The Trump Administration is looking for ways to pressure China to change its trade practices, but how about not hurting the U.S. along the way? The latest shoot-self-in-foot moment came Friday when word leaked that the White House may restrict bilateral U.S.-China investment. Bloomberg News reported that the Administration may also block Chinese companies like Alibaba from listing on U.S. stock exchanges.
Rising stock prices went in reverse, and thats no surprise. A blanket ban on bilateral investment is a good way to hurt America while making Chinese reform less likely.
The delisting of Chinese companies is especially foolish. American financial exchanges are sources of U.S. economic strength, but they compete in a global market. Foreign firms can choose to list in London or Hong Kong or Frankfurt as easily as on the Nasdaq or the New York Stock Exchange. Banning Chinese companies from U.S. exchanges would merely hurt those American businesses and U.S. capital markets. The damage to the Chinese firms would be minor because investors would still be able to raise capital elsewhere.