Biden Team Hints at Keeping Trump’s Tough Line Toward China
American investors look to the Biden administration for guidance on Washington's policies on Chinese companies as Donald Trump resorts to administrative reprisals to solidify his tough stance on Beijing in his final days as president..
Donald trump continued to look to the presidential decrees as a favored way of adopting new measures, as his presidency would soon be over. Last week, the president signed his latest decree banning US business with eight Chinese digital payment platforms, including Alipay and WeChat Pay..
The ban will go into effect after Trump stops being president and leaves his implementation to the new administration Joe biden, which could potentially cause a disruption to world markets. An executive order is the way «do not show it to agencies or lawyers», – said Jim Lewis (Jim Lewis), Head of Technology and Public Policy, Center for Strategic and International Studies in Washington.
«His advisers are desperate to perpetuate a tough China policy. They no longer want a disconnect, they want a sharp break – to sever as many ties as possible with a focus on technology and finance.», – said Lewis. «This is not particularly logical, but it is a hallmark of this administration's strategy.».
Financial separation, many have argued, would hurt American investors more than Chinese companies.
But this administration is focused on showing its tough stance on China, and implementing executive orders is the fastest way to achieve this..
Trump has signed 207 such decrees in the past four years – more than any of his three predecessors in his first term. Over time, he relied more and more on government decrees on China policy..
From July 14 to August 14, Trump signed four executive orders regarding Hong Kong, WeChat and TikTok. And little will change in the last days of his tenure.
«I believe it would be premature to assume that the Trump administration will no longer take any action against China.», because «some of these actions seem to have been dictated by individual players», – said Andrew Bishop (Andrew Bishop), Head of Global Policy Research at Signum Global Advisors, emphasizing that these measures were often imposed on behalf of certain individuals, such as the Secretary of State Mike pompeo or the president himself.
This approach has already shown its ability to confuse global markets..
To comply with Trump's vaguely worded November decree barring U.S. investors from entering into deals with 35 Chinese companies that Washington considered to be linked to the Chinese military, the New York Stock Exchange twice reversed its decision to exclude three Chinese telecom operators, as due to lack of coordination between the Treasury, State Department and Department of Defense there was no clear understanding of whether these rules concern "daughters" these companies.
«Here and there» by the NYSE, in its trade ban announcements, China Mobile, China Telecom and China Unicom shocked the US capital markets by sharply raising and lowering their shares. A messy week undermined investor confidence and the stability of the economic policy they had hoped for.
The changes were made unilaterally and outside the financial markets. Pompeo said over the weekend that he is lifting restrictions on how US officials can interact with their Taiwanese counterparts, calling those restrictions «invalid».
One analyst pointed out that the administration's ability to pursue any new policy towards China is diminishing as the president could now face impeachment after his supporters attacked the US Capitol last week..
Recently, at least two cabinet members have resigned, and senior White House advisers have left en masse..
Among them was the Deputy National Security Advisor Matthew pottinger (Matthew Pottinger), a key person in the West Wing of the White House who has spearheaded many tough actions against China, including initiatives to counter the Chinese Communist Party's attempts to influence U.S. institutions in the tech sector and on Wall Street.
Resignation of Pottinger «reduces the administration's ability to formulate new policies quickly», – said Gabriel wildau (Gabriel Wildau), China Analyst at Teneo Consulting Company.
But that could mean fast-track methods such as issuing edicts without the need to consult with his advisers will become even more dominant in the final days of the current administration..
Andrew Bishop of Signum Global Advisors noted that «paradoxically, the fact that the president must now «behave in the best possible way» after last week's Capitol incident, could mean he is focusing his final attention on China rather than more controversial domestic affairs».
To save time, the administration simply added more Chinese companies to existing blacklists as another quick way to strengthen their policies..
Last Tuesday, the US banned US investments in Alibaba and Tencent. Major Chinese oil and gas companies are rumored to be next, especially after China National Offshore Oil Corporation (CNOOC) was added to the blacklist of companies designated by the US government as affiliated with the Chinese military..
Trump's November decree entered effective on Monday. MSCI, FTSE Russell and S Indices&P Dow Jones Indices announced that they removed Chinese telecommunications companies from their listings at the end of last week, resulting in US investors, mutual funds and exchange-traded funds (ETFs) that reflect stocks of indices, there is little time left to sell these assets in accordance with US law.
Krane Funds Advisors, a New York-based firm investing primarily in Chinese ETFs, was forced to sell about $ 39 million in shares in six ETFs that included these companies' securities, according to data provided by Bloomberg..
Krane, which manages more than $ 5 billion in assets in total, said the fund will not only sell its assets in funds that reflect MSCI indices, but it will also proactively sold sanctioned investments in funds in which the underlying indices – CSI and FastINDX – did not delete those companies.
Earlier this week, Goldman Sachs, JPMorgan and Morgan Stanley said in filings with the Hong Kong Stock Exchange that they will remove from the list of 500 Hong Kong-listed structured products that are associated with these telecommunications companies. These moves further limit investor access to these companies outside of the US capital markets..
But chances are some last-minute decrees could be overturned by the new administration..
for example, «prospects for success seem dim» for a new proposal to ban Chinese apps, Teneo's Wildau said.
«US federal courts will almost certainly block enforcement of the ban, which relies on the same legal authorities as previous bans», – said Wildau, referring to TikTok and WeChat.
The Justice Department under Biden may also withdraw this offer. or just let it disappear in a lawsuit. «In any case, the latest ban attempt is unlikely to ever go into effect.», – said Wildau.