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The next war of the trade war could be China's access to Wall Street




BEIJING – President Trump's trade war with China has led to a broad reassessment of how the two economies have become so intertwined, causing some manufacturers to trim supply chains in China and US authorities to begin cutting off key Chinese technology companies. [19659002] Another important area looks more closely at: financial markets.

Some business experts and others who urge the Trump administration to hold a hawkish attitude, discuss whether White House should slow down China's access to Wall Street. Chinese companies have raised tens of thousands of dollars through US financial markets in recent years.

Stephen K. Bannon, Mr. Trump's former chief strategist, said there was continued efforts in and outside the administration to reassess China's role in US stock markets, partly due to lack of transparency on the ultimate owners of Chinese companies.

"The New York Stock Exchange and the Nasdaq break their fiduciary responsibilities to institutional investors, the pension funds of hard-working Americans," Bannon says. "It is outrageous. Everything should be stopped immediately."

By adding fuel to the discussion, Alibaba, the Chinese e-commerce giant who held a hugely successful original public offer in New York, is considering five years ago. Also, listing its shares in the semi-autonomous Chinese city of Hong Kong, according to a person familiar with the case. The person, who requested anonymity because the discussions were not public, said that the move was not under consideration due to geopolitical concerns.

As the United States is addressing other trade barriers, the outlook for the financial sector on both sides of the Pacific is beginning to change, part of a broader decoupling between the two economies.

"There are growing conversations in the United States for complete relaxation, causing Chinese companies to reassess their confidence, not only on US technology, but also on other US resources, including financial markets," said Andy Mok, senior center employee at China and Globalization, a leading research group in Beijing.

China has long considered Wall Street as an ally.

In the late 1990s, Beijing appealed to senior financial leaders to lobby the Clinton administration to allow it to Leaders of major corporations such as Goldman Sachs and Blackstone Group often meet with top Chinese leaders, who have also acted as go-betweens, advises Trump management staff on how trade war is received both in China and on Wall Street.

Large banks see the fast-growing country as an important business source e, although they have been largely blocked from competing in China's tightly controlled financial system. Chinese companies have raised tens of thousands of dollars through US financial markets in recent years. Wall Street banks have made huge contributions from advising Chinese businesses on initial public offerings and on the acquisition of US companies and properties.

"China is full of wonderful entrepreneurs we look forward to welcoming us," said Robert H. McCooey Jr. , senior director of listing services on Nasdaq.

Trump administration has not announced any measures to cut out China, and Chinese companies continue to enjoy access to US markets. Just two weeks ago, Luckin Coffee, a Chinese competitor of Starbucks, increased in his New York trading debut, although the shares have since traded lower.

However, skepticism grows among some administrators and legislators about the presence of Chinese companies in US capital markets and in large stock indices.

In a letter in April, a bipartite group of senators, including Marco Rubio, a Republican from Florida, urged the administration to increase the disclosure requirements of Chinese companies listed in the United States States that pose national security risks or are complicated in human rights violations.

The HikVision letter, which the Trump administration considers to block from buying America components over its role in monitoring and mass presentation of Uighurs, a most Muslim ethnic minority. HikVision is part of the MSCI indexes, and investors have included UBS, JP Morgan and the public pension funds of California and New York teachers.

"The Americans would probably be very worried, if not furious, to teach it their retirement and other investment dollars fund Chinese companies with links to the Chinese government's security device and malicious behavior," the letter read.

It is not clear how much credibility such ideas have with the president and his current advisers. But if Washington acted, then China has its own way to fight back.

Chinese entities, mainly the country's central bank and sovereignty fund, own at least $ 200 billion in US stocks, with an estimate that gives Beijing an additional extra weapon, Chinese leaders should decide to sell. China's economic policemen are aware of the extreme option, people who are familiar with politics said. They insisted on anonymity because of the political and diplomatic sensitivity of the problem.

Such a move could shake the American stock market, as Herr. Trump considers a barometer of his success. Politicians, economists and bankers have been asking for many years what might happen to the US economy if China suddenly dumps much of the $ 1.3 billion it has in US debt.

Selling shares may be stronger than returning bonds. The stock markets tend to respond to less money than US government bonds, because the government bond market is simply so big.

China is unlikely to dump stocks fast, says Mark Sobel, former former finance minister, now the US leader of London-based Official Monetary and Financial Institutions Forum. Doing so would not only interfere with the United States, but could also mean selling stocks with losses during a temporary price decline, which would damage the investment returns on China's assets.

"In my experience, China's reserve managers have always acted in a professional manner and tried to promote financial stability," Sobel said in an email.

Formerly, Chinese authorities have quietly sold part of their US stock holdings when they needed extra dollars to help deal with the value of the currency, said Brad Setser, economist at the External Relations Council of New York.

Chinese companies that are starting to change their relationship with US financial markets now have questions about whether their moves are trade-related.

Shanghai-based Semiconductor Manufacturing International Corporation, a trading company most traded in Hong Kong, is trading its US shares in the New Yor k stock exchange to the much less visible discotheque market. S.M.I.C, as is known, attributed the low trading volume decision to its New York shares.

"S.M.I.C has overweighted this transfer for a long time and it has nothing to do with the trade war" or with the trans-Pacific dispute over Huawei, a Chinese technology company, S.M.I.C. said in a statement in response to the questions. "Migration requires a long preparation, and the timing has coincided with today's commercial rhetoric, which can lead to misunderstandings."

Alibaba has long been discussing selling his shares in mainland China or Hong Kong, so it is not clear what role, if any, had the trade war in their deliberations. Jack Ma, co-founder of Alibaba, had said at a conference last January that he would consider whether to make another listing in Hong Kong.

For Alibaba, a Hong Kong stock sale could allow more Chinese investors put their money into a company that many of them use in their daily lives. Alibaba's intensified discussions on listing in Hong Kong were previously reported by Bloomberg.

With the trade war, Mok, at the Beijing Research Group, said Chinese companies were now more likely to think twice, depending on US financial markets.

"There is no desire on the Chinese side for relaxation," he said, "but it may be a sound management decision to reduce risk exposure."



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