Treasury’s Weak Denial Acts as Confirmation: US Weighs Crackdown on Capital Flows to Chinese Companies, Stocks & Bonds, Listed in the US or China

Stocks of Chinese companies listed in the US have turned into a fiasco.

The US Treasury Department’s denial on Saturday focused on only one item, omitted to deny the other crucial items, and made the denial even soggier by ending it with “…at this time.” With this statement, sent to Bloomberg on Saturday, the Treasury was reacting to revelations by Bloomberg on Friday:

“The administration is not contemplating blocking Chinese companies from listing shares on U.S. stock exchanges at this time.”

According to sources, a group led by Peter Navarro, Assistant to the President and Director of the Office of Trade and Manufacturing Policy, is pushing a multifaceted and broad crackdown on capital flows from US investors to Chinese companies.

The National Security Council and the Treasury are part of the discussions. The National Economic Council has been chairing meetings on the issue and is working on an analysis of the potential impact of any limits on these capital flows.

According to Bloomberg’s sources, action is not imminent, but the officials are discussing options and repercussions, and “even more dovish advisers have rallied behind some of their suggestions.”

The benefits and risks of a financial decoupling from China — including how it could even be done and what impact it might have on American investors — was discussed last week at a dinner hosted by the Center for Strategic and International Studies in Washington. Attendants included White House economic adviser Larry Kudlow; Number 2 on the National Security Council Matt Pottinger; and members of Congress.

The measures that the Trump Administration is contemplating are running roughly in parallel with efforts by Florida Republican Senator Marco Rubio and others in Congress who have already put forward legislation to that effect. The Trump Administration is discussing its plans with Rubio and is considering backing his legislation.

Rubio said in a statement: “This administration deserves credit for their efforts to deal with the threat that the Chinese government and Communist Party poses to U.S. national and economic security, including how Beijing takes advantage of its access to U.S. capital markets for predatory purposes.”

Among the items contemplated by the Trump Administration:

Delisting Chinese companies from US stock exchanges. Most of these companies trade as American Depositary Receipts (ADRs) in the US that do not convey ownership in the company in China, but only in some kind of off-shore entity. This includes Alibaba.

The dollars involved are big. According to the US-China Economic and Security Review Commission, cited by Bloomberg, the combined market capitalization of ADRs of 156 Chinese companies traded in the US was $1.2 trillion as of late February. This includes at least 11 state-owned companies. Alibaba alone accounts for $432 billion of this, as of Friday.

Curtailing Americans’ exposure to Chinese companies via US government pension funds. These are retirement funds administered by the Federal Retirement Thrift Investment Board. “According to several people involved in the discussions,” there is new momentum among lawmakers on this issue as these funds are facing a deadline next year to plow billions of their beneficiaries’ dollars into Chinese companies.

Imposing limits on Chinese companies included in stock indices managed by US firms. There are many funds that track these indices. Americans that buy these funds, indirectly own shares of the hundreds of Chinese companies that have been included in these indices. These may be companies listed in China or in the US. It includes Chinese bonds that have filtered into bond funds sold to Americans.

One of the reasons for curtailing capital flows from American to Chinese companies is that with these investments, unwitting Americans – they only know that they bought some broad equity or bond fund – are supporting the Chinese Communist Party and an increasingly difficult strategic and economic rival.

Other reasons are focused on protecting unwitting Americans from being indirectly exposed to the risks of Chinese companies with their opaque and sorely lacking financial disclosures.

Chinese ADRs have been a fiasco recently for US investors.

In reaction to the news on Friday, the ADRs of Chinese companies traded on US exchanges sank even further. Here are some of the legitimate Chinese companies that I track. There is a slew of toxic ones traded in the US, but I don’t bother with them. This is the cream of the crop. All but one have plunged from their peaks, and some went public in the US fairly recently:

  • Alibaba [BABA]: -5.2% on Friday; -20% since its peak in June 2018
  • com [JD]: -6% on Friday; -44% since its peak in January 2018.
  • Baidu [BIDU]: -3.7% on Friday; -59% since its peak in May 2018.
  • Weibo [WB]: -3.1% on Friday; -68% since its peak in February 2018.
  • Pinduoduo [PDD]: -4.2% on Friday; -15% since its peak on September 13. Its US IPO was in July 2018.
  • netEase [NTES]: -4.6% on Friday; -43% since its peak in December 2017.
  • Tencent Holding [TCEHY]: -2.6% on Friday; -33% since the peak in January 2018.
  • Tencent Music [TME]: -1% on Friday; -33% since its peak in April 2019. Its US IPO was in Dec 2018.
  • Sina Corp [SINA]: -3.8% on Friday; -68% since its peak in March 2018.
  • Tal Education Group [TAL]: -4.5% on Friday; -28% since its peak in June 2018.
  • Ctrp.com [CTRP]: -2.7% in Friday; -51% since its peak in July 2017.
  • New Oriental Education [EDU]: -7.45 on Friday, from a new high on Thursday.
  • iQiyi [IQ]: -4.1% on Friday; -59% since its peak in June 2018, three months after its US IPO in March 2018.
  • NIO [NIO]: -10.7% on Friday; -83% since its peak in March this year. The collapsing EV maker had its US IPO in October 2018, when it extracted $1.1 billion from US investors.

This is why no one should be an unwitting investor in Chinese companies! If you make a conscious decision on the risks and rewards of investing in NIO, and you get your face ripped off, so be it. But no one buying an equity fund or bond fund should be exposed to Chinese companies until they get their act together – that includes financial disclosures and scrutiny in the US on at least the same level as US companies face in the US.

But hundreds of Chinese companies – those traded in the US and those traded in China – have recently been added to indices that are tracked by mutual funds, ETFs, and pension funds that Americans have their money tied up in.

How to do it? It gets complicated.

How to turn any proposals put forward into action is not going to be easy under US law, and the mechanism for some of them have not been worked out yet, according to sources cited by Bloomberg. The proposed mechanisms include:

  • Imposing the same financial disclosure and transparency rules and the same scrutiny on Chinese companies that US companies are subject to in the US. And if they fail to comply, delist them in the US.
  • Creating a level of reciprocity between China and the US.
  • Raising national-security concerns over some Chinese companies that US pension funds are exposed to.

One source told Bloomberg that President Trump has given the green light for the discussions, but if a plan emerges, he would still need to approve it. The administration – particularly the Treasury Department and the National Economic Council – is hesitant to pursue this, fearing that investors could get spooked, and “that the already fragile economic relationship between Beijing and Washington could collapse.”

Those hesitant officials want to convey to stakeholders that the rule of law in the US can be trusted and that any such policies are directed against companies that have persistently been out of compliance with US laws.

These are layers of complex ideas that are difficult to implement, though one of them – putting Chinese companies under greater scrutiny and imposing US transparency and disclosure requirements – should have been implemented years ago.

Another piece in the Chinese capital-flow puzzle. Read…  Debt-Wracked Chinese Companies Dump US & Other Foreign Assets, Become Net Sellers Overseas for First Time

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  115 comments for “Treasury’s Weak Denial Acts as Confirmation: US Weighs Crackdown on Capital Flows to Chinese Companies, Stocks & Bonds, Listed in the US or China

  1. 2banana
    Sep 28, 2019 at 10:29 pm

    Isn’t this Rubio’s senate bill in a nutshell?

    “Imposing the same financial disclosure and transparency rules and the same scrutiny on Chinese companies that US companies are subject to in the US. And if they fail to comply, delist them in the US.”

    https://www.scmp.com/business/companies/article/3013323/marco-rubios-bill-increase-scrutiny-us-listed-companies-may-be

    • Eastwind
      Sep 29, 2019 at 1:17 am

      Rubio’s bill seems like bare-minimum common sense to me.

      I’d take it a step further. I’d require Chinese companies wanting to list on American exchanges not only to open their books to American regulators, as Rubio’s bill would require, but to be *audited by American accounting firms*.

      Such a requirement would be consistent with the types of regulations American companies have to deal with to do business in China – they are forced to hire and contact work out to, and usually partner with, all sorts of Chinese firms.

