Why Wall Street Backs China Despite Beijing’s Tighter Grip

A lot of companies and investors have made a lot of money over the years from China. And despite the frosty talk between the two sides, they still share extensive business ties. China makes iPhones and buys iPhones. Same with Chevrolets. China’s economic growth, while slowing, is still stronger than in most places. That won’t change overnight.

But even as Wall Street cheers on China, the balance between engaging with Beijing and confronting Beijing has fallen out of whack. And Americans lawmakers are starting to scrutinize those ties. Elected representatives from both the Democratic and Republican Parties have expressed concerns about American funds investing in China. A U.S. government retirement fund halted plans to invest in Chinese stocks last year after growing criticism that the move could work against national security goals.

Matthew Pottinger, a deputy national security adviser under former President Donald J. Trump, warned recently in Foreign Affairs that these institutions “cling to self-destructive habits acquired through decades of ‘engagement,’ an approach to China that led Washington to prioritize economic cooperation and trade above all else.”

Compared with Wall Street’s confidence, China’s business community is jittery about what comes next. The wealthiest people are pledging to spend millions, sometimes billions, of dollars on charities and other projects to stay aligned with Mr. Xi’s goal of “common prosperity.”

Access to senior Chinese policymakers doesn’t work its magic as much as before, either. Stephen Schwarzman, head of the private equity giant Blackstone, has long cultivated relationships with the Chinese leadership. He is tight with Liu He, the country’s economic czar. Still, his firm was forced to call off a $3 billion deal to buy Soho China, a property developer, in September because they failed to get regulatory approval. Blackstone declined to comment.

The Wall Street firms are apparently betting that China’s past successes will continue. They have a long track record on their side, but they would do well to remember what they constantly tell their customers: Past performance isn’t necessarily indicative of future results.

Article source: https://www.nytimes.com/2021/10/06/business/china-business-wall-street.html