US Must Act on Moral, Economic Imperatives and Win Cold War With China

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As a result of its secrecy and negligence, the Chinese Communist Party bears responsibility for failing to minimize the tragic costs of COVID-19. Our government must not forget the 600,000 Americans who have died from COVID.

A fitting response to honor these lost Americans would be making sure we peacefully bring down this communist regime.

China’s rise has been financed by its largely unfettered access to the American capital markets. Investors in the United States, and around the world, have unwittingly (or worse) financed Chinese companies that are modernizing the Chinese military.

On December 18, 2020, President Donald Trump signed the Holding Foreign Companies Accountable Act. This law requires foreign companies to prove that they are not controlled by a Chinese governmental entity.

Further, it mandates that companies listed on U.S. securities exchanges and over-the-counter (OTC) markets must comply with the Public Company Accounting Oversight Board’s (PCAOB) audits for three consecutive years.

It is highly unlikely that any of these prominent Chinese companies could withstand that level of scrutiny. In May 2021, there were 248 Chinese companies listed on the NASDAQ, New York Stock Exchange, and NYSE American, which are the three largest U.S. exchanges.

These Chinese companies had a total market capitalization of $2.1 trillion, including 8 state-owned enterprises.

From October 2020 to May 2021, 17 Chinese companies were delisted. Many more are likely to follow.

On November 12, 2020, President Trump signed Executive Order 13959. This order prohibits any Americans from purchasing or investing in companies that are controlled by the Chinese military.

This executive order included a list of 31 Chinese companies. On June 3, 2021, President Biden expanded this list of Chinese companies to 59 under his Executive Order 14032.

The American crackdown on Chinese companies in our capital markets has already produced a response from Beijing. On July 10, the Chinese government announced new regulations to discourage its companies from initial public offerings abroad.

Without American investors, the Chinese banking system will likely take on more loans.

In April 2021, China had almost $3.2 trillion in foreign currency reserves. It’s not clear that the Chinese can use these reserves due to the growing number of non-performing loans (NPLs) within its banking system.

Even before this crisis, the official number of NPLs was 1.8% in 2018. Unofficially, it is believed that the percentage of NPLs is much higher.

A loan is considered non-performing when it is 90 days past due. In March 2021, China’s official number of NPL’s amounted to $554 billion.

On top of NPLs, there are the special mention loans in the Chinese banking system.

Special mention loans are past due and can quickly become non-performing loans. At the end of the third quarter of 2020, China’s NPLs were almost 2 percent while an additional 2.7 percent of loans were special mention loans.

This means that approaching 5 percent of all loans were officially past due.

The Chinese banking system had $49.5 trillion in combined assets in 2020. As it takes on more loans, China’s liabilities will eventually exceed its foreign currency reserves.

Even if China doesn’t face an imminent Soviet-style collapse, the corrupt nature of the communist system is what makes China’s growth model unsustainable in the long term.

As Chinese dissident Cai Xia wrote in Foreign Affairs: ”China’s long-standing problems of corruption, excessive debt, and unprofitable state enterprises are rooted in party officials’ power to meddle in economic decisions without public supervision.”

There is bipartisanship in Congress for standing up to China. For instance, Congress recently passed the CHIPS for America Act as a way of restoring America’s share of the global production of semiconductors.

In 1990, the United States produced 37 percent of the world’s semiconductors compared to 12 percent today. The Chinese are producing 15 percent.

Another recent bipartisan effort is the Uyghur Forced Labor Prevention Act. In 2020, the House voted for this bill by 406 to 3. It prevents any Chinese goods produced through slave labor from entering the United States (please call your senators and tell them to pass this bill).

As Sen. Marco Rubio recently said: ”Last year, we saw companies — Nike, Apple, Coca-Cola, even the U.S. Chamber — lobbying against this bill. Well, soon we’re going to find out what holds more power in our country — corporations making billions off genocide and slavery, or our basic sense of right and wrong.”

Much the same can be said about the moral and economic imperatives of winning the cold war against China.

Robert Zapesochny is a researcher and writer whose work focuses on foreign affairs, national security and presidential history. He has been published in numerous outlets, including The American Spectator, the Washington Times, and The American Conservative. When he’s not writing, Robert works for a medical research company in New York. Read Robert Zapesochny’s Reports — More Here