      I wouldn’t take the Chinese government’s word for Chinese-manufactured generic drug purity, I’d insist on FDA testing, with all the testing and documentation costs to Chinese companies that FDA approval entails, so why should I take the word of a Chinese accounting firm about a listed Chinese company?

      Unfortunately, there are probably too many senators from both parties who have been gifted with personal financial conflicts of interest when it comes to regulating China. My guess is Rubio’s bill won’t ever see a vote.

      • Bobber
        Sep 29, 2019 at 1:16 pm

        What are these “American accounting firms” you refer to?

        There are no global accounting firms headquartered in America. The global audit firms like DT, EY, KPMG, and PWC are just loose affiliations of firms in different countries. The audit firms operating in China today are locally-owned operations, and while they may have a loose global affiliation, they report to the Chinese government for all important purposes.

        • Wisdom Seeker
          Sep 30, 2019 at 5:05 pm

          Bobber – I’d say that’s exactly the point. It’s about time we had some honest accounting in the USA again. For everyone.

      • Bobber
        Sep 29, 2019 at 2:38 pm

        The dispute between US and China is just a battle in the war between nationalist and globalist perspectives.

        I would like to see Trump score a win for the nationalists, unless the globalists start allocating more of their profits to the countries and workers they exploit. Global corporations have no loyalty to any particular country or set of workers. They exclusively serve executives and shareholders around the world.

        • JZ
          Sep 29, 2019 at 3:38 pm

          I think globalist and nationalist are labels.
          What’s underneath is still the good old capital vs labor. I do NOT want to go full Karl Marx here but I guarantee you if China wants to stay providing “international labor” supply, US capitalist will be happy to work with China to compete down US W2 earner’s salary.
          China does NOT want to be labor. China want capital, the IPs, recipes, formulars, trade secrets, patents, source code and data base. To guard the US capitals with all the guns, US capitalist have to go to trade war with China until China taps out and become US labor bitch again. Going global is the route China can steal capitals. Going global is what US capitalist can drive labor cost down. They will work together as long as China agree to play labor for ever. They don’t.

        • JZ
          Sep 29, 2019 at 3:43 pm

          My point is Trump with the nationalist label is still fighting China for the benefit of US capitalist under the name of helping W2 workers.

        • MCH
          Sep 29, 2019 at 4:50 pm

          @JZ

          You basically summed it up in a nutshell, everyone wants to be #1, the sad truth is, there can only be one.

        • JZ
          Sep 29, 2019 at 10:43 pm

          @MCH
          As a W2 earner in US, I actually do NOT want Trump to win. I want nobody wins. I want nobody is #1. I want the ruling class across the world trade dispute/war themselves into oblivion and for ever.
          This way, everybody has to pay me more W2.
          This is NOT about being patriotic. This is about power equilibrium. The corporations/capitalist have F***ed world labor for too long and it is time for them to fight wothin themselves.
          Let’s talk about patriotism when shooting starts. At trade/business table, it is all about negotiation power.

      • MCH
        Sep 29, 2019 at 4:49 pm

        So FDA does in fact go through and do testing on API for manufacturers in China, and they certainly inspect. But it doesn’t mean things aren’t slipping through.

    • Rob
      Sep 29, 2019 at 7:36 am

      This would be tough on the life and freedom of Jack Ma

    • mike
      Sep 30, 2019 at 5:46 pm

      Hurrah!!! However, before the Chinese communists allow their companies to be subject to the same (still inadequate) financial disclosure requirements as US companies, the poles will fully melt, and we will all have dolphins as roommates. They do not even use the Enron-style accounting/financial tricks used by US banksters to defraud investors; they just invent false numbers out of whole cloth.

      Their companies (usually run by communist cadres or their relatives or lovers) run even more scams than the banksters. Preventing US investors from being scammed by them is a public service. I suspect that they were “opening up” their financial system as a way to bribe the banksters that control the US government now with shares of their ill-gotten profits to allow the gigantic frauds to continue.

      Apparently, the banksters prefer to be the only ones perpetrating massive frauds and destroying American investors, as they have destroyed future retiree’s pension plans and savers’ rights since 2000. U.S. investors in most Chinese communist-run companies should be thankful later, when the companies collapse after they have taken out their investments under the proposed rules.

  2. Howard
    Sep 28, 2019 at 10:31 pm

    Very right wing of you, Wolf.

    • Sep 29, 2019 at 1:07 am

      That’s funny.

      • Sep 29, 2019 at 2:35 pm

        I rarely reply, often read.
        I rarely discuss politics, left or right, because of the right/left, republican/democrat chasm which leads to wingnut/libtard types of antagonism & seems so prevalent in our public discussions. This popular paradigm only diminishes the conversation & the ability/possiblity to go deeper into the ideas. Why are ideas defined by who holds them, instead of their insight or truthfulness?
        How do we get to discussing ideas in depth before drawing our preconceived or preferred judgments?
        I would hope for at least on this one site that we can discuss ideas based on their merits.

        Respectfully,
        Joe

    • Vespa P200E
      Sep 30, 2019 at 11:20 am

      Guess you prefer heavyhanded propagandas by Pravda or sophisticated state monitoring by emperor Xi’s CCP vs. our right to free speech under the 1st amendment?

      Sounds like some folks in WH and state dept finally saw the movie The China Hustle and realized Chinese crooks in cahoots with penny stock pumpers stole billions from (dumb) US investors?

      I mean anyone who believes any #s even from CCP controlled Alibaba and others deserved to get fleeced.

  3. Javert Chip
    Sep 28, 2019 at 10:36 pm

    Free people should be able to invest in Chinese companies (that aren’t a military threat to USA) if they see fit. However, that does not mean Chinese companies should have free reign to use the American financial system.

    If you want to invest in Chinese companies (which have, as a group, demonstrated miserable compliance with American rules), go invest your USD on Chinese stock exchanges, and take your chances with Chinese regulations, compliance & legal system. This arrangement precludes using American courts to litigate Chinese grievances.

    Caveat Emptor (a whole lot of Caveat)!

  4. Paulo
    Sep 28, 2019 at 11:06 pm

    Why doesn’t the US just crank up the trade war to full bore and finally get it over with? At the very least it would be a diversion of the latest events to hit the news. Seriously, China isn’t going to drop to their knees any time soon and the US has overplayed its hand with China, NK, Iran, and of course Ukraine. Add on Airbus, European cars, Canadian and Mexican products, (what have I missed?). It just never ends.

    At this rate everyone will be living like 1930s sharecroppers by 2020. Folks get hosed buying stocks…buying poor or mislabeled Chinese stocks hidden in a fund? What about due diligence? Delist them, already. I noticed Alibaba on the list, won’t this help Amazon? Bezos?

    If you think Peter Navarro cares about individual investors and regular folk’s pension funds, I’ve got a Jim Dandy bridge for sale. Cheap. Needs a few repairs but has an attractive private/public partnership agreement and a long term toll contract, plus (and here’s the clincher) all maintenance performed by local prisoners (another 3 P marvel). Sure nice to see the pols and insiders looking after the citizens. “Pssst, buy Boeing and Peabody Coal. The sky’s the limit”.

    From the article:
    “Those hesitant officials want to convey that the rule of law in the US can be trusted and that any such policies are directed against companies that have persistently been out of compliance with US laws.”

