China-US Decoupling Gushes Out | NewsClick

In a flurry of statements on Friday amid escalating US-China tensions, five of China’s largest state-owned companies announced their intention to delist from the New York Stock Exchange — PetroChina Co Ltd, China Life Insurance Co, China Petroleum & Chemical Corp, Aluminum Corp of China and Sinopec Shanghai Petrochemical Co. which represent over $300 billion in market capitalization.

As of August 2022, the market capitalization of these Chinese giants was as follows: PetroChina ($132.11 billion); China Life Insurance ($94.88 billion); China Petroleum & Chemical Corp ($70.23 billion). Aluminum Corp of China ($10.29 billion) is also the world’s second largest producer of alumina and the third largest producer of primary aluminum; and, Sinopec Shanghai Petrochemical Co. ($3.77 billion) is a subsidiary of Sinopec (market capitalization: $68.45 billion) and is one of the largest petrochemical companies in China.

At work here, it is above all an increased surveillance of Chinese companies listed in the United States on which American regulators have insisted since the legislation of Congress passed in 2020 under the Trump administration in this direction. The legislation follows the failure of lengthy negotiations for U.S. regulators to gain full access to inspect the audit documents of U.S.-listed Chinese companies, in what Beijing sees as a “crackdown” on Chinese companies and as “financial decoupling”.

Both in terms of the market capitalization of the New York Stock Exchange as a whole (which currently stands at $26.2 trillion) and in terms of US depository shares in the five Chinese companies, this development in itself is not upsetting but has implications.

Will it bring a bad name to the New York Stock Exchange? Maybe, eventually. Will this have a serious impact on the operations of Chinese companies? Unlikely. (For example, PetroChina’s U.S. depositary stock was approximately 0.45% of the company’s total share capital.)

Nonetheless, it is an indicator that will be noted in financial markets, even as a growing number of Chinese companies are also positioning themselves to pull out of US markets. Interestingly, the 2020 US legislation also includes a push to delist US-listed companies by changing auditing rules. The U.S. Securities and Exchange Commission put 159 Chinese concept stock companies (companies that operate in China) on its watch list as of the end of July.

Considering that the race to maintain the top spot among global capital markets is fierce, global investor perceptions matter and the exodus of high-potential Chinese companies can only reflect badly on the New York Stock Exchange. Wall Street is also a powerful lobbyist. Therefore, the Chinese game plan would be to moderate the strict US regulations, which currently tighten the screws on Chinese companies raising funds in the United States, unless they fully explain their legal structures and disclose the risk that their activities will be hampered by the Chinese. government.

Clearly, China’s interest is to achieve consensus. Going forward, the ultimate litmus test will be whether or not more major Chinese state-owned companies pull out of US markets. There are about 250 Chinese companies listed in the United States. This is where uncertainties in US-China relations will come into play.

It’s only natural for Chinese companies to revamp their financing approaches — for example, going public in Hong Kong — rather than expose themselves to growing political risks in the United States. And political risks can come from a variety of sources.

Traditionally, political risks could have been assessed in terms of political decisions and changes affecting trade tariffs, taxes, working conditions, privatization and regulation, changes in political leadership, political volatility or resulting uncertainty. terrorism, riots, coups or war, etc. that could disrupt a company’s ability to execute its chosen strategy and its ability to provide its products or services profitably.

But geopolitical risks, such as Russia’s intervention in Ukraine, have introduced a new pattern: “hellish sanctions” have frozen Russian currency and gold reserves, confiscated Russian private assets, and expelled Russian banks from the banking system. western. Leading Western politicians have hinted that similar horrible things could also be done to China, if it helped Russia – although that is easier said than done, given the sheer size of the country. Chinese economy compared to that of Russia and the high degree of interdependence in EU-China trade and US-China economic relations.

Meanwhile, the situation in Taiwan looms large. Following House Speaker Nancy Pelosi’s visit to Taipei on August 2-3, the Chinese comments threatened “serious far-reaching implications for bilateral relations, including in economic areas” – citing as an example The decision by China’s leading electric vehicle battery maker Contemporary Amperex Technology Co will suspend plans to announce a multi-billion dollar plant in North America.

A unattributed comment in world times threatened on August 4 that “With the start of major military exercises around the island of Taiwan, the mainland has actually started or accelerated the reunification process, which the United States cannot stop. This means that China is, indeed, prepared for US intervention. One can only imagine what China will do to eliminate potential risks, including its massive holdings of US Treasuries.

“China is the second largest foreign holder of US Treasuries, only after Japan. China’s holdings of US Treasury securities fell to $980.8 billion in May, falling below $1 trillion for the first time in 12 years…a further deterioration in US-China relations will have likely a direct impact on China’s risk appetite for holding US Treasuries and reducing US Treasuries holdings could become a precautionary option. This could deal another blow to the global reputation of the US dollar, the backbone of the US economy.

“The Russian-Ukrainian conflict has already dealt a severe blow to the credibility of the dollar. Now, an escalation in Sino-US tensions could further weaken the status of the dollar if China reduces its holding of US Treasuries. In that sense, in the long run, Pelosi’s graduation trip will eventually come back to bite the US economy in a way that will drain the dollar’s credibility.

It sounds exaggerated, but then such blasphemous thoughts are spread at all! The good part in all of this is that Washington and Beijing seem to agree that the jawbone is better than war.

Basically, the farewell message that Kurt Campbell, the Indo-Pacific affairs coordinator on Biden’s National Security Council, gave during his recorded press call During Pelosi’s visit yesterday, he confirmed that Biden and Chinese President Xi Jinping raised the possibility of an in-person meeting during their last phone conversation in late July “and agreed to have their team follow up.” to sort out the details.

Campbell said there were no new details to announce, but the two leaders are expected to attend November’s G20 meeting in Bali.

Interesting way, an influential Chinese publisher noted on calm reflection, a full week after House Speaker Nancy Pelosi’s trip to Taipei, that “one of the reasons” might be that she intentionally used the Taiwan issue to stir up “a storm of opinion public” and “creating atmosphere” for the passage of the CHIPS and Science Act last Tuesday, in a deft “combination of punches” against China.

You can never tell in these extraordinary times of American politics! In fact, Campbell also pointed to Beijing’s disapproval sanctions against Pelosi and his family members.

Campbell said the United States will ensure freedom of navigation in the Taiwan Strait and the region, but “we will not be reflexive or instinctive. “We will be patient and efficient. We will continue to fly, sail and operate where international law permits, consistent with our long-standing commitment to freedom of navigation and this includes conducting standard air and sea transits across the Taiwan Strait in over the next few weeks.

Crucially, Campbell did not provide details on when such transits would take place, or confirm reports that the United States had chosen not to sail an aircraft carrier through the strait as the administration Biden “did not want to escalate the tense confrontation.”

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