SAN FRANCISCO (Reuters Breakingviews) – The U.S. Senate is taking pressure on China to a new level. A bipartisan bill doing the rounds on Tuesday would impose sanctions on Beijing officials and local banks if the country puts into place fresh curbs on Hong Kong. Tensions between the two superpowers are already high. The legislation would bump that up several notches.
Anger against China has united a usually divided Congress. The Senate plan would freeze U.S. property assets of individuals responsible for implementing a proposed Hong Kong national-security law. Unlike past legislation, Chinese banks doing significant business with those officials would also be targeted, cutting them off from American counterparts and limiting access to U.S. dollar transactions. Democratic lawmaker Chris Van Hollen, a bill co-sponsor, said on Tuesday that the intention was to hit the communist party “where it hurts.”
President Donald Trump, who has made his anti-China credentials part of his re-election campaign, has been reluctant to impose such sanctions in the past. That’s because he wants to avoid jeopardizing a trade deal with China. Last November, the president reluctantly signed a congressional bill to impose sanctions on Chinese officials responsible for human-rights abuses in Hong Kong. But he has yet to act on that authority…
Sanctions are a red line for Beijing. Crossing it raises the potential for revenge against U.S. companies beyond retaliatory tariffs. China could reverse moves to open up to U.S. financial institutions. That would, for example, impact JPMorgan, which in April said it would seek full ownership of its Chinese asset-management joint venture after foreign shareholder caps were lifted; it’s also building a brokerage business there.
The People’s Republic could in addition follow through on threats to put U.S. companies like Apple, Boeing and Qualcomm on a so-called unreliable-entity list. That could restrict their business and may even spark calls for boycotts.
In other words, sanctions could lead to certain ties being cut altogether. That would have a higher economic – and political – impact than the increased costs businesses and consumers faced from the tit-for-tat tariff increases. But that’s the kind of fallout America’s policymakers seem increasingly willing to tolerate.
U.S. Moves to Audit Chinese Firms. Market Frets Over What Comes Next.
Investors worry proposed legislation will further inflame tensions between Beijing and Washington
By Dave Michaels and Akane Otani
May 26, 2020 5:30 am ET
- Companies controlled by foreign government would be banned
- Senator Kennedy says he wants China to ‘play by the rules’
The Senate overwhelmingly approved legislation Wednesday that could lead to Chinese companies such as Alibaba Group Holding Ltd. and Baidu Inc. being barred from listing on U.S. stock exchanges amid increasingly tense relations between the world’s two largest economies.
The bill, introduced by Senator John Kennedy, a Republican from Louisiana, and Chris Van Hollen, a Democrat from Maryland, was approved by unanimous consent and would require companies to certify that they are not under the control of a foreign government.
U.S. lawmakers have raised red flags over the billions of dollars flowing into some of China’s largest corporations, much of it from pension funds and college endowments in search of fat investment returns. Alarm has grown in particular that American money is bankrolling efforts by the country’s technology giants to develop leading positions in everything from artificial intelligence and autonomous driving to internet data collection.
Shares in some of the biggest U.S.-listed Chinese firms, including Baidu and Alibaba, slid Thursday in New York while the broader market gained.
If a company can’t show that it is not under such control or the Public Company Accounting Oversight Board, or PCAOB, isn’t able to audit the company for three consecutive years to determine that it is not under the control of a foreign government, the company’s securities would be banned from the exchanges.
“I do not want to get into a new Cold War,” Kennedy said on the Senate floor, adding that he wants “China to play by the rules.”