    Gotta love that ‘rule of law’ thingy. From wiki: ” The Fruit Company, Inc. reserved for itself the most succulent, the central coast of my own land, the delicate waist of America. It rechristened its territories as the ’Banana Republics’ and over the sleeping dead, over the restless heroes who brought about the greatness, the liberty and the flags, it established the comic opera…
    — Pablo Neruda

    “The business practices of United Fruit were also frequently criticized by journalists, politicians, and artists in the United States. Little Steven released a song in 1987 called Bitter Fruit with lyrics that referred to a hard life for a company “far away,” and whose accompanying video depicted orange groves worked by peasants overseen by wealthy managers. The lyrics and scenery are generic, but United Fruit (or its successor Chiquita) was reputedly the target.[15]

    The integrity of John Foster Dulles’ “anti-Communist” motives has been discredited, since Dulles and his law firm of Sullivan & Cromwell negotiated the land giveaways to the United Fruit Company in Guatemala and Honduras. John Foster Dulles’ brother, Allen Dulles, also did legal work for United Fruit and sat on its board of directors. Allen Dulles was the head of the CIA under Eisenhower. In a flagrant conflict of interest, the Dulles brothers and Sullivan & Cromwell were on the United Fruit payroll for thirty-eight years.[16][17] Recent research has uncovered the names of multiple other government officials who received benefits from United Fruit:”

    Rule of Law…….Navarro….. (“psst, run”) Those dastardly Chinese look pretty benign from where I sit, at least when I look at US Company practices.

    • Sep 29, 2019 at 1:21 am

      Paulo,

      The US has a huge problem with China. This includes the massive trade deficit that the US has with China. Trump is the first president to even put it on the table. I might not agree with how he is handling this, but I’m glad he put it on the table. China hugely benefited from US offshoring, which was done by Corporate America in connivance with China, at the expense of US workers. It’s time to come to grips with it.

      Wall Street has connived for years with China to extract billions of dollars from US investors and siphon them out to China where they disappeared. It’s time to shed some light on that too. No Chinese company can get its ADRs listed in the US without a big Wall Street bank making a ton of fees from the deal. That’s why they’re happening. Imposing and enforcing disclosure requirements should have been done years ago. And delisting companies that don’t comply should have been done years ago too. US companies get delisted all the time for non-compliance.

      • Jack
        Sep 29, 2019 at 4:32 am

        “Wall Street has connived for years with China to extract billions of dollars from US investors and siphon them out to China where they disappeared.”!!!

        I hope you’re NOT serious Wolf!

        So APPLE’s over inflated cash hoarding is ( in the communist’s pockets)!?

        I understand you’re a patriot, but please spare me and your readers this utter bull.

        • Sep 29, 2019 at 9:38 am

          Jack,

          You’re making a crazy leap here. We’re talking about ADRs issued by Chinese companies — this is what the entire article is about — and not actual shares issued by a US company that convey actual ownership in the company.

          Apple is NOT a Chinese company. Its shares are actual shares that convey ownership in Apple Inc. They’re not ADRs issued by an offshore entity that just has a contract with a Chinese company. Apple is subject to US reporting requirements and sticks to them. So I’m not sure how you leap from ADRs issued by Chinese companies, which is what all this is about, to Apple shares.

        • Petunia
          Sep 29, 2019 at 10:57 am

          Where Apple manufactures and where Apple’s billing comes from are two very different places, with many other places inbetween. It’s the saga of how a phone lands up costing $1000.

        • HowNow
          Sep 29, 2019 at 12:02 pm

          Wolf,
          What flavor of kool aid were you drinking? I think you need to take a long step away from the political s**tshow. Many of the bogus American stock listings by “Chinese cheats” aren’t what you probably think they are. See the documentary “China Hustle”. And, many of the top U S accounting firms are listed as auditors for reverse mergers which have ended-up on American exchanges. Of course, the ADRs are a genuine problem, and Wall Street may be the culprits, but, you’re talking about enforcing regulation, an anathema to capitalism. I thought that enforcing regulations is a modern-day crime? Don’t you want the government off your back?
          One thing that completely astonishes me is that the traditional Republican principles of “states rights” and “free market capitalism” and minimal (read: “NO”) govt. regulations are no longer in the GOP lexicon of good things. Same for deficit spending, govt. tax subsidies, et al, but no one seems to care anymore, except for a few cranks who comment on this website, like me. How are “tariffs” part of the “price discovery” – how are the “invisible hand” enthusiasts taking this? (I know… they’re ignoring it.) And aren’t “tariffs” government intervention writ large? But, for many of the new breed of conservatives, the only principles being conserved are those from the Confederacy, which, you may recall, lost the war.
          I used to be a conservative… but the party moved on from economic reasoning to con men who talk tough, wave the flag, but have made a livelihood ripping off fellow Americans. Let me ask you, how do casino operators, ones who throw their spouses, ex-lawyers, ex-AGs, ex-cabinet members under buses, and who lie incessantly, part of the conservative cannon? What happened to George Will and his ilk? They’re old school conservatives, and today, well it’s just a sh*tshow for the final act.

        • ng
          Sep 29, 2019 at 11:43 pm

          US taxpayer will pay through the nose for Trump poilicies

        • Jack
          Sep 30, 2019 at 7:39 am

          Wolf,

          I don’t like to elaborate here, but only in a world governed by “ the Vacuum” Rule does your ( cheer leading )! For the Administration works here!

          This subject is more complicated than to be addressed by a tit for tat policies or policies implemented on the run!

          Remember the geopolitical structure that was handed down to us on a plate of a @ Marshal plan” has expired well and truly,
          The Americans ( both the administration and the citizens) have to come to terms with these issues and work out a whole new set of relationships with their foes and friends!

          This is NOT a good moment in history for a power like the USA to be governed by the whims of a whimsical crop of politicians to steer the nation into a safe harbor.

          All trade wars end in either shooting wars or famines.

          So tread carefully here, there will be billions of people affected with the outcome of US- China stoush.

          Just imagine what would happen to the PE ratio of companies like Microsoft, Apple, google Fb and your beloved Euber !! When the money gets redirected to them once these threats are implemented?! :)

          I’d like to thank Old Engineer, How Now and NG for their insights into this.

      • Realist
        Sep 29, 2019 at 5:41 am

        As being outside the USSA, taking a a look at the trade spat with China:

        – the US ( and the rest of the West ) in their short sighted greed have given away their technological lead to the Chinese

        – manufacture of stuff has been transfered from the US to China because it generates more profits compared to manufacturing in the US, thus hollowing out the US economy. Trump has actually a valid point here, driving for manufacturing to be returned to the US.

        -if the leadership wants the US to remain top dog, it is now that the US have to stop the Chinese from becoming top dog while the US is strong enough, otherwise it will be too late. US strenght (and influence) is weakening due to hollowing out of the economy and internal strife plus a slew of other factors.

        -US policy against Russia is stupid. Instead of trying to keep Russia and China apart, the US is doing their best (read worst ) to unite Russia and China. At the same time the US is forcing Russia to develope its domestic industries because of imposed sanctions. A Russia dependent on imports is much nicer than a Russia with strong, domestic production of food and other stuff, me thinks. (My old man used to say that you need not worry as long as Russia has to import grain …)

        -as the reliability of Chinese numbers are somewhat interesting, what will happen on global scale if Chinese debt blows up ? Is here to be found the reason why Chinese companies now are selling of investments in th West ?

        -I think the Chinese PTB aren’t too happy about their weakening currency, especially as they have to import their oil and a lot of raw materials paid in foreign currency and companies having aquired sizeable debt denominated in foreign currency …

        Just a few discussion points.

        Btw, the British did end the rule of battleships at Taranto, I wouldn’t be surprised if in their turn the Chinese top brass have allready figured out a way to end the rule of aircraft carriers

      • Petunia
        Sep 29, 2019 at 9:30 am

        Watch this interview with Kyle Bass, of Hayman Capital, where he talks about how western capital is financing the manufacturing of Chinese war ships. It’s crazy that our pension money is going into building weapons to destroy us. The entire interview is worth watching but the part I cite is at about 13:20+.

        https://www.youtube.com/watch?v=Wot4YNEf5pI

      • Old Engineer
        Sep 29, 2019 at 9:39 am

        I disagree completely with your statement that “The US has a huge problem with China”. The U.S. has a huge problem with U.S. companies that move production overseas , then protecting the proceeds in overseas bank accounts, at then being allowed to repatriate the money with minimal or no taxes. Scattering the production that is in China around to multiple countries all over the world will not solve any of the evils that you describe, but rather make them dizzyingly complex to deal with. It may be a loss for China but in the long run it will be a win for the U.S. companies that are forced to diversify.
        Finally this behavior is going to force China to expedite the development of technologies of which the U.S. has a near monopoly and will bring them into competition in these areas sooner than otherwise.
        This whole thing is political theatre.

