Wall Street and China’s Military Industry Complex

Anyone who has not yet read the U.S.-China Economic and Security Review Committee 2021 report It was released to Congress last week and picked up immediately. Any more than 500-page report submitted to lawmakers is difficult to describe in force, but this report does.As i am in mine Latest column, It ushered in a new era that may be the decoupling of the United States and China, and put forward various new proposals to restrict the flow of capital between the two countries. The committee is not a legislative body, but it has a good track record of advancing recommendations that do become laws or administrative policies, from restricting US-Huawei business to insourcing rules around key pharmaceutical ingredients.

The committee members were jointly elected by the leaders of the Republican Party and the Democratic Party. They reached an unusual consensus around this year’s report, which described the way the Communist Party of China (CCP) is building global economic, political and military forces to promote the construction of the “Belt and Road”. A new model of human progress.” As readers of the Financial Times know, the party has done so with a lot of help from Wall Street. The question is, how long will this disagreement last? Is it possible for US financial institutions to change indefinitely Remittance of funds to and from a country that supports forced labor? Low environmental, social and governance standards; is it the main strategic opponent of the United States?

I think the answer is no, but I must say that I am shocked that the hypocrisy of Bank of America and asset management companies injecting funds into companies that may endanger the security of the United States has not received more attention. This is a question raised by two committee members, Jeffrey Fiedler and Michael R Wessel, in the additional comments at the end of the report. Although BlackRock, Goldman Sachs, Charles Schwab, and many other companies investing in companies like AVIC Shenyang Aircraft Company, the main manufacturer of Chinese fighter jets, are not technically illegal, it is difficult to say that this is correct, especially at the moment. As the committee members said“Some people think that the basic responsibility of American citizens should be not to do anything harmful to the American military. This may be justified.”

The current Biden executive order only prohibits investment in 24 Chinese listed companies. But the report also pointed out that currently about two-thirds of non-state-owned enterprises in China have CCP officials involved in their business decisions. This means that most American companies that do business with such companies have been influenced by the party to some extent, even if the impact is small. The committee members speculated that the current loose supervision of capital flows may be attributed to the increase in the influence of the Treasury Department on these issues and the weakening of the influence of the US Department of Defense on these issues. But I want to know whether this situation will continue as Americans become more aware of Wall Street’s deep roots in China.

As Fiedler and Wessel said 504 renters“To put it simply, U.S. investment banks and institutional investors can still buy and sell Chinese military-related companies and profit from them, as long as they do not do so in the U.S. and only non-U.S. citizens are involved. If we are really interested in protecting U.S. national security Instead of simply showing it, then this loophole should be plugged as recommended by the committee.”

I agree with this-Ed, how about you? If so, what should Wall Street be allowed to do in China today?

Recommended reading

Edward Luce responds

This is not just about Wall Street. Large Silicon Valley venture capital funds, such as Sequoia Capital, hold shares in various Chinese high-tech start-ups ranging from quantum computing to advanced semiconductor production. Whether some of them have specific military applications is almost irrelevant. Beijing’s “Made in China 2025” plan is to dominate artificial intelligence and advanced technology by 2030. Therefore, the Biden administration is facing a severe dilemma. Is it to take more thorough measures to decouple the United States from China, as suggested in this report, or to continue Washington’s temporary practice of foreign investment in China? The latter is by far the easier path.

I admit that I feel very contradictory on this issue. You mentioned that almost two-thirds of Chinese private companies have the influence of the Communist Party. But this is almost impossible to avoid. There are 100 million party members in China, so I am surprised that the number of companies affected by the party is not 100%. It is almost impossible to establish a system to distinguish true Chinese companies from companies with more dual-use potential. So the logic is that the United States and China should limit trade and investment to commodities and low-value-added electronic products and white goods-these industries are the main sources of the US-China trade deficit.

There is no doubt that the economic divorce between the United States and China will make the world more dangerous. However, it is also dangerous to continue along today’s path, because the United States may provide guarantees for the accelerated development of China’s technology.As I wrote last weekThe competition between China and the United States is a multifaceted global challenge. We disagree on whether the United States should strengthen its diplomatic and commercial presence around the world, and I think it should. If Washington takes the path you like, it means that the United States will also decouple from the rest of the world. I believe this is what China wants to see. But this is a complicated problem, and I don’t have an overall solution. Divorce is reckless, but so is the status quo.

Your feedback

Now our swamp man has a word. ..

Respond to “America will never get rid of the Middle East‘:

“The United States cannot expect to maintain its status as a global power without ignoring the Middle East; but it does not need to participate in it as it has for most of its time since 1945… [A] There have been many articles on the geopolitical impact of global economic decarbonization. Although Mohammed bin Salman has made grand statements on hydrogen and other issues, it is difficult to regard the Gulf region as a geopolitical and Net loser in geoeconomics. In this regard, the region became less important not only to the United States but also to China in the next few decades. However, China seems to firmly adhere to the principle of supporting the Mackinder Heartland Theory, in which the Middle East is a key component, even putting energy resources aside. But I doubt whether there are many geopolitical thinkers within the ring road that agree with this view.

Issues more interesting than the competition between China and the United States in the Gulf region may become China-India competition in due course. This should not only take into account the geographical proximity, but also the deep and lasting historical ties between India and Iran. ” — Alastair Newton, Livingstone, Zambia

“Edward Luce wrote,’The essence of good diplomacy is to see the world from the other side’s point of view.’ Then he added, “At least temporarily, the United States seems to have lost interest in doing so. “The first assertion is correct, the second is incorrect. Unfortunately, the United States has not temporarily lost the ability to see the world from the other side’s perspective. At least for the past three decades, in other words, since the end of the Cold War, It has always lacked this ability.

Today we repeatedly mention “one world, two systems”, because the United States has lost a lot of credibility; this is not only because of endless wars, but also because on too many occasions, the United States is diplomatic arrogant and only provides’ The “take my way or take the highway” policy has alienated too many countries. ” — Marco Carnelos, Rome, Italy