The market euphoria on display to start the week will likely fade a bit as investors absorb a double-barreled reality check on Donald Trump’s penchant for caustic foreign relations.
Just before midnight, the president tweeted out a letter sent to World Health Organization Director General Tedros Adhanom Ghebreyesus. In it, Trump essentially accuses Tedros of being complicit in a Chinese conspiracy, and demands the Geneva-based body “commit to major substantive improvements within the next 30 days”.
He didn’t explain, with any degree of specificity, what “improvements” the White House is seeking, but Trump did say WHO must “demonstrate independence from China”.
The letter is a slap in the face to Xi Jinping, who addressed the body by video conference on Monday, pledging $2 billion in Chinese support for the pandemic, and promising that any vaccine will be a global public good.
The Trump administration recently accused China of trying to steal America’s vaccine technology, and on Sunday, Peter Navarro claimed Beijing wants to use the vaccine to “hold the world hostage”.
Although Trump has repeatedly accused WHO of disingenuously touting China’s purported “transparency” around the virus, Trump’s own public comments and tweets sound remarkably similar to what Dr. Tedros and WHO were saying around the same time.
For example, on February 7, Trump said he “just had a long and very good conversation by phone with President Xi of China”. He then lavished praise on Beijing, calling Xi a “strong, sharp and powerfully focused on leading the counterattack on the Coronavirus”.
….he will be successful, especially as the weather starts to warm & the virus hopefully becomes weaker, and then gone. Great discipline is taking place in China, as President Xi strongly leads what will be a very successful operation. We are working closely with China to help!
— Donald J. Trump (@realDonaldTrump) February 7, 2020
To say Trump’s letter comes across as hypocritical given tweets like the one shown above would be an understatement.
Trump suspended funding for WHO on April 14, blaming the organization for disseminating “all sorts of false information about transmission and mortality” of COVID-19. He then said the body’s mistakes “caused so much death”.
The decision was widely criticized by the president’s political opponents as an effort to deflect blame for the spread of the virus in the US.
It is the furthest thing from clear how quickly WHO could implement any sort of “changes” demanded by the White House even if it were clear what changes were being sought. It appears as though Trump wants the body to cut ties with China in order to ensure it gets funding from US. One of the most pernicious aspects of the Sino-US spat under the Trump administration is the extent to which it’s forced nations and multilateral bodies to pick a side for the coming bipolarity. This is yet another example.
Barring changes, Trump threatened to “make my temporary freeze of United States funding… permanent and reconsider our membership in the organization”.
Over the course of his presidency, Trump has variously threatened to pull US financial support for a variety of multilateral institutions. Late last year, he largely succeeded in crippling the WTO via a spiteful clerical maneuver.
Perhaps more worrisome, the aggressive language in the final letter to Tedros appears to have been at least partially motivated by Fox’s Lou Dobbs and Tucker Carlson, who criticized an initial draft. Consider this public exchange:
Lou, this is just one of numerous concepts being considered under which we would pay 10% of what we have been paying over many years, matching much lower China payments. Have not made final decision. All funds are frozen. Thanks! https://t.co/xQUzHy4NDa
— Donald J. Trump (@realDonaldTrump) May 16, 2020
This is yet another manifestation of the Fox-White House echo chamber, and it isn’t healthy, that’s for sure.
Meanwhile, in another sign that the US is moving to turn the screws on capital flows to China, Nasdaq is planning new IPO rules that could make it harder for Chinese companies to list.
Obviously, Nasdaq isn’t explicitly singling out China, but the thrust of the proposed new regulations would disproportionately affect Chinese listings. “Nasdaq’s proposals include requiring companies from certain countries to raise at least $25 million in their IPO, or alternatively, an amount equal to at least a quarter of their post-listing market capitalization”, Bloomberg notes, adding that “out of the 29 Chinese companies that went public on the Nasdaq last year, 10 raised less than $25 million”.
That’s hardly the end of it. Under the prospective changes, companies would have to count someone with experience at a publicly-traded US firm as a director or a member of senior management. Failing that, they would need to hire advisers who meet that description.
It’s not clear how impactful the planned move will be.
“While the US remains a popular listing destination for Chinese stocks (16% of aggregate global funds raised in the past 5 years), the listing rule changes in Hong Kong since 2018 and the recently launched STAR board in Shanghai could potentially alleviate the disruptions in case of further tightening of listing standards for Chinese companies in the US”, Goldman said last year.
“It is China that has a surplus of capital due to a high savings rate”, Gary Dugan, chief executive officer at the Global CIO Office in Singapore, told Bloomberg Tuesday. “Many of these younger companies can get funded from within”.
Last week, Trump told Fox’s Maria Bartiromo the administration is “looking very strongly” at Chinese listings on US exchanges. Last autumn, he reportedly mulled forcibly delisting Chinese companies as part of a broader push towards capital restrictions.
Earlier this month, the White House effectively banned the Federal Retirement Thrift Board from implementing a planned shakeup that would have entailed investing some government employee savings in Chinese stocks.