        • c1ue
          Sep 29, 2019 at 10:15 am

          Really, this is the negative outcome to “not playing by the rules” per Network (the movie).
          Make all the money you want from the US, but you have to do what we say – whether that is recycling surpluses into US Treasuries and vanity real estate, having open capital flows, allowing national resources to be privatized and/or plundered, etc.
          China has not been buying Treasuries for 7 years now.
          I am not the least bit surprised that the Empire is Striking Back.
          You are absolutely right about the multinationals moving production overseas, but wrong about the multinationals being locked into China. They would have moved anyway, as China becomes more and more wealthy.
          China is just so much easier because of its enormous and poor labor supply, and coherent leadership. Only India has a comparable labor supply, but Indian leadership is much less organized and capable vs. the CCP.

      • Sep 29, 2019 at 12:59 pm

        Well said Wolf. Too many of our Congress critters and faux leaders have gone along with this charade for years, because it was profitable to look the other way and pretend it wasn’t happening.
        I liken it to the money laundering in the real estate sector. As long as the prices keep going up, nobody wants to spoil the party. But it’s still destructive for the average person, a Gresham’s dynamic that ends up hurting innocent people.

      • MCH
        Sep 29, 2019 at 1:40 pm

        So true on so many levels. I did notice that you didn’t list Tencent here, I don’t think it’s an ADR, rather it is on the pink sheets just like Roche is.

        There are really two considerations here out of a multifaceted problem.

        1. Whether one likes it or not, China has surged ahead, (yes, because of the stupidity of US companies, and aided and abetted by those same companies and Wall Street). It is no longer a country that can be simply ignored. In certain technology areas, China is considered ahead now, for example 5G, and certain areas of Fintech. (I really think the idea of paying for everything through Wechat is advantageous, it certainly eliminates some of the middle men in the chain… at least I think it does)

        2. Geopolitcially, let’s face it, China saw that capitalism as a model is in some ways superior to communism. So, like any good martial artist, they turned capitalism to their advantage, and in turn elevated 1 billion+ people into a better economic condition overall, and brought up the standard of living. If anyone should be faulted for China’s rise, it’s the bankers on wall street and the captains of industries in the west. (they laughably considered China as a market, and still do so… correctly to a small extent today, but considering how closed off it is still to some extent, it’s a big pipe dream) China is doing what is only logical, elevating itself as much as possible, the same as every other nation in history.

        • Sep 29, 2019 at 2:59 pm

          MCH,

          “I did notice that you didn’t list Tencent here, I don’t think it’s an ADR, rather it is on the pink sheets just like Roche is.”

          You can find the two Tencent entities in the middle of the list:

          Tencent Holding [TCEHY]: -2.6% on Friday; -33% since the peak in January 2018.
          Tencent Music [TME]: -1% on Friday; -33% since its peak in April 2019. Its US IPO was in Dec 2018.

          Both are ADRs. The biggie Tencent Holding spun off Tencent Music via an IPO. Tencent Holding is traded over the counter (“pink sheets”). Tencent Music is traded on the NYSE.

      • lisa
        Sep 29, 2019 at 6:19 pm

        top US political leadership IS corporate America AND Wall street. That is- Both sides of the political spectrum. The little bit of comparative stock shares owned by the rest of the US mass citizens is TP. The US majority are not any of the REAL stakeholders that count for anything at all.

      • vid l
        Sep 29, 2019 at 6:38 pm

        100% accurate

      • max
        Sep 29, 2019 at 8:17 pm

        “The US has a huge problem with China.”

        what is problem?

        they are cheating us?

        how?

        they work cheaper and have less regulation

        and by the way I did not see that you call for abolition of FED and fiat money and return to gold and silver standard

        • Wisdom Seeker
          Sep 30, 2019 at 5:12 pm

          Max, look deeper. There is a massive asymmetry in the rules and regulations applied by the two countries. The Chinese are working cheaper, true, but they are ALSO taking all foreign intellectual property for any company that sets up operations there AND demanding far more in bureaucracy and red tape than they apply to their own local companies. And then they aren’t following our rules here, nor providing proper accounting. Then try disentangling the “businesses” they have financed here from the Party or the government’s other tendrils there. And don’t get me started on the Fentanyl…

          This relationship needs a lot of work.

      • kam
        Sep 30, 2019 at 2:08 pm

        The sellout of America to the Chinese Dictatorship for a bit of skim.

      • Brett
        Oct 2, 2019 at 7:58 am

        Steve Bannon has some interesting commentary on this. He describes a long term planned decline of the west, with American corporations serving as the PR department of the Chinese Communist Party through their influence on U.S. lawmakers. It’s compelling grand narrative stuff that, if true, would portend big trouble ahead.

    • cienfuegos
      Sep 29, 2019 at 6:16 am

      Perhaps tiresome in the retelling because there are rarely consequences for the perpetrators, but accurate nonetheless.

    • California Bob
      Sep 29, 2019 at 10:44 am

      “TRUMP has overplayed his hand with China, NK, Iran, and of course Ukraine”

      FIFY.

      • NBay
        Sep 29, 2019 at 2:50 pm

        What’s FIFY mean? With two “F’s” I suspect it’s not a counter argument, just an insult, but not being a texter, I honestly don’t know.
        Thanks.

        • Sep 29, 2019 at 2:51 pm

          “Fixed It For You”

    • mike
      Sep 30, 2019 at 6:26 pm

      You are not wrong. Aside from the opioid pushers, major companies also engaged in rapine and plunder in the US and other countries: e.g., the rail roads and others received a lot of free land for decades from the government after “contributing” to lots of politicians. I will not even go into how the US government has funded research for decades, which research is then used by major US and world corporations for their profit, without taxpayers getting any share of the profits or resulting patents.

      However, the Chinese communists have proven that they are militarily aggressive and autocratic: they are using their military to steal a huge area of the South China Sea. They are like the Nazis: imprisoning religious minorities, opponents, racial minorities, dissidents but have made mass murder even more profitable by stealing (“harvesting”) even the organs of their victims.

      Collapsing such a regime should be a priority, or we (or people from other countries like Tibetans, Vietnamese, etc.) will be next. While US corporations are slowly moving us in that direction with more and more private spying over the lives of Americans, in China, the government is investing in tools to control and oppress its population that even Orwell never even dreamed of in 1984.

      In China, not just your TV watches you, but the camera on the lamp post, on the traffic light, on the phone, on your computer, etc. It is almost as bad as Edward Snowden warned.

      Their new 500 megabyte camera, which can conveniently perform automatic face recognition, will be great when they want to hunt down and kill more protestors. You just take pictures of protestors, do face recognition (e.g., even just the pictures of the ears can be used for this) get a list of their names and addresses from your national database, and send some Chinese police to beat up the small fry and kill the leading or repeat protestors.

      Why do you think that someone funded that project? See https://www.digitaltrends.com/photography/500-megapixel-super-camera-china/

      If that 500 megapixel camera has infrared capabilities, even the use of masks may not shield them. I bet the US banksters are salivating at that tech, since it would enable future US crackdowns against our protestors, if the banksters can control the US army or its drones and mass protests or nationwide strikes occur, when they are not prosecuted again, if or when there is the next financial collapse.

    • mike
      Sep 30, 2019 at 7:14 pm

      One important point is always overlooked, as in your comment: we always talk about US corporations and companies, as if they were these Godzilla-like entities that commit heinous acts. However, if the control group of a company, e.g., the founding family, yells jump, ALL the executives will ask “how high.” The control group of a company is the group of people deciding to do and ordering the crimes in a corporation/company.

      Having worked for large companies, I can tell you that nothing gets done that would displease the control group, which usually consists of the major shareholders and a few, prominent directors, who can financially afford to disagree with them. If an officer or lawyer displeases them, he or she is terminated, ASAP.

      The corporation is used to allow the crimes to occur safely: the SEC and other authorities have “forgotten” about wiretaps, etc., which would reveal who actually did what to whom in major corporations. Getting a crooked attorney’s opinion that a crime is legal enables the “advice of counsel” defense.

