understands that without dollars China sinks.  The current economic weakness in Europe is driven partly by China getting less dollars due to their conflict with the U.S.
It is the reverse exfiltration problem.  With less dollars inbound to Bejing, China has to limit purchases from other nations;  less purchases from Europe are an outcome.  This is a source of contention from Germany, France and the EU.

President Trump appears to be looking for ways to influence the withdrawal of U.S. investments, especially pension and retirement accounts, from what he and Treasury Secretary Steven Mnuchin perceive as high-risk exposure in China. However, it’s not because the administration wants to pressure Beijing; but rather because the administration is attempting to protect American investment interests.

President Trump knows as soon as he fully decouples, all investment assets in China will plummet…. and everyone knows China’s financial markets are tenuous at best.  Trump has been warning American interests, albeit carefully and with nuance, to position themselves according to a predictable outcome.  This latest series of discussions is simply an extension of the Trump administration trying to get people to think ahead…. forced medicine.

 More on China’s financial position:

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