Biden’s China policy greater risk for U.S. financial firms than Trump


The “Fearless Girl” sculpture is seen outside the New York Stock Exchange (NYSE) during a snow storm in New York, February 1, 2021.

Brendan McDermid | Reuters

BEIJING — As U.S.-China tensions continue to simmer under a new administration, risks for American investors with exposure to China are only going to rise, according to a report from Cowen.

“We believe President Biden represents a greater risk for financial firms on the China front than President Trump,” Cowen Washington Research Group’s D.C.-based analyst Jaret Seiberg wrote in an April 7 note. “We believe Team Biden will be more strategic, more multi-lateral and more effective in how it confronts China than Team Trump.”

The unrelenting U.S. pressure will likely turn Trump-era policies with initially long grace periods into a reality. That includes delisting Chinese companies from U.S. stock exchanges, Seiberg said.

Tensions between the two countries escalated under former President Donald Trump, initially centering on trade and then spilling over into technology and finance. The Trump administration wanted to curb U.S. investment in Chinese companies and stocks with new regulation, but the policies had relatively less impact than tariffs and sanctions on Chinese companies.

Since taking office in late January, U.S. President Joe Biden has kept a firm stance on China. His administration called the country, a more assertive “competitor” and on Thursday added more Chinese technology companies to a U.S. blacklist, citing national security concerns.

“(Delisting) is going to happen. Congress enacted legislation last year, and we see no probable scenario in which it repeals this law,” Seiberg said, noting it’s unlikely Beijing will allow the U.S. to inspect audits. “This will likely force these Chinese firms to trade in Hong Kong.”

In December, Trump signed a law stating that foreign companies cannot be listed on a U.S. exchange if they do not comply for three straight years with audits from the U.S. Public Accounting Oversight Board.

The board’s website lists roughly 300 instances of denied inspections, with the overwhelming majority from U.S.-listed Chinese companies such as Alibaba and Baidu. In the last 15 years, some Chinese companies were able to raise billions of U.S. dollars through stock listings before their financial fraud was revealed, causing huge investor losses.

Despite the growing political tensions, 30 China-based companies went public in the U.S. last year — raising the most capital since Alibaba’s giant IPO in 2014 — and many more have held initial public offerings since. Optimists have said the three-year compliance period would give companies and politicians time to act.

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