Under Joe Biden, tapping US capital markets will get even tougher for corporate China
- Fund managers who mirror global investment indices as a strategy are obligated to increase their Chinese stock and bond holdings as their weight increases
- Washington fears Beijing’s strategy to develop its military by tapping its private companies’ tech capabilities
As the Biden administration takes the reins in Washington, the stakes have never been higher for the US relationship with China and the rest of Asia. In the latest in a post-election series, Jodi Xu Klein explores the challenges facing US-listed Chinese companies.
When large indices provider MSCI increased China shares a year ago to the highest single country weight in its emerging market benchmark, the Trump administration lent support for legislation to cut off corporate China from American investors. That financial decoupling from China is still deepening.
In November, US President Donald Trump signed an executive order barring Americans from investing in 31 Chinese companies deemed to have military ties. That number has since risen to 35.
“Those companies raise capital by selling securities to United States investors that trade on public exchanges both here and abroad, lobbying United States index providers and funds to include these securities in market offerings,” Trump said in an executive order signed on November 12.
“People’s Republic of China is increasingly exploiting United States capital to resource and to enable the development and modernisation of its military, intelligence and other security apparatuses,” he said.
At the heart of the decoupling is the fear in Washington about military-civil fusion, a Chinese strategy designed to develop a world-class military by 2049, partly by tapping its private companies’ tech capabilities to accelerate the growth of its defence industry. Under the incoming Biden administration, that focus to contain China’s military rise and its potential threat to American national security will hardly let up.