      Thus, the public can never find out that it is a relatively few, very wealthy number of persons that control massive corporations like the opioid pushers, decide to commit, and order their minions (corporate officers) to do the crimes. US government agencies are so corrupt that they do not even try to get the small fry to roll over on the bigger fish anymore in these “civil fraud or misconduct” investigations: e.g., the opioid crisis. Maddoff would not even have been arrested, much less prosecuted if his family had not “turned him in,” which coincidentally prevented his defrauded investors from dealing with him.

      These people (with the opioid frauds) killed more people than Jack the ripper, but they are above the law due to indirect bribery and corruption. Lesser crooks like the banksters are similarly protected by corruption. Wiretaps would have revealed the ringleaders in the opioid crisis or 2008 frauds, if any of the government agencies were not corrupt.

      The companies that you identify and other companies were used by families of crooks to perform their heinous acts. E.g., the opiod pushers that will soon get away with causing the deaths of hundreds of thousands of people in the US and more in other countries by using the shield of their “that company or corporation did it.”

      Other families got away with huge profits from their frauds before the 2008 financial crisis, from theft by bribery in Central America and other countries, and will get away with huge profits from their current frauds soon, if the predicted financial collapses of major banks/corporations reoccur again. One major corporation has recently been identified as being Enron 2.0 by a well known whistleblower, but it is actually probably Enron 2245.2.

      I no longer trust most US companies’ financial statements, because my accounting and finance background and other sources reveal that accounting and reporting standards have declined year by year. Insider trading is how major profits in stocks are being made now: only an occasional, famous, media personality is going to ever be prosecuted for that so that the government can pretend to the public that the ongoing, massive corruption is being combated.

      It must be nice to be a bankster or work for their cartel, the “Federal” Reserve: you can indirectly or at times directly make investments depending on what it will do: e.g., buy options on companies that will be affected by interest rate changes or at times, short the dollar.

  5. Wellstone's Ghost
    Sep 28, 2019 at 11:25 pm

    A copy of the movie “The China Hustle” should be sent to every member of congress.

    • Wisdom Seeker
      Sep 30, 2019 at 5:13 pm

      Most of them don’t need to see it because they already have roles and know it.

      What you want to do is send the movie to every person running to unseat the corrupt incumbents…

  6. littlebit
    Sep 28, 2019 at 11:28 pm

    I did not see any mention of the 1.3 trillion of our debt that they are holding.

    • Sep 29, 2019 at 1:06 am

      littlebit,

      1. It’s down to $1.1 trillion

      2. So what? Let them sell it. It will steepen our yield curve finally, if it moves anything at all. China holds just 4.8% of the US debt. And the Fed can always buy whatever China sells. It doesn’t really matter anymore.

  7. timbers
    Sep 28, 2019 at 11:28 pm

    “Those hesitant officials want to convey to stakeholders that the rule of law in the US can be trusted and that any such policies are directed against companies that have persistently been out of compliance with US laws.”….As in when America applied it’s Rule of Law on Wall Street & banks during the 2008 financial crisis and sent Jimmy Dimon and the entire executive suite of Goldman Sachs and other top executives caught in broad daylight to jail for their massive & systemic fraud? Well well well, now that’s a relief.

    • NBay
      Sep 29, 2019 at 3:11 pm

      Agree. Corporations have come a long way since 1800, when they were considered dangerous, not to be trusted, highly regulated, and chartered and dissolved when their stated purpose for forming one was accomplished. By Lincoln’s time, they were called “enthroned”, by Abe himself, and would lead to most of our countries wealth in the hands of a few.
      Each is effectively a sovereign dictatorship, specializing in all sorts of wealth extraction, buying “law” as needed.

      On Haight St in ’66 the talk was that ITT would someday have it’s own private army…..little did we know of their real plans.

      • NBay
        Sep 29, 2019 at 3:17 pm

        BTW, the very first lobbyists were called “borers”, like the termites in government they are. I prefer the original term.

      • mike
        Oct 2, 2019 at 5:51 am

        Large corporations do not need private armies. They can bribe and coerce our politicians to use US government funds to do their bidding and have the tax payers foot the bill too.

        That is much cheaper and more effective. See https://www.aljazeera.com/indepth/features/2011/12/2011122813134071641.html. See also https://www.cnn.com/2013/03/19/opinion/iraq-war-oil-juhasz/index.html (“Why the war in Iraq was fought for Big Oil”) What those articles omit is that the oil majors saw that it was safer and more immediately profitable to sell their “rights” to Iraq’s oil to China.

        Thus, our troops went and bled or died or were maimed and the oil majors profited by then selling their oil contracts to China, which now controls most Iraqi oil fields. Our maimed troops must often still be supported by their whole families, because they did not and do not receive enough government aid when severely maimed, but the oil majors profited from that war.

        One of my relatives was a marine in that war and I met his buddies who devoted years to that war due to imaginary WMD. I still feel sad when I think how their sacrifice, idealism, and patriotism was betrayed by crooks. Next time one of your relatives is called to go to war, make sure that it is not to make some crook richer.

  8. Sporkfed
    Sep 28, 2019 at 11:49 pm

    This maybe the equivalent of yelling fire in a movie theater. I hope I am sitting near th exit.

    • timbers
      Sep 29, 2019 at 12:10 am

      I’ve a better equivalency: “I’m shocked. Shocked! That gambling is going on in this casino!

      • walter map
        Sep 29, 2019 at 6:58 am

        Your winnings, sir.

        • NBay
          Sep 29, 2019 at 3:21 pm

          Might as well laugh as cry.

      • Sep 29, 2019 at 9:27 pm

        Casablanca. Classic movie.

  9. Old Dog
    Sep 29, 2019 at 12:18 am

    Expecting transparency from the Chinese regime is like expecting a woman who’s smarter, richer and better looking than you to fall in love with you :)

    It seems to me that emperor Xi Jinping is in a much weaker position than he would have us believe. For example, one of his signature projects, the Belt and Road Initiative (which he announced in 2013 with great fanfare), is not going anywhere. BRI was a great marketing move but is built on smoke, mirrors and stinky deals. T

    Other signs of weakness are emerging. The Communist Party cannot be happy with Xi’s performance. Don’t be surprised if he’s promoted to some powerless position before 2025. Because of that I’d expect Xi to make draconian moves in an effort to save face. Expect widespread repression, total censorship and more obfuscation in the months ahead.

    Xi’s worst nightmare is that the Hong Kong discontent spreads out to the other rich cities. As the people’s standard of living starts declining and the repression increases, that’s pretty much what he’s going to get.

    • Michael
      Sep 29, 2019 at 6:46 am

      You don’t have a clue what you’re talking about. Xi IS the communist party. There is no one in China that can challenge him now. The belt and road initiative is definitely happening. Do some research before commenting. Widespread repression, total censorship and more obfuscation is Xi’s signiture since the beginning. Xi knows he is in for a fight. He isn’t stupid. The Chinese people will fall in line if he tells them to. If he tells the people that they are under attack they wil move as one.

      • kiers
        Sep 29, 2019 at 10:12 am

        I was always curious how is it, that CHINA, of all places, managed to elevate a right nationalist (from their view) head of their communist party, in sync with right nationalists globally!

        I can understand Brazil, Israel, India, Philippines, Eastern Europe etc having a right wing wave because these countries are in some measure open to outside money pushing the wave, the funny bit is CHINA! Goes to show you, world affairs are rigged rather nicely.

        • EchoDelta
          Sep 29, 2019 at 4:15 pm

          The conflict here is that there are multiple spheres of political values that conflict. In the US it was intentionally conflated that capitalism equals democracy, which has reached its reductio ad absurdum apogee with Citizen’s United, wherein the corrupt court equated money with votes. All the freedom you can afford to buy, outcomes are the result of free choices, so it must all be your fault even if the system is clearly rigged. See Falling Down, John Q, They Live, The Outlaw Josey Wales.

