“The administration is not contemplating blocking Chinese companies from listing shares on US stock exchanges at this time”, Treasury spokeswoman Monica Crowley said in an emailed statement to Bloomberg on Saturday.
Crowley was responding to news that the Trump administration is looking at ways to choke off capital flows to China. The deliberations – first reported by Bloomberg on Friday, and subsequently confirmed by CNBC and others – are centered around a handful of proposals including delisting Chinese equities from US exchanges, compelling US firms to limit inclusion in indexes and capping investment via government pension funds.
Although this isn’t an entirely “new” idea, and although it does have some support among lawmakers, tariffs weren’t a “new” idea either – the point being, the prospect of Donald Trump and Peter Navarro spearheading a push to forcibly restrict US investment in China with draconian interventions in capital markets is terrifying, irrespective of whether similar proposals have been advanced and discussed by sane individuals in the past.
Although Treasury is now on the record saying a move to restrict Chinese listings isn’t imminent, that’s small comfort. Examples of Trump contradicting his own administration are so numerous as to elude quantification, and nobody should be surprised if he tweets something about this next week ahead of the new round of trade talks.
Additionally, it isn’t entirely comforting that Crowley added the “at this time” caveat. That means banning Chinese listings has, in fact, been discussed and she didn’t elaborate at all on the other two options Bloomberg said the administration is considering.
“Administration officials for weeks have been examining their options, and Treasury has been participating in inter-agency meetings chaired by Larry Kudlow”, Bloomberg notes, in the linked article, adding that despite some traction with moderates, “the push largely comes from Trump’s more hawkish aides, like White House trade adviser Peter Navarro, and outside advisers like Steve Bannon”.
Unsurprisingly, Kudlow and Mnuchin (Bloomberg says “the NEC and Treasury”) are said to be palpably concerned about the prospect of rattling markets, and “are working to ensure that any plan would be executed in a way that doesn’t spook investors”.
Spoiler alert: There is no way to do this without “spooking investors”, something the administration got a preview of on Friday.
For what it’s worth, Stephen Roach underscored just how perilous of an idea this really is in a segment with CNBC.
“Free and open investment is the best way to enhance cross-border opportunities for multinational corporations, so we’re going the wrong way”, he said, noting that it “really would concern me if we were to make progress on it”.
He didn’t stop there. If the administration were to actually forge ahead with the plan, Roach warned “it would be an unmitigated disaster”.