Beijing and Wall Street Strengthen Ties Despite Growing Political Differences

Despite President Trump’s trade and tech war with China, the Chinese and US finance sectors and strengthening ties with growing investments.

Wall Street bankers and senior Chinese financial officials all sat down for a teleconference less than 24 hours after the US president accused Beijing for trying to steal US technology. In addition to this accusation, President Trump went one step further by announcing an initiative to stop the alleged theft attempts.

The China-US roundtable was established two years ago when trade tensions between the two global superpowers were at their highest. The aim of the roundtable was to foster goodwill and enhance integration between the US and China, the world’s two largest economies.

China’s foreign Capital increased 20%

According to the people who were briefed on the discussions, the forum highlights the positives in the financial relationship between China and the US. Following the Covid-19 pandemic, Beijing is attempting to accelerate market reforms and better attract foreign capital. In the first 8 months of 2020 the amount of Chinese onshore bonds held by foreign institutional investors has seen a 20 percent increase on last year. According to market data provider Refinitiv, 12 percent of all purchases of Chinese government and policy bank bonds have been bought up by foreign investors.

Wall Street groups to expand into China

On the other side of the table, several high profile Wall Street Groups, including Citigroup and JPMorgan Chase, now have the go-ahead to expand business into China after they were given approval at the forum on October 16th. These financial approvals have coincidentally occurred alongside loose central bank policies elsewhere. The 10 year yield on Chinese government bonds is now 3.18 per cent, significantly higher than 0.8 per cent in the US.

China-US geopolitical relations are a motivator

Rather than hindering their financial ties, the increasingly poor geopolitical relations between China and the US have actually somewhat acted as a motivator for Beijing. Essentially China wants to preempt possible worsening relations that could lead to future sanctions. According to a China-based executive, integrating into global financial markets now will reduce US leverage in the future. On top of that, the exec added that there’s more chance of representatives of the US investment banking industry lobbying the Trump administration regarding its relationship with China if they are doing larger amounts of business with Beijing.

Geopolitical relations to remain sour, even if Biden wins

Despite the strengthening ties, American participants have allegedly advised their Chinese counterparts that the US political establishment’s anti-Chinese stance will not likely go away overnight if Joe Biden is elected. This is because, they claim, the sentiment is deeply entrenched in the US political scene, rather than simply being the view of the current president.

In other news, PNC Financials looks to buy BBVA in the US and we take a closer look at what you can expect from Airbnb’s IPO.

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