US Bans Alibaba and Tencent Investments... Trump Raises Pressure on China to the Highest Level

by Kwon Jaehee

Published 07 Jan.2021 11:20(KST)

Following the Removal of China's 3 Major Telecom Companies from the New York Stock Exchange
Chinese Government Calls It "The Last Madness Two Weeks Before Trump's Term Ends"

[Image source=Yonhap News]

[Asia Economy Beijing=Special Correspondent Cho Young-shin, Reporter Kwon Jae-hee] The Trump administration, which has been continuously pressuring China, has now targeted Alibaba and Tencent. The plan is to add Alibaba and Tencent to the list of Chinese stocks banned for investment by Americans. Since Alibaba and Tencent hold significant weight not only in the U.S. but also in global stock markets, there are concerns that if delisting proceeds, the repercussions could be substantial.

In this regard, China expressed unfiltered hostility toward President Donald Trump, who has less than two weeks left before leaving office, accusing him of unleashing a final frenzy to leave a political legacy.

On the 6th (local time), the Wall Street Journal (WSJ), citing sources, reported that the Trump administration is considering a plan to prohibit Americans from investing in Alibaba Holdings and Tencent Holdings.

According to sources, in recent weeks, the State Department, Department of Defense, and Treasury Department have discussed expanding the blacklist and its impact on capital markets due to ties with the Chinese military. The Trump administration is also considering including two other Chinese companies suspected of links to the Chinese military on the 'blacklist' in addition to Alibaba and Tencent.

This news came especially as the New York Stock Exchange (NYSE) announced on the same day that it would delist China's three major telecom companies?China Mobile, China Telecom, and China Unicom?from the New York market, raising concerns that Alibaba and Tencent might follow the same path. Previously, the NYSE had announced the delisting of the three telecom companies on the 31st of last month but withdrew the delisting after additional consultations four days later, only to reverse the decision again. The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) cited guideline changes as the reason, but Bloomberg reported that the pressure from Treasury Secretary Steven Mnuchin and the Trump administration was the real cause.

If investment bans on Alibaba and Tencent are decided, it is expected to have a significant impact not only on the U.S. stock market but also on global capital markets. Alibaba and Tencent are considered the most valuable stocks in China, with a combined market capitalization reaching $1.3 trillion (approximately 1,413 trillion won). Alibaba and Tencent are included not only in various U.S. mutual funds but also in major stock indices such as Morgan Stanley Capital International (MSCI) and FTSE Russell. Because Alibaba is listed simultaneously on the New York and Hong Kong stock exchanges, and Tencent is listed only in Hong Kong, they have a high weighting in global stock indices. There is even speculation that Alibaba could be delisted from the New York Stock Exchange.

In response, the Chinese government issued a firm warning message that it will take necessary measures. On the 7th (local time), the Chinese state-run Global Times dismissed President Trump's political moves?such as banning eight Chinese applications, delisting the three telecom companies from the NYSE, and resuming political and military dialogues with Taiwan?as ineffective and malicious attempts. It also reported that these are merely political shows aimed at obstructing the future political actions of U.S. President-elect Joe Biden.

Above all, it emphasized that vigilance should not be relaxed as President Trump, having lost the election, might take extreme actions in economic and diplomatic fields during his remaining term.

Li Haidong, a professor at the