Bans on stock purchases harm the interests of American investors
The China delistings have begun. This week, the New York Stock Exchange expelled three Chinese telecom companies to implement President Donald Trump’s November order that bars Americans from buying shares in “communist Chinese military companies”.
Others might also be booted. Separately, the Holding Foreign Companies Accountable Act — signed into law by Mr Trump in December — will delist all China-based companies in three years if China does not co-operate with audit-oversight inspections.
Such moves grab headlines and allow politicians to express pique at China. Hence their appeal. But they are poor policy tools. Their main effect is to enrich Chinese insiders and investors at Americans’ expense. Here is why.
Mr Trump’s order aims to slow the modernisation of China’s armed forces by depriving military-linked companies of US capital. But it is risible to think these companies need US equity investment. They have substantial assets and revenues, financial backing by China, and access to large pools of Asian capital.