Many companies and investors have made a lot of money over the years from China. And despite the frosty talks between the two sides, they still share extensive trade ties. China manufactures iPhones and buys iPhones. Ditto with the Chevrolets. China’s economic growth, while slowing, is still stronger than in most places. This will not change overnight.
But even as Wall Street encourages China, the balance between engaging with Beijing and facing Beijing has broken down. And US lawmakers are starting to scrutinize those links. Elected officials from the Democratic and Republican parties have expressed concerns about US funds investing in China. A U.S. government pension fund halted plans to invest in Chinese stocks last year after growing criticism that the move could run counter to national security goals.
Matthew Pottinger, deputy national security adviser to former President Donald J. Trump, recently warned in Foreign Affairs that these institutions “cling to self-destructive habits acquired over decades of engagement,” an approach to China, which led Washington to prioritize economic cooperation. and trade above all.
Compared to the confidence of Wall Street, the Chinese business community is nervous about what will happen next. The richest people pledge to spend millions, sometimes billions of dollars, on charities and other projects in order to stay aligned with Mr. Xi’s “common prosperity” goal.
Access to top Chinese politicians is also not working as much as it used to. Stephen Schwarzman, boss of private equity giant Blackstone, has a long relationship with Chinese leaders. He is close to Liu He, the country’s economic czar. Still, his company was forced to cancel a $ 3 billion deal to buy Soho China, a real estate developer, in September after failing to obtain regulatory approval. Blackstone declined to comment.
Wall Street companies are apparently betting that China’s past successes will continue. They have a long history on their side, but they would do well to remember what they constantly tell their clients: Past performance is not necessarily indicative of future results.