Person:

Friesen, Connie

Against the backdrop of heightened tensions between China and the United States that is accompanying the Ukraine war, this paper considers practical measures that the United States might take to manage the inbound investment activities of certain Chinese financial institutions in the United States more effectively. It also explores steps that might be taken by U.S. policy makers and regulators to manage outbound investments by U.S. entities and individuals in Chinese financial institutions and securities. Several policy suggestions are made. First, regulators need to broaden the concept of national treatment to include a full review of state ownership and political party influence. Second, U.S. policy makers and regulators should require appropriate disclosure to investors of the risks presented by direct investments in Chinese financial institutions such as asset managers. Third, the widespread use of variable interest entities and measures to ensure state and CCP influence within Chinese companies merit a more active U.S. government role to protect U.S. investors and markets. Fourth, resolution of issues related to potential large-scale delisting of Chinese companies from U.S. exchanges should be pursued through continued active discourse between U.S. and Chinese regulatory agencies.

This paper explores ways in which the United States might shape the structure and terms of its financial engagement with China more effectively. The recommended policies envision international institutions, payment systems and strategies that will affirm U.S. interests and values, demonstrate economic leadership in a bipolar world and promote a stable relationship with China. Steps that the United States might take to protect the primacy of the U.S. dollar (“USD”) over the long term and promote payment systems and strategies led by the United States and its allies are identified and evaluated.