James Politi in Washington and Peter Wells in New York
The Trump administration is considering aggressive steps to limit financial investments between the US and China, which would represent an escalation in the trade war ahead of a new round of negotiations between the countries next month. According to people familiar with the matter, Donald Trump’s advisers are weighing measures including stopping Chinese companies from listing on US exchanges, and curbing the ability of US government pension funds to make investments in Chinese equities. An expansion of the US economic conflict into the arena of capital markets has long been pushed by China hawks in Washington, particularly Marco Rubio, the Republican senator from Florida, and like-minded officials within the administration. However, it has been resisted by other Trump advisers who fear that it could deal a fresh blow to markets and undermine investor confidence. The Trump administration’s move to actively consider cutting the ties binding China to Wall Street was reported by Bloomberg on Friday, prompting a sharp drop in the shares of New York-listed Chinese companies and a weakening of the renminbi. Alibaba was down 4.2 per cent and Baidu dropped 1.7 per cent. The depository receipts of Tencent and online retailer JD.com were down 1.6 per cent and 3.4 per cent, respectively. China’s renminbi, traded in offshore foreign exchange markets outside the mainland, weakened by as much as 0.4 per cent — a sizeable move for the currency — as the news broke. It tempered that decline to be 0.2 per cent softer at 7.1372 per US dollar. After a flurry of tariff escalations rattled markets in August, US and Chinese officials have been exploring ways to reduce tensions ahead of next month’s new round of negotiations, with Beijing moving to boost its purchases of US farm goods in a gesture of goodwill towards Washington. Potential limits would also come in the wake of China’s decision this month it would scrap caps on foreign investors purchases of domestic stocks and bonds. Action by the Trump administration could therefore stymie the potential flow of international capital into the Asian country.