In the first of a three-part series on financial decoupling between China and the US, experts say the economies of the world’s two biggest countries are highly intertwined and pulling apart would inflict pain equally on both sides.
What a difference five years makes. When one of China’s largest cloud services providers raised US$240 million from a stock offering last month, its underwriters had to contend with two rules that did not exist when Kingsoft Cloud Holdings listed in the US in May 2020.
The first was the Outbound Investment Rule that came into effect on January 2 in the waning days of the Biden administration, imposing restrictions on American investments in China-linked companies on national security grounds. The second was the America First Investment Policy, announced by President Donald Trump on February 21, which further tightened Biden’s rules.
Together, they added another step to Kingsoft’s fundraising in the US and Hong Kong. The rules apply to any Chinese company engaging in overseas securities financing that could potentially sell to American investors.
“Mutual trust between the two sides has significantly declined,” said Chen Zhiwu, chair professor of finance at the University of Hong Kong. “Once trust is lost, financial relations are particularly vulnerable, as finance relies heavily on commitments across time. Without trust, there can be no sustainable finance.”
The threat of delisting from US exchanges looms large on nearly 300 Chinese firms. Photo: EPA-EFE
The world’s two largest economies, long intertwined across sectors from trade to finance, have been driven further apart since Trump returned to the White House in January, imposing tariffs on America’s trading partners and upending the global trade order. China has borne the brunt of Trump’s tariffs, with goods from China penalised with levies of as much as 145 per cent.
