Following the announcement on Friday that the White House was considering blocking Chinese companies from listing on US exchanges, it appears that the plan has been put on the back burner.
The US Treasury Department cleared the air, indicating that the land of the free and the home of the brave welcomes investment in the US, Chinese or otherwise… for the time being.
What was going on?
On Friday, reports surfaced that the White House planned to restrict investment into Chinese companies, particularly through the US stock markets. The goal was to protect investors from risks that stem from a lack of regulatory oversight on the side of the Chinese.
Keeping US government pension funds from investing in the Chinese market was also on the table.
That’s not all, though
Chinese firms aren’t in the clear just yet. Nasdaq said it would be clamping down on smaller Chinese firms looking to IPO, through tightened restrictions and delayed approvals, in order to keep Chinese investors from hogging IPO shares. When small Chinese companies go public, a large portion of their shares is held by a small number of investors that are connected to the company, making the offering about as attractive to US investors as a WeWork IPO.
Nasdaq’s decision was made independent of the White House… “apparently.”
The bottom line…
As of now, you can keep investing in China… even if it does make you a little bit communist. And China is still planning to meet with the US on October 10th. Depending on how those talks go, we could be looking towards eased tensions between the two global powers.
If the White House ever ends up following through with blacklisting Chinese stocks and bonds, however, US investors couldn’t include them in portfolios. That causes problems given China’s ever-growing economic presence. Chinese assets make up an increasingly larger percentage of global indexes.
Bottom line: *POTUS finds out he has investments in China*