Capital Market Concerns: The Growing Influence of Chinese Companies in the US

The recent announcement of the intention of the Chinese fast fashion giant Shein to become publicly traded in the US, with lead underwriters Goldman Sachs, JP Morgan Chase, and Morgan Stanley, has generated skepticism and controversy. Shein, among other Chinese companies, has been subject to criticism for labor exploitation, trademark violations, unsustainable production methods, and tax avoidance. However, the deeper concern lies in the potential impact of Chinese companies exploiting American capital markets, highlighting a dangerous divide between US policy and market realities.

Despite US efforts to defend against and compete with the Chinese Communist Party (CCP) and its global ambitions, the public listings of Shein and other Chinese companies reveal the ineffectiveness of US policy towards China. Despite previous executive orders intended to limit US investment in Chinese companies, the recent surge of Chinese IPOs in the US suggests that these policies have had minimal impact.

What is particularly concerning is that many of these Chinese companies have ties to the CCP and engage in activities that run counter to US interests, such as human rights violations and military advancement. With concerns about companies like Shein relying on forced labour in the Xinjiang region and Lidar technology companies potentially supplying the Chinese military, the implications for both the US economy and national security are significant.

The contradiction between US policy and market realities must be addressed. Washington must take action to ensure that its policies truly reflect the nation’s interests. US capital markets should not be a means for Chinese companies to advance their agendas, and American investors should not be exposed to the risks associated with investing in companies with ties to the CCP.

It is clear that the current approach is not effective, and a more robust policy with real consequences is necessary. If the US is going to claim to enact a policy, it should have teeth and be backed by action, especially when it comes to protecting the integrity of American capital markets and safeguarding national interests.

As the US grapples with the growing influence of Chinese companies in its capital markets, it is clear that the time for real action is now. Otherwise, the prosperity and security of Americans could be at stake. It is imperative that Washington demonstrates strong leadership and implements policies that mitigate the risks associated with the increasing presence of Chinese companies in US capital markets.

Emily de La Bruyere and Nathan Picarsic are senior fellows at the Foundation for Defense of Democracies and co-founders of Horizon Advisory. This article is copyrighted by Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.