HomeAttacks on U.S.Gallagher Urges Biden to Radically Expand Limits on Investments in China

Gallagher Urges Biden to Radically Expand Limits on Investments in China

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Mike Gallagher, the chair of the House China committee, has made an urgent plea to President Joe Biden, advocating for a widening of anticipated limits on investments in China to encompass both stocks and bonds. Gallagher firmly expressed his concern that overlooking public markets would essentially mean not addressing the majority of the security risk posed by Beijing.

As Gallagher highlighted in his letter to President Biden, “Public market investments represent the majority of US capital flows to the People’s Republic of China. Any rules that exempt them will fail to address the bulk of the national security threat.” He added that a significant portion of the US investment, estimated around $1.3 trillion, ends up financing groups linked to the People’s Liberation Army and contributes to what the US government has termed as “the Communist party’s abhorrent human rights abuses”.

The discussions surrounding the new executive order, expected from Biden in the near future, initially targeted restricting direct investments from private equity and venture capital groups. However, Gallagher, hailing from Wisconsin, stressed the need to broaden this scope to include US participation in Chinese public markets.

The emerging issue here is not confined to the realm of national security. The financial sphere is equally affected. Gallagher’s committee has accused BlackRock, a prominent asset manager, and MSCI, a notable compiler of stock market indices, of profiting from investments that bolster the Chinese military. This accusation signals a warning to Wall Street about the inherent dangers of such investments. Gallagher articulated this point to the Financial Times, saying, “If American capital continues to flow to Chinese military companies, we are at risk of funding our own destruction.”

Gallagher’s fervent hope is for the creation of an efficient and transparent process that wouldn’t burden investors with convoluted case-by-case screening. Furthermore, he suggests that the US administration should persuade its allies to implement similar restrictions to ensure a united front.

These proposed restrictive measures have raised concerns both domestically and internationally. Some US corporations and allies worry that these regulations might be too stringent, while countries like Japan are skeptical of the effectiveness of such a screening tool. This dilemma serves to underline the delicate balancing act of maintaining national security, upholding human rights, and protecting economic interests. It resonates with Gallagher’s words: “That’s a deadly cocktail the American people didn’t order and don’t want to be served.”

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