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Are we heading towards a financial decoupling between the USA and China?

Brian Wong discusses how far China remains an investment-worthy nation, and how regulatory requirements are having a significant impact on Chinese firms’ ability to list on the New York Stock Exchange.

18 Oct 2022

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There has been a fair amount of talk over a prospective financial decoupling between US and China. As with most commentary concerning the bilateral relationship these days, however, such a sweeping statement must be put into perspective. In truth, a better way of describing the status quo is that the two economic superpowers are heading towards a new model of coupling that is far more controloriented and securitised – whilst China seems to be welcoming foreign investment into its markets, including from the United States and the European Union, it is relatively loathe to permit Chinese companies from seeking listings abroad. Similarly, whilst many American firms have no qualms with expanding their investment and presence in China, it is clear that the Securities and Exchange Commission (SEC) is undertaking drastic measures to shore up against what it deems to be national security liabilities incurred by foreign investment. In short, the two countries are not trending towards eventual decoupling – but are instead pursuing a far more cautious and caveated mode of financial engagement with one another. Indeed, underlying much of the bombast is the fact that Chinese investment into the United States amounted to 38.25bn USD in 2021 – the second highest volume ever on record; and American investment into China stood at 118.19 billion USD in the same year.

China and Capital Consolidation

All of this took place against the backdrop of a trade war, ongoing geopolitical
tensions, and increasing scrutiny of foreign investments by both countries. Chinese
companies remain dependent upon American stock exchanges for capital
consolidation, and China represents the largest growth market for American investors
and high-net-worth individuals.
The deepening of financial ties is by no means surprising. China has undertaken drastic
measures to lure in foreign investors, through granting JPMorgan full ownership of a
securities venture in China – the first in the country’s history. The government of
Guangdong, the nation’s manufacturing and trade powerhouse, has pledged to reduce
investment barriers through measures such as cutting the total asset requirements for
foreign companies seeking to relocate or establish their regional hubs and lifting the
sole-proprietorship requirement for offices.

Is China 'investable'?

Of course, a worry remains – and has grown all the more potent in light of China’s
radical 0-COVID policy and escalating regulatory risk; to what extent is China
investment-worthy, or ‘investable’? Yet the concern, that China lacks lucrative yield in
the short- to medium-term, must be differentiated from the separate concern over the
accessibility of the market at large. Furthermore, with a rapidly burgeoning middle
class, the country remains a profitable and potential-laden market for investors in the

Yet it is apparent that Chinese companies are finding it increasingly difficult to list
abroad – in America, specifically. This is for two reasons. First, the stringent
enforcement of auditing requirements, paired with growing regulatory risks and
heightened scrutiny under Holding Foreign Companies Accountable Act (HFCAA) in
America have spurred many existing Chinese firms to de-list from the NY Stock
Exchange. Prominent examples include Bibibili, China Life Insurance, and Sinopec – the
latter two are notably state-owned.

The recent audit deal tentatively reached between China and America is a promising
sign – though is likely to be signaling a slowdown, as opposed to reversal in trend, in
the broader withdrawal of Chinese firms from the American market. Whilst the
pressure on PRC- and Hong Kong-based US public companies has been momentarily
eased, this respite could well be short-lived, as American foreign policy towards China
continually heats up.

It is also for this reason that Beijing is unlikely to welcome – and indeed has put its
foot down, proverbially – on certain Chinese firms seeking listings in America. The
chokehold exerted over Didi – in the aftermath of its IPO in America – is merely the tip
of an iceberg in reflecting the wariness of Chinese regulators of having some of the
country’s largest and most valuable companies exposed to the volatility and shifting
whims of the American financial market.

Such reticence is largely motivated by concerns over security and oversight – as openly
noted by Chinese regulators. Despite this, the unrivalled depth and size of the
American market (as measured by capitalisation, but also in terms of institutional
wherewithal and resilience) renders it near-unavoidable for most substantial Chinese
firms seeking to raise funds for further expansion and consolidation. Complete
withdrawal from the American market is neither possible, nor desirable, even when
taking into account China’s distinctive concerns.


Brian Wong

Guest Contributor
Hong Kong