As a new, more skeptical consensus about America’s economic relationship with Beijing emerges in Washington, Wall Street is growing more tightly integrated with China than ever before. The disconnect highlights one of our nation’s biggest vulnerabilities in our confrontation with China over who will determine the course of the 21st century.
American capital markets are the most open, liquid, and valuable in the world. They are also increasingly a source of funds for China’s most strategically important companies. Chinese companies that produce surveillance technology and weapons of war that could one day kill Americans finance their investments with Wall Street capital.
Historically, both Republicans and Democrats have been weak when it comes to identifying and correcting these kinds of problems. Politicians in my own party have too often been reluctant to intervene over concerns about the “free market.” But things are changing. Faced with the catastrophic impacts of deindustrialization, which has choked opportunity for the American working class, and a growing reliance on an authoritarian regime, more of my colleagues in the GOP have awakened to the dangers of economic policymaking that prizes short-term economic efficiency over all else.
American capital markets are increasingly a source of funds for China’s most strategically important companies.
But just as many Republicans have grown more skeptical of big business’s cozy relationship with Beijing, large swaths of America’s financial and corporate sectors are making a play for a new base of political support—this time complete with deep-blue, progressive social stances on hot-button issues in our politics.
It’s the height of hypocrisy. U.S. corporations with lucrative business ties to the Chinese Communist Party will boycott states here over anti-abortion laws, while Beijing systematically sterilizes Uyghur women. They routinely inflame divisive race issues within the U.S. while marginalizing African American actors or erasing Tibetan characters to keep Chinese audiences happy.
And in instances when the U.S. government has acted, our financial sector, fearful of losing out on a lucrative investment opportunity, often intervenes to protect state-tied Chinese firms. For example, after the Trump administration called for the delisting of Chinese companies tied to Beijing’s military from the stock market last fall, it was Wall Street that initially went to bat to ensure that three Chinese telecommunications firms complicit in state censorship, China Telecom, China Mobile, and China Unicom, were spared. (After several reversals and a failed appeal process, the three ended up recently delisted.) And just this month, the Biden administration allowed one of China’s biggest companies, Xiaomi, to relist on U.S. exchanges.
Democrats should be skeptical of the opportunistic progressive social stances in our finance and tech sectors. The presence of a diversity and inclusion czar does nothing if a company is profiting off of slave labor in Xinjiang.
More fundamentally, Wall Street advances the goals of the CCP with its investment in China, which needs American capital to grow its economy. As China has evolved from an export-driven economy to one reliant on state-led investment, it needs foreign investment to help pay for its debts. Investing in China funds the Chinese companies powering Beijing’s economic strategy and industrial policy.
In 2019, the United States became a net investor in China for the first time in history. How did this happen? The answer lies with the fund managers. As China has “opened” its market to American financial companies and sought the listing of its businesses on American stock exchanges, the portfolios of American investors have been increasingly invested in Chinese companies. Many well-meaning Americans may inadvertently be propping up a genocidal regime because Wall Street does it for them.
Furthermore, Chinese firms listed on U.S. securities exchanges are widely shielded by their government from the full oversight of American financial regulators, putting teachers’ pensions and retirees at risk.
Thankfully, there are legislative solutions that both Republicans and Democrats should be able to support. First of all, we should ban any U.S. investments in Communist Chinese military companies. This is part of the reason why I first introduced my Taxpayers and Savers Protection (TSP) Act in 2019—to ensure the retirement savings accounts of federal workers and service members didn’t end up invested in Chinese companies tied to the People’s Liberation Army or engaged in human rights abuses.
In instances when the U.S. government has acted, our finan-cial sector often intervenes to protect state-tied Chinese firms.
Similarly, no Chinese company on the U.S. Department of Commerce Entity List or the U.S. Department of Defense list of Communist Chinese military companies should be allowed to access U.S. capital markets—a move that could simply be accomplished by passing my American Financial Markets Integrity and Security Act.
We can also require increased scrutiny of activist investors in companies tied to national-security work or supply chains—particularly ones related to China—through my Shareholder National Security Awareness Act. Finally, we must ensure that Chinese companies, the only ones in the world that routinely skirt U.S. regulatory oversight, are no longer welcome to publicly list on U.S. stock exchanges.
Americans from across the political spectrum should feel emboldened by the growing bipartisan awakening to the threat that the CCP poses to American workers, families, and communities. As we deploy legislative solutions to tackle this challenge, Democrats must not allow our corporate and financial sectors’ leftward shift on social issues to blind them to the enormity of China as a geo-economic threat.