The Commerce Department on Monday put a number of Chinese entities -- including surveillance technology company Hikvision -- on an export blacklist that prohibits American firms from doing business with them unless they have a U.S. government license to do so. Hikvision, which is listed on the MSCI All Country World index, has been cited by Trump’s advisers as one of several Chinese companies that presents a threat to American investors.
In response on Tuesday, a Chinese official warned it would retaliate.
As with most policy discussions in the Trump administration, the president’s advisers have a range of opinions on the matter and haven’t agreed on a path forward yet, people close to the deliberations said. The officials do seem to agree, however, that there’s a political upside to engaging on the issue, the people added.
The White House is citing investor protection as the main reason for taking action and is carefully working to keep the matter separate from the ongoing trade negotiations that are set to resume in Washington this week.
“What we’re looking at is U.S. investor protections, transparency and compliance with a number of laws," Kudlow told reporters Monday. “There’s been complaints by the stock exchanges about this, the SEC has heard complaints, so we’ve opened up a study group to take a look at it, but we’re very early in our deliberations.”
Trade Talks
Any action on capital flows could undoubtedly be seen as a negotiating chip by President Donald Trump, who has in the past put other issues on the table in the talks with Beijing.
The Office of U.S. Trade Representative Robert Lighthizer isn’t playing a key role in the discussions around capital flows because they are separate from the trade talks, two of the people said. A spokesman for Lighthizer didn’t respond to a request for comment.
Lighthizer, however, is Trump’s point person in talks for a trade deal and any Chinese reaction to the investment limit plans would likely be taken to him in the context of the negotiations.
The options for investment limits that were initially discussed included forcing a delisting of Chinese companies from U.S. exchanges, imposing limits on investments in Chinese markets by U.S. government pension funds and putting caps on the value of Chinese companies included in indexes managed by U.S. firms, according to people familiar with and involved in the discussions.