AILSA CHANG, HOST:
On January 15, President Trump signed a preliminary trade deal with China. It was a momentary pause on a year-long economic battle between the two superpowers.
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PRESIDENT DONALD TRUMP: This is something that – far beyond even this deal, it’s going to lead to even stronger world peace. We now have a big investment in each other and in getting along with each other.
CHANG: Well, less than a week later, the first case of COVID-19 was diagnosed in the U.S., and regional outbreaks soon swelled into a global pandemic.
MARY LOUISE KELLY, HOST:
The president’s tone on China is less conciliatory now. Here he is yesterday in Michigan speaking about the coronavirus.
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TRUMP: It came from China. We’re not happy about it. We just signed a trade deal. The ink wasn’t dry, and all of a sudden, this floated in. We are not going to take it lightly.
KELLY: And amid the president’s criticism of China’s handling of the virus, new tensions have emerged. This week the Senate overwhelmingly approved a bill that would bar some Chinese companies from getting listed on U.S. stock exchanges.
CHANG: And there is controversy brewing in China. Beijing has unveiled new national security measures for Hong Kong in an effort to exert more control over a city that was guaranteed a great deal of autonomy. Well, joining me now for more on all of this is NPR business correspondent Jim Zarroli and diplomatic correspondent Michele Kelemen. Hey to both of you.
JIM ZARROLI, BYLINE: Hello.
MICHELE KELEMEN, BYLINE: Hi there.
CHANG: So, Michele, how has the administration responded to this move from Beijing so far?
KELEMEN: Well, what China is doing is basically chipping away at Hong Kong’s autonomy – this idea of one China, two systems. It’s considering these national security measures that bypass the local legislative process, and that’s provoked a lot of anger here in the U.S. from both Republicans and Democrats in Congress. Secretary of State Mike Pompeo today called it a disastrous proposal and said it could be the death knell for the high degree of autonomy that Beijing had promised Hong Kong.
CHANG: And this move is just, like, one irritant in a relationship that seems to be fracturing all over the place.
KELEMEN: Right. I mean, you mentioned trade. There’s also technology and intellectual property rights. There’s the handling of the coronavirus. The whole relationship really seems to be disintegrating at the moment. Richard Haass, who runs the Council on Foreign Relations, wrote on Twitter today that the U.S. and China are at their most dangerous moment since their modern relationship began in the 1970s. That was his quote. He said there’s no real plan to limit the friction, and both countries stand to lose.
CHANG: Well, Jim, let’s turn to you to talk about one huge piece in this relationship, and that is the economy. What exactly is in this new bill that the Senate just passed?
ZARROLI: Well, right now companies that are traded on a stock exchange in the U.S. have to submit an audit from an independent firm every year. China typically doesn’t allow companies to do that. So the bill says if a company doesn’t do this for three years in a row, it must be kicked off the exchange – also has to state explicitly if it’s owned or controlled by a government. And this is clearly aimed at Chinese companies. Chinese government owns big stakes in a lot of companies, and if it doesn’t own them, it often has deep ties to them. So the fact that this has come up so suddenly really shows how bad the relationship has become between China and the U.S., you know, over trade and over China’s…
ZARROLI: …Handling of the coronavirus.
CHANG: Well, how significant is this bill? Because, I mean, are there a lot of Chinese companies that are traded in the U.S.?
ZARROLI: There are about 200 if you include companies based in Hong Kong. And these include some very big, important companies like Alibaba, which is kind of the Amazon of China. And these have become, you know, an everyday part of Wall Street. They’re in people’s retirement funds. The problem is it’s really easy for investors who put money in Chinese companies to get burned. Here’s Scott Kennedy at the Center for Strategic and International Studies.
SCOTT KENNEDY: Chinese corporate governance is famously horrible. There’s a lot of corruption in China, and it’s very difficult for anybody to know what goes on inside Chinese companies.
ZARROLI: And we saw a really big example of this recently. The Luckin Coffee Company, which is China’s answer to Starbucks – it was traded on NASDAQ in April. It acknowledged that some of its sales figures were fabricated. The stock plunged, and it was delisted by NASDAQ just this week.
CHANG: Wow. Well, how do you think the Chinese government and Chinese companies are going to be reacting to this?
ZARROLI: Well, they’ll see it as an attack on their sovereignty. I mean…
ZARROLI: For Chinese companies, it’s a problem but less of one than it was. I mean, Chinese companies have always wanted to be listed in the U.S. because it was a way to raise money. But they have other options now. I mean, you can buy shares in Chinese companies through the Hong Kong Exchange. So money isn’t the issue. There is a prestige factor. I mean, it looks good for young Chinese companies to be listed in New York.
CHANG: Sure. What does this potentially mean for American investors?
ZARROLI: Well, China is the second largest economy in the world. It has a lot of really fast-growing companies. There’s a lot of money made there. I think this will just make it harder for American investors to participate in the growth in China. It’s also, you know, a big deal for Wall Street firms like JPMorgan Chase and Goldman Sachs. You know, they can make a lot of money doing initial public offerings of Chinese companies, and now that money will at least potentially be gone.
CHANG: Yeah. Well, Michele, back to you because it’s not just the Senate bill that we’re talking about with Jim here. The administration just released a new strategy on how it intends to compete with China. Can you tell us what is this new strategy?
KELEMEN: Yeah. I mean, the White House laid out what it called this competitive approach to China. Basically, the Trump administration argues that China’s Communist Party is a threat to the international system. Secretary of State Mike Pompeo actually explained this week why this new approach is needed. Let’s take a listen.
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MIKE POMPEO: For several decades we thought the regime would become more like us through trade, scientific exchanges, diplomatic outreach, welcoming them in the WTO as a developing nation. That didn’t happen. We greatly underestimated the degree to which Beijing is ideologically and politically hostile to free nations. The whole world is waking up to that fact.
KELEMEN: And I reached out to James Green, who’s a former U.S. government official with two decades of experience on China, and he says no one who worked on these issues had any illusions about China’s ambitions for itself and for the region. So, you know, the fact is the U.S. has to deal with a rising China. It’s going to have to figure out a way to work with Beijing not only to deal with this pandemic but also…
KELEMEN: …To revive the global economy.
CHANG: That is NPR’s diplomatic correspondent Michele Kelemen and business correspondent Jim Zarroli. Thanks to both of you.
ZARROLI: You’re welcome.
KELEMEN: Thank you.
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