          For China the two spheres of authoritarianism and capitalism give them a state controlled capitalism with little freedom. The winners are chosen and the power of capitalism (evolution with money in place of reproductive fitness) is harnessed to serve the needs of an authoritarian state. It was never going to be fair, but ideally you wouldn’t be allowed to starve or suffer needlessly-your suffering serves the collective. Crouching Tiger, Hidden Dragon, Drunken Master, Once Upon a Time in China.

          Built into our primate operating system (Great Ape 10) is reaction against unfairness. In America we have been accustomed to thinking the system is fair in operation but have accepted that outcomes are unfair, so no cognitive dissonance. At some point outcomes are so obviously rigged that people following the rules are screwed hard. Reaction: junkies dying on opiates in the street, mass shootings, Trump.

          In China and its possessions life is unfair but those who have benefited from rigged outcomes have demonstrated themselves as unworthy, which has the warning flags popping up from the tool bar of Great Ape 10 OS. Capitalism in service of socialist revolution (an aspect of Leninism) has created corruption that weakens the revolution. The suffering is needless and doesn’t serve the collective. At some point the outrage drives people into the streets to make public their outrage and you get Tienanmen Square, Hong Kong, and Uighur rebellion in the Xinjiang.

      • Rowen
        Sep 29, 2019 at 2:20 pm

        There is a report in Reuters that the Chinese are importing (?) corn from Brazil to its American subsidiaries (specifically Smithfield) to produce pork for export (?) to China (to offset its swine fever issues).

        That’s the BRI in a nutshell.

      • Old Dog
        Sep 29, 2019 at 2:59 pm

        You had me till “Xi IS the communist party”.

        I assume you have put your money where your mouth is and you have invested your savings in Chinese SOEs. Good luck to you.

        • Wisdom Seeker
          Sep 30, 2019 at 5:18 pm

          Xi is in power for life, not on a political term. There is no way to dethrone via standard political processes. He’s the newest Mao until some intrigue gets him murdered.

  10. OutLookingIn
    Sep 29, 2019 at 1:21 am

    Too late.
    Separating, disentangling, withdraw, or extricate any one large segment of the global financial system from it’s whole is impossible. Not without dark and foreboding economic consequences.
    However this seems to be the west’s program. To burn down the house to rid it from unwanted guests.
    The macro-political game of one upsmanship being played on the worlds center stage, is leading the world ever closer to the edge. This is just what may be, that the elite want.

  11. MC01
    Sep 29, 2019 at 1:47 am

    Personally I am a fan of the ancient Chinese saying “Hit one to educate a hundred”.

    The cheapest and easiest way to obtain some measure of compliance to SEC regulations would be to single out a few of the worst offenders and either force them into compliance or forcibly delist them.
    Note the term “worst offenders”: this must not turn into another Huawei, a company singled out for special treatment because their US competitors are increasingly unable to compete with it. No, these should be companies easily framed for malfeasance, and judging by that list there’s no shortage of suitable candidates.

    Putting pressure and eventually delisting three or four companies won’t affect the New York Stock Exchange. There may be some wailing by the usual Wall Street shills and the usual culprits in the political media but do they really want to side with a shady Chinese conglomerate depriving hard-working Americans of their retirement savings? ;-)

    Of course there’s always the question of how Chinese authorities will react. So far their reactions to tariffs and the like have been somewhere between confused and ineffective, hinting their leadership was caught by surprise and that the Ministry of Commerce hasn’t gone through a shakeup yet.
    Exactly like I have been told by some wise Chinese expats President Xi may be a master of backroom deals and political alliances but he’s no “helmsman” by any stretch of imagination. His leadership in these, let’s be frank, unimpressive political squalls has been far from impressive and had to be buttressed by a propaganda campaign only Westerners have fallen for so far, proving Simon Leys was right about everything.

    • MCH
      Sep 29, 2019 at 2:01 pm

      This is what happens when sub optimal leaders deviate from the path that Deng Xiaoping laid out and start getting their own ideas.

      You’ll note that Deng’s immediate successors did not seem to have the same problems with the US presidents. To be sure, the current one is far out of the mainstream. But Deng’s immediate successors at least… what was that Dirty Harry saying: “knew their own limitations.”

  12. Hotairmail
    Sep 29, 2019 at 3:40 am

    “Imposing the same financial disclosure and transparency rules and the same scrutiny on Chinese companies that US companies are subject to in the US. And if they fail to comply, delist them in the US.”

    Yes, that may well cover capital. But I’ve always advocated imports should be subject to the same wage, social welfare and environmental standards as if they had been produced in the country. Any difference should be factored into tariffs or, in the case of environemental standards, banned altogether.

    Okay, if they have their own point of distinction they should do well (that they haven’t stolen), but just participating in a global race to the bottom in workers’ standard of living shouldn’t be tolerated either.

  13. David Hall
    Sep 29, 2019 at 4:27 am

    11 of the 13 Chinese companies described do not pay dividends (Google stock quotes). China wants foreign investors, but does not want to give foreign investors dividends. It is risky investing in companies ultimately controlled by the state instead of owned by shareholders.

    • JM
      Sep 29, 2019 at 4:53 am

      David, so why are those that invest so stupid, or maybe I think they invest the money of others who don’t know where they invested, that confirms what Wolf wrote.

  14. JM
    Sep 29, 2019 at 4:45 am

    And if this were the really reason for the lack of bank liquidity of the next economic crisis?

  15. Lance Manly
    Sep 29, 2019 at 5:31 am

    Since there is already pending legislation on this why not push forward with the bill? Legislation is always more powerful than regulatory action. Same thing happened with tariffs, since the executive acted unilaterally it was an inherently weak maneuver because it came with an expiration date.

  16. Danlxyz
    Sep 29, 2019 at 6:19 am

    Will there be any repercussions? If I were China, I would just stop buying Treasuries. Don’t sell what they have just let them mature and don’t buy any more.
    This might be happening already. It might be the reason the primary dealers inventory of treasuries have increased as Wolf reported on 8-21.

  17. cienfuegos
    Sep 29, 2019 at 6:29 am

    This China bashing is pretty unseemly for a usually reasonable and articulate blog. If there is a rogue nation-state in the world it is the USA…100+ years of wars, sanctions and anti-democratic coups, with military bases in 140+ countries…what a pathetic legacy of our Founding Fathers dream of limited government as an example for the world.

    • Winston
      Sep 29, 2019 at 8:39 am

      Sure, and when an openly brutal high tech police state whose “leader” just appointed himself to that position for life becomes the world power, things will be so much better.

      THINK!

    • d
      Sep 29, 2019 at 8:42 am

      So you wish to jump from the thick American made frying pan to the hot ccp chinese fire that seeks to melt it? Strange.

    • kiers
      Sep 29, 2019 at 10:16 am

      someone in the comments section above mentioned: they’re holding on to ~$1 trillion of “OUR” debt…..”OUR” debt is locked away in a chinese prison. ……send in the seal team to FREE “OUR” debt!

      Amazing. Not much different at even the Peterson Institute or such think tanks. “OUR” intellectual property…..”OUR” money…….

      Personally, I don’t think Apple, Cisco, Nike, Walmart, Blackstone, etc have sacrificed too much for “US”. (Might as well stitch those corporate logos into the flag)

  18. walter map
    Sep 29, 2019 at 7:42 am

    This is what the Chinese get for not paying protection money – er, political bribes – er, campaign contributions, like everybody else. Their ability to avoid this cost of doing business clearly gives them an unfair advantage.

    So Chinese companies are going to have to be audited now, just like American companies. Maybe American companies should be audited too, real audits, not the fig leaves and window dressing you have now. GAAP reporting. Transparency, the dreaded “T” word. While you’re at it, maybe drop the pretenses and do some enforcement too. Maybe ban fraud, insider trading, tax evasion, and the rest of the list. Bust some banksters, just to show everybody you’re Serious. Put those dentures in and show some teeth for a change.

    Scary, huh? Aren’t there ‘market-based solutions’ to this? Milton Friedman’s going to spin in his grave and come back to haunt you.

