Posted by Alan Rappeport and Ana Swanson
The Trump administration is debating whether to prevent Chinese companies from listing stocks on US exchanges, the latest push to try to sever US-China economic ties, according to people who are familiar with the overlays.
The internal discussions are in their early stages and no decision is imminent, these people warned.
The talks come as senior officials from both countries will resume trading negotiations in Washington early next month. President Donald Trump, who has continued to give mixed signals about the prospects of a trade deal with China, said earlier this week that a deal could come "faster than you think." His decision to postpone an increase in tariffs until mid-October and China's recent purchase of US agricultural products have fueled the optimism that the talks could make a deal.
However, the prospect of further limiting US investment in China underlines the challenge that the two sides will continue to face even as they try to downsize. a trade war that has shaken the global economy. The administration has already tightened oversight of foreign investment with a special eye on China, including the expansion of investment types that may be the subject of a national security review.
Last week, the Department of Finance unveiled new regulations describing how a 2018 law, the Foreign Investment Risks Modernization Act, will work to prevent foreign firms from using investments as minority interests to capture sensitive US information. And the US has already blacklisted some Chinese companies, including Huawei.
China hawks in the administration have been discussing the possibility of stricter restrictions on listed Chinese companies for many months. Supporters say the effort would close protracted loopholes that have allowed Chinese companies with links to the government to take advantage of US financial rules and solicit funds from US investors without proper disclosure.
Skeptics warn that the move could be deeply disruptive to markets and the economy and risk turning US investors and pension funds into another casualty of the trade war.
The effect of restricting Chinese firms from raising capital in the United States can be significant. "The underlying concerns have merit, but how to deal with them without creating a lot of collateral damage is difficult," Patrick Chovanec, CEO of Silvercrest Asset Management, wrote in a post on Twitter. "Abrupt delisting of Chinese companies galore would clearly send shock waves through the markets."