U.S. Vice President Joe Biden made statements at the Strategic and Economic Dialogue (S&ED) at the State Department in Washington, USA, on June 23, 2015.
Yuri Gripas | Reuters
BEIJING – As tensions between the United States and China continue to simmer under new administration, risks for U.S. investors exposed to China will only increase, according to a Cowen report.
“We believe President Biden poses a greater risk to financial companies on the Chinese front than President Trump,” Jaret Seiberg, an analyst at Cowen Washington Research Group, DC, wrote in an April 7 note. “We believe the Biden team will be more strategic, more multilateral and more effective in the way it faces China than the Trump team.”
Relentless pressure from the United States will likely make Trump-era policies a reality with initially long periods of grace. This includes the withdrawal of Chinese companies from U.S. stock exchanges, Seiberg said.
Tensions between the two countries rose under former President Donald Trump, who initially focused on trade and later turned to technology and finance. The Trump administration wanted to curb U.S. investment in Chinese companies and stocks with new regulation, but the policies had a relatively smaller impact than tariffs and sanctions on Chinese companies.
Since taking office in late January, U.S. President Joe Biden has maintained a firm stance on China. His administration called the country a more assertive “competitor” and on Thursday added more Chinese technology companies to the U.S. blacklist, citing national security concerns.
“It will happen. “This will likely force these Chinese companies to trade in Hong Kong.”
In December, Trump signed a law stating that foreign companies could not be listed on a U.S. stock exchange if they did not comply with U.S. Public Accounting Supervisory Board audits for three consecutive years.
The board’s website lists about 300 cases of denied inspections, with an overwhelming majority of Chinese companies listed in the United States, such as Alibaba and Baidu. In the past 15 years, some Chinese companies have been able to raise billions of US dollars through stock listings before their financial fraud was revealed, causing huge losses to investors.
Despite growing political tensions, 30 Chinese-based companies went public in the United States last year, gaining more capital since Alibaba’s giant IPO in 2014, and many more have held bids. initial public since then. Optimists have said the three-year compliance period would give companies and politicians time to act.
More investment restrictions
Cowen’s Seiberg expects the Biden administration to block U.S. investment in Chinese banks and expand the U.S. blacklist of investments to include more Chinese companies, especially those with alleged links to the Chinese military.
Chinese companies are likely to face more challenges in acquiring U.S. financial firms, including emerging fintech companies, given the continued limitations in the acquisition of U.S. consumer data from the Chinese, he said. Seiberg.
Some extreme, but highly unlikely, measures the Biden administration could take include a Hong Kong ban on clearing US dollars, he said. But he doesn’t expect the U.S. to go as far as canceling China’s stakes in U.S. treasuries.
“It would destroy global demand for U.S. Treasury securities, as foreigners would fear they could become the next target,” Seiberg said. China is the second largest owner of treasures in the world.
The Biden administration should also monitor Beijing’s retaliation.
China could fail to meet previous commitments and revoke changes that would allow foreign companies to take ownership of the majority of its operations in China, including finance, Seiberg said.
– CNBC’s Michael Bloom contributed to this report.