    Isn’t anybody worried about that slippery slope to Full Regulation? Angels rushing in where fools fear to tread? Avenging angels?

    Where will this end? Russians coming clean? Swiss spilling the beans? Compliance with subpoenae? Let’s see those tax returns, dammit.

    Maybe everybody should just cool their jets and give this some more thought.

    • c1ue
      Sep 29, 2019 at 10:09 am

      The Swiss have long since spilled the beans.
      As has the Caribbean.

  19. Nicko2
    Sep 29, 2019 at 8:00 am

    China surpassed the US in GDP-PPP way back in 2011, they will surpass the US in GDP-nominal by around 2028 —- this is inevitable. We are in China’s century.

  20. Brad
    Sep 29, 2019 at 8:07 am

    Yes all Chinese financial products should be held to the same or even higher standards than the US . Enough of these criminal activities being perpetrated on the US and the rest of the world. China has had enough time to give up their criminal ways like we the public were told they would. Great article ,it is well past time the Chinese corruption was exposed and punished and kudos to Wolf for having the courage and honesty to write the article.

  21. tom
    Sep 29, 2019 at 8:09 am

    There will be no trade deal. Never was going to happen with CCP, and President Trump knows that.

    Heck of time to follow the global ( EU & Wall street ) v.s. nationalism.
    Will the globalists toss out Boris and thwart Brexit? Will they impeach a US president? Grab the popcorn, its gonna be a heck of a ride.

    Thankfully I’m in fly over country & zombie fortified.

  22. d
    Sep 29, 2019 at 8:22 am

    Is tHe US an evil entity YES.

    It is however the most benign of the group that wish to take its place.

    When in the frying-pan it is possible to carefully move out to the cooler end of the handle.

    You it seems wish to jump into the fire

  23. Satya Mardelli
    Sep 29, 2019 at 8:30 am

    The Trump Administration should consider placing tariffs on Chinese-owned companies as well as Chinese-based companies.

    In response to the tariffs many Chinese manufacturers simply closed down their facilities in China, moved the manufacturing equipment to Vietnam and reopened using Vietnamese labor.

    The money from American buyers still ends up in China. Many of these Chinese companies are state-owned enterprises (SOE). Greedy American companies are still doing business with China Inc. no matter where the factory is located.

    The tariffs should be placed on Chinese-based companies AND Chinese-owned companies regardless of their location.

    If China squawks about that, tell them to relinquish majority ownership in these companies to a local partner. Only after ceding control of the company to a non-Chinese entity will the tariffs be lifted.

    Keep squeezing these nitwits until they capitulate.

  24. Winston
    Sep 29, 2019 at 8:36 am

    Isn’t this actually all about this?:

    Kyle Bass ‏@Jkylebass
    Sep 27

    Why is it that chinese companies that sell stocks and bonds in the US to US investors don’t have to submit themselves to PCAOB covered audits or be Dodd/Frank compliant? The US should require any securities sold in the US to adhere to US Securities Laws. Crazy huh?

    • Winston
      Sep 29, 2019 at 11:34 am

      And this:

      The China Hustle (2018)

      https://www.amazon.com/China-Hustle-Dan-David/dp/B07BQRKGLG

      From the producers of Enron: The Smartest Guys In The Room, a Wall Street heist story about Chinese companies, the US stock market and a still-unfolding financial crime so big, it has the power to affect all of our wallets.

    • walter map
      Sep 29, 2019 at 12:34 pm

      The US should require any securities sold in the US to adhere to US Securities Laws. Crazy huh?

      A radical innovation. You can start by making Enforcement a full-time paid position.

      • Wisdom Seeker
        Sep 30, 2019 at 5:21 pm

        And eliminating that revolving door allowing regulators to leave and joint the regulatees.

    • Bobber
      Sep 29, 2019 at 1:53 pm

      Regulation rarely works, as evidence by many financial catastrophes in the US.

      Effective policies necessarily involve holding bad players accountable via indictments and executive liability. Corporations should be subject to a real threat of indictment, not just wrist slaps.

      To regulate, you need a whole army of regulators. Throwing some bad actors in jail wouldn’t cost anything and would be1000 times more effective.

      • walter map
        Sep 29, 2019 at 7:16 pm

        Regulation rarely works, as evidence by many financial catastrophes in the US.

        It works when the regulations are enforced, and more than just occasionally, and more than just enough to make it look good only after the meltdown has already occurred. US financial history since WWII clearly demonstrates that.

        It doesn’t work in the present environment where the regulated have captured the regulators. History clearly shows that as well.

        Effective policies necessarily involve holding bad players accountable via indictments and executive liability.

        That’s regulation, specifically, regulatory enforcement.

        In the current environment politicians sell out to Big Money and Big Money can replace them with little difficulty if they don’t. Monied interests very much seem to have a lock on any process and any contingency which could diminish their domination and control, much less end it. There does not appear to be any path to regulatory reform of the Financial Industrial Complex at all.

        I certainly do not see one. Do you?

        • Bobber
          Sep 29, 2019 at 9:09 pm

          I think there’s a path with Elizabeth Warren. She’d be a good financial cop, given her experience.

  25. Gene
    Sep 29, 2019 at 8:41 am

    Every time I think we’ve reached the limit of the trade war with China, and maybe, just maybe, things might actually become more rational, having hit rock bottom, Trump announces another major escalation. I was surprised by what happened to the Huawei CFO. I thought that was going way, way too far. To basically jail a young woman in a foreign country, to threaten her with prison, whose job was to generate financial docs. Shame on us. Huawei is no national security threat to the U.S. Then the tariffs. It’s as though we’re living through Smoot-Hawley again. Trump isn’t interested in protecting American investors. He’s just interested in yet another way to get at China. And what have the Chinese actually done the last couple of decades? They’ve provided us with inexpensive products and gotten worthless pieces of paper in return, promises of future debt repayment, from us. We should thank our lucky stars that they’ve financed the consumer boom for the last couple of decades.

    • Winston
      Sep 29, 2019 at 11:36 am

      “Huawei is no national security threat to the U.S.”

      People who actually know what they’re talk about disagree. Educate thyself.

      • JonTX
        Sep 30, 2019 at 8:08 am

        Snowden told us just how easy it is for the NSA to root Cisco routers. Any Cicso router replaced with one from Huawei reduces what the NSA can see.

        Beyond that, the NSA would assume that their Chinese counterparts would use the same tactics so they’re obviously considered a threat. Are they? I really can’t say but I’ve yet to see anything that looks like proof.

        As for the “people who know better than you”, they all seem to be politicians quoting their sockpuppet “security” firms that get paid to produce political accusations. But hey, what would I know, I’m retired from the field now.

        • Wisdom Seeker
          Sep 30, 2019 at 5:25 pm

          @JonTX – “the NSA would assume that their Chinese counterparts would use the same tactics”

          That’s not really an assumption.

          The Chinese have been caught modding US designed chips and adding features to create their own backdoors even in items built for US companies. The fab plants in China don’t necessarily build exactly to spec. But at least you can reverse-engineer it and find what they added.

          The US spy state needs to be reined in too, but when there’s already a jackal in the house you don’t want to open the door for a tiger.

    • MCH
      Sep 29, 2019 at 2:10 pm

      When someone takes advantage of naivete and stupidity to gain an advantage using your systems. They are still taking advantage. Let’s not pretend that China has not benefited hugely here from the relationship. I would say as a nation, far more than the US has benefited. The advantage of thinking in the long term over looking at how they financed bad fiscal habits and providing cheap junk.

      If you’re satisfied with cheaper trinkets while your job goes away, and the fabric of your community rots away. I’d have to say, it isn’t China’s fault that there is ignorance.

  26. c1ue
    Sep 29, 2019 at 9:29 am

    I don’t disagree that many Chinese companies are more than a little “smoke and mirrors”.
    But, let’s be honest: this is totally politically motivated.
    There are all manner of American and European companies in the same category.
    And they’re not small: the ongoing Deutsche Bank and GE train wrecks are just the biggest examples.
    The reality is that no large company is really complying with “financial disclosures and scrutiny in the US on at least the same level as US companies face in the US [in theory].”

