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The U.S. government has called for a major overhaul of China’s major markets so that, if approved, could have significant implications for regulators and index providers.
Recent annual report from the US-China Economic Security Review Commission expressed security concerns over the sharp rise in US currency. “The growing number of participants in Chinese markets exceeds the US government’s protection against the various US national security and economic threats posed by US funding to companies with Chinese problems,” the report said.
“Despite ongoing conflicts in the US-China, US investors, financial regulators and corporations are increasingly participating in China’s financial markets,” it added.
It also stated that US positions in the Chinese economy and debt rose 57.5 percent from $ 765bn in 2017 to $ 1.2tn in 2020.
According to the report, “Chinese policymakers are engaging with foreign exchange regulators as they work to develop China’s major markets as a source of foreign exchange. [Chinese Communist party’s] The goals of professional development and other legal goals “.
The committee seeks to increase the amount of information available to close the “entry”, and to show that US investors can buy, sell and profit from Chinese military-related companies as long as they do not do this in the US and only affect people who do not have them. -Residents of the US.
“If we are really interested in protecting US national security rather than in public, this relief should be closed as the committee recommends,” it said.
Earlier this year, penalties were changed printed and the U.S. Office of Foreign Assets Control had indicated that agencies were not “prohibited” from providing financial management or advisory services to non-US citizens, foreign exchange or organizations involved in the purchase or sale of securities that would violate financial restrictions. .
The announcement in June appeared to alleviate some of the concerns of US managers that their upcoming business in China and Hong Kong could have a significant impact on US government policies.
The new Commission report also looks at how the Chinese government has opened up its major markets to foreign investors.
“The Chinese government allows foreign companies and investors to participate in the Chinese market as long as it is in line with national interests,” it said.
As a result, the “opening up” of China’s financial name is essentially a well-planned approach to promoting the control of large markets and foreign direct investment mechanisms to meet China’s development goals, “the commission said.
One of the problems identified by the committee’s review was the allocation of exports to Chinese expenditure on supervised funds.
Recently, FTSE Russell began to place Chinese debt in its World Government Bond Index. The gradual integration process, which began on October 29, in three years will see Chinese government bonds form 5.25% of the index.
The report said a sharp increase in the integration of Chinese security into financial institutions has led to a significant increase in U.S. exports to Chinese companies.
“Because randomly controlled investments take this in and the fast-moving funds need to make it possible, index providers have played a significant but ineffective role in regulating foreign exchange in Chinese companies,” it added.
The commission emphasized the need for “index providers to combine their licenses with the Chinese market or the Hong Kong Stock Exchange, the protection of Chinese companies listed on US exchanges through the US exchange. [variable interest entity], or any other type of back-to-back protection equipment, must be regulated by the SEC “.
The commission also recommends that Congress order the U.S. Treasury Government to review the correct annual US portfolio in China since 2008, in addition to funding for offshore areas such as the Cayman Islands.
US President Joe Biden signed the law in early June ban Americans by making money in 59 Chinese companies ranging from security and safety units through alliances with the Chinese military, amplifying the old law of former President Donald Trump. However, the law was also seen to reduce the amount of information, reducing the fear that US groups in Asia would be more likely to fail with the ban.
BlackRock, Vanguard and State Street Global Advisors have all invested heavily in China, while many other U.S. regulators, including JPMorgan Asset Management and Morgan Stanley, are actively rebuilding seafood markets.
Additional reports of Echo Huang
* Ignites Asia is an article published by FT Specialist in property management. It affects everything from the development of new products to the rules and regulations of the industry. Tests and registrations are available at ignitesasia.com.
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