Wall Street Is Finally Getting Access to China. But for How Long?

China is easing restrictions on foreign ownership of financial services firms because it agreed to do so as part of a trade agreement with the Trump administration. But the country could just as easily bar those firms, said Dick Bove, a veteran banking analyst at Odeon Capital Group.

“Give it a year and a settling of their financial problems,” Mr. Bove said. After that, “they won’t need the American banks, and they can kick them out.”

Banks also have to consider the fraught relationship between the United States and China, even though their economies are deeply interlinked. China was America’s largest trading partner for goods last year, with $559.2 billion in goods changing hands between the two nations, according to the Office of the United States Trade Representative. It was the third-largest market for exported U.S. goods.

The flow of goods and services has continued despite a continuing trade war that intensified in 2018 after President Donald J. Trump imposed tariffs on a broad swath of Chinese products. President Biden is scheduled to hold a virtual summit with President Xi Jinping of China on Monday amid friction over trade, cyberthreats and Taiwan, among other issues.

Geopolitical tensions involving Taiwan and worries that military maneuvers could spiral into hostilities that would jolt financial markets have also weighed on the minds of financiers.

Six senior Wall Street banking executives, who declined to speak publicly about some aspects of their business because of the political sensitivities, said that although they welcomed China’s latest steps toward financial opening, they were keenly aware that the Chinese government could at any moment revoke their right to do business. They noted that their firms had other bases in Asia, like Singapore or Tokyo, in case they needed to pivot away from the mainland.

Bankers cited Beijing’s crackdown on tech companies, including the ride-hailing giant Didi, the internet powerhouse Tencent and the e-commerce giant Alibaba, as examples of other policy changes that could unnerve foreign businesses and investors. Mr. Xi’s “common prosperity” initiative to address the country’s wealth gap, which has put many homegrown tycoons on notice, is also worrisome to foreign companies.

Article source: https://www.nytimes.com/2021/11/15/business/wall-street-china.html