  27. Nodak65
    Sep 29, 2019 at 9:54 am

    I think the arrest of that chinese mayor and communist party secretary and what they found in his secret basement. 13 tons of gold and billions in cash shows that the western ideas and laws will ever change china.

    • c1ue
      Sep 29, 2019 at 10:09 am

      Corruption is all relative.
      The CCP, the mayors and what not presided over China’s economy gaining $100+ trillion net over the past 30 years.
      Should we compare with the ongoing Clinton and Obama leadership in economic growth vs. personal enrichment? Or the members of the US Congress in general?
      Bush excluded only because he was already wealthy and from a wealthy family.

  28. Sporkfed
    Sep 29, 2019 at 10:05 am

    I would take this as a warning sign that things are going to get worse on the trade front before
    they get better. It’s going to be a mess . For those who would like a little more detail on how entangled Chinese investments in the US are,
    google the blog deep throat . The blogger gives a detailed analysis into the corruption in Chi a and the US.

  29. bebe rebozo
    Sep 29, 2019 at 10:10 am

    A few observations. Senate Majority Leader Mitch McConnell is not the guy you want to ” get tough” with China. Two, when US corporations rushed in to feed on the China buffet, they were picking our pockets. Greed claims another victim. Three, is Charles Manson in charge of our China trade negotiating team ? If China trade reform is so important, why is Helter Skelter our most visible strategy ?

    • Sporkfed
      Sep 29, 2019 at 10:20 am

      The Chinese have effectively “influenced” both
      Republicans and Democrats. Politicians don’t
      seem to be held to the emoluments clause.

  30. Sep 29, 2019 at 10:38 am

    The US China trade relationship has been an embarrassment of riches. Those low paying jobs that were offshored, were probably going to be automated out of existence. The US has simply failed to face up to the future. 2008 started here, not Bejing. The notion that Apple is an American company is ludicrous. To pose China’s point, the US colonial model of exploiting labor without sharing intellectual property, or ownership, is recognizable to anyone with a middle school history book. The trade deficit exists because the US has nothing to sell, nothing they will sell. They (we) pawn off phony Treasury bonds in BIS, and their (our) record on human rights is mediocre, our healthcare system exploitative, and our record on graft and corruption, laughable. For all that they remain civil about the arrangement. They flood markets with new credit, which keeps US markets, and the wealth effect trickling down, and they plan to keep production (and affordable goods) going despite a global slowdown. Is that selfish of (us) them?

  31. Blinglite
    Sep 29, 2019 at 11:37 am

    I remain appalled that alibaba was placed in the US stock exchange, versus going to Hong Kong, because corps from China have garbage accounting rules, and the DEC and Treasury were (are) morons for allowing non-GAAP companies to become intertwined and commingled with all our indexes and pensions — creating systemic risk on our economy — and now we have the saudis ready to play the same game, where we now apparently will play war games to protect foreign commodities and help enrich monarchs that have found a new way to game taxpayers… it’s total crap. As for trump playing this game now, that’s all about his own private gains and his little war with China … if he was honest, he would be looking at delisting anyone that doesn’t comply with GAAP, no matter which foreign entity they are!

  32. sunny129
    Sep 29, 2019 at 11:41 am

    After reading all the comments, I come back to the same conclusion, again & again:

    CAPITAL(mobile) keeps winning and the loser is LABOR (home bound wage workers in any country) Just accelerated after China got accepted into WTO.
    China didn’t take our jobs, American Corporations just ‘gave’ to them, to pad their bottom line. Rest is smoke & mirror show!

  33. njbr
    Sep 29, 2019 at 12:11 pm

    Our fine President will agree to anything, as long as the foreign leader will declare him to be “the best”, “the winner”–personal flattery will get you everywhere and anywhere with him.

    I seem to recall a recently reiterated statement that every country has the absolute right to act in their sovereign interests (or in their sovereign’s).

    This is where we are at–surprised at the rising level of discord? Why?

  34. Michael Engel
    Sep 29, 2019 at 12:57 pm

    Once u see the Chinese military parade on Tuesday, Oct
    first, u might change your mind.
    Dong 41 can hit SF within 30 min, with x10 multi heads.

  35. Rcohn
    Sep 29, 2019 at 1:12 pm

    A clear cut explanation of the proposal.
    It seems that this proposal is about a year too late

  36. Augusto
    Sep 29, 2019 at 2:57 pm

    China has destroyed businesses and jobs across the United States. Via a state plan/mercantilist system, they undercut American firms using predatory pricing and steal US intellectual property. To do business in China, American businesses must locate operations there (thus undermining US jobs and investment) and give up technology to Chinese companies. I actually think Trump was right to go after China. But the truth is that China has many allies in the US, like Wall Street, who as long as they make money, get their cut or percentage, than their neighbours can live in the street for all they care. My fear with Trump is just like Wall Street, as long as he gets what “he” wants, that is a deal that re-elects him, thats all that matters. What was it Lenin said about Capitalists, selling the rope that is used to hang them with?

  37. jb
    Sep 29, 2019 at 3:49 pm

    excellent article/commentary . starving china of US dollar capital maybe a good move at this point. perhaps more effective than tariffs . anyways i believe I saw Bank of China fdic insured brokered cd’s listed via my fideltity account. their rates were pegged above other like type offerings .

  38. Anon1970
    Sep 29, 2019 at 10:14 pm

    The one Chinese company that I recently started to follow, CNOOC, has ADR’s which trade both in New York and Toronto, with very few shares trading on the Toronto Stock Exchange. If the company’s ADR’s are banned from trading in the US, will such trading shift to Toronto?

  39. NJDUDE
    Sep 29, 2019 at 11:58 pm

    Great article Wolf.

  40. Dennis
    Sep 30, 2019 at 11:24 am

    At the same time , shouldn’t the treasury also protect US investors from
    Good old American cash extracting IPOS;’s like

    Slack  -0.38 %
    Uber -0.28 %
    Lyft -0.53 %
    Drop -0.33 %
    Spotify -0.31 %

    Where are the libertarians when we need them ? This sounds like
    more government regulation not less to me.

  41. tommy runner
    Sep 30, 2019 at 4:29 pm

    w/ narrative penciled in, expect china to effectively replace the fundamental, massively important, desperately missing.. election/usa adversary. current admin’s complete full court press vs china immediately following the oct trade meet (no deal before election) along w/lines drawn blurring the ‘ism’s vs ‘ism, the radical blue team, etc will be expected to rally/ galvanize their supporters. w/ terms like rule of law being dusted off and trotted out can republic be far behind?

  42. yewtai
    Oct 5, 2019 at 10:15 pm

    The most important factor in China economic rise is giving China PERMANENT MFN status in 2001 by Clinton. This is the biggest mistake of America foreign policy which are mostly lead by Kissinger pro China group.

    This MFN and PNTR status allow China to export to America with zero tariff.

    This special status were not given to India, Taiwan, Thailand, South Korea, Japan etc, which also have strong manufacturing base.

    This American very biased foreign policy is very unusual since all of these countries are strong ally of America, except India.

    Some very powerful elite group from the outside are controlling American foreign policy, and having a top secret agenda to destroy America industrial capabilities in the long term and thus destroy American cowboys middle class freedom fighters and innovators.

    China tremendous and speedy growth in the past are due to able to export to USA zero tariff. China ultra cheap Yuan policy also sort of make China exporters the sole monopoly to exporting to USA.

    Other competitor from India, Taiwan, and south east asia were literally destroyed by China exporters.

    America is the biggest consumer market in the world and is still is today 2019.

    Now in 2019, American elite have realise too late , what big mistake Kissinger and Clinton make by giving China PERMANENT MFN status.

    Of course Clinton the fool and womaniser will never admit his big mistake but he does not care because he is a psychopath and sociopath with a deranged personality.

    https://www.theatlantic.com/ideas/archive/2018/06/normalizing-trade-relations-with-china-was-a-mistake/562403/

    Normalizing Trade Relations With China Was a Mistake

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