“Tis is strange but true; for truth is always strange!” George Gordon Byron once wrote in Don Juan.
Last week, US President Donald Trump, who is still digging in to stay in the White House for a second term, banned American individuals and companies from investing in Chinese firms for national security reasons.
Also his Chinese counterpart, President-for-Life Xi Jinping, ironically, prevented Alibaba founder Jack Ma from launching the world’s largest IPO, fearing the company could become larger than communism!
Both these steps, although unrelated, point in the same direction: spreading rot in the Chinese economy.
Not even in its wildest dreams would China have thought that Trump, in his last weeks in office, could take such stern steps against Chinese companies only two months before handing over the baton to his successor, Joe Biden.
On November 12, Trump signed an executive order banning Americans from investing in Chinese firms that are deemed to be supplying or supporting Beijing’s military and security apparatus.
The ban will be applicable on 31 major Chinese companies from January 11, 2021, at 9.30 AM—that is, just nine days before Biden takes oath as the 46th President. They include both government-owned and privately-promoted companies in China.
China was using them for “increasing exploitation” of US investment capital to fund military and intelligence services, including the development and deployment of weapons of mass destruction, the Trump order said.
The US-China relations had nosedived rapidly during Trump’s presidency from 2017. This was the latest in a series of executive orders and regulatory actions targeting China’s economic and military expansion.
Under his “America First” agenda, Trump portrayed China as the biggest threat to the USA and global democracy, pursued a trade war with it, harangued Chinese technology firms, and blamed Beijing for the Covid-19 pandemic.
Thursday’s order prohibits US companies and individuals from owning shares in any of the listed companies, which include major telecommunications, construction and technology firms such as China Mobile, China Telecom, video surveillance firm Hikvision, and China Railway Construction Corp.
Current US investors in these companies will have to divest from the Beijing-linked companies within a year.
The Trump order’s reverberations were immediately felt on the Hong Kong stock market where share prices in state-owned China Telecom dropped more than nine percent, China Mobile fell six percent and China Railway Construction Corp lost more than five percent.
US National Security Advisor Robert O’Brien said the order will prevent Americans from unknowingly providing passive capital to Chinese companies — listed on exchanges around the world — that support the improvement of Beijing’s army and spy agencies.
He said the companies included on the list “routinely target American citizens and businesses through cyber operations,” as well as its economy and military.
O’Brien also lashed out at Beijing over its removal of four pro-democracy lawmakers in Hong Kong this week, calling China’s claims of “One Country, Two Systems Governance” in respect of the former British colony a “fig-leaf” masking Beijing’s increasingly authoritarian grip on the financial hub.
Neither Biden nor his party or representative reacted to this fresh Trump order. Predictably, Trump has dug the pitch for Biden—the new President could soon find himself in a Catch-22 position!
Trump opponents dubbed this executive order as his desperation reflected in his attempts to inflate the Chinese danger for his own survival.
On his part, Xi Jinping also scored a self-goal for Chinese economy!
Apparently, he felt that Alibaba founder Jack Ma had become globally popular and, therefore, a threat to Beijing, its Communist Party, and even the PLA.
So, the President halted Ant Group’s mammoth USD 37 billion Initial Public Offering (IPO) after Jack Ma questioned government policies and criticised its leaders.
China halted the IPO just a week before the financial technology company was set to go for public listing. Ma’s ‘inflammable’ remarks infuriated the Jinping Establishment no end.
The record-breaking IPO would have made Alibaba register the largest public listing. However, China’s new lending rules threw a spanner in its works.
Even after opening the economy, the Chinese Communist Party does not like ascendance of private businesses beyond a limit as they could pose a potential challenge to the fossilized party’s authority. Beijing also controls state-owned companies tightly and their employees are treated not as humans but spare parts of the Machine.
Ma had quoted Xi as saying “success does not have to come from me” and said he wanted to use innovation to help solve China’s financial problems. Ma also criticized the regulators for enforcing a set of international banking rules as “an old people’s club.”
This was too much for Xi and his cohorts. On the President’s orders, the Chinese regulators investigated Ant’s offering, and the IPO was suspended for fears that global investors, including those from Hong Kong, could benefit from it more than Beijing.
The fintech had already secured over USD 3 billion from individual investors across its dual listings in Hong Kong and Shanghai.
The long-term impact of the separate American and Chinese governments’ orders will begin to unfold sooner than later…