China earlier this month removed a $300 billion cap on overseas purchases of Chinese stocks and bonds meaning global funds no longer need to apply to purchase quotas to buy the assets. The move is designed to lure more foreign capital into Chinese markets.

Next Big Phase

Roger Robinson, president and CEO of RWR Advisory Group who has been working on the issue since the ’90s, said this type of pressure can make a difference. “Treating the unequal financial dimensions and undisclosed material risks associated with China’s presence in the U.S. capital markets will likely represent the next big phase in the bilateral economic relationship,” he said.

One of the most extreme arguments for cutting China off from American capital — advanced by Navarro and outside advisers like Steve Bannon — is that U.S. investments in Chinese companies or on China’s exchanges mean that Americans are unwittingly giving financial support to the Chinese Communist Party and a rising strategic and economic rival.

Trump would also have the support of hardline advocates, like Bannon, his former chief strategist, and hedge fund manager Kyle Bass. Both are leading the Committee on the Present Danger: China. It’s a group that advocates for total economic decoupling as a way to secure America’s national security.

In a recent “threat briefing” — which is how the group titles its meetings — Bannon said American financing have helped spur China’s economic ambitions and technological advances.

“The Frankenstein monster that we have to destroy is created by the West. It’s created by our capital,” Bannon said at the Sept. 12 briefing.

Rule of Law

While some administration officials see these steps as giving the U.S. more leverage in the trade negotiations, others are working hard to ensure the two are kept separate. At the same time, the administration is hesitant to move forward on this out of fear that the already fragile economic relationship between Beijing and Washington could collapse.

In particular, officials at the Treasury Department and the National Economic Council are wary of how any action could spook investors and are trying to signal to relevant stakeholders that the rule of law can be trusted. Those officials would want to frame any move as taking action against known bad actors that have persistently been out of compliance with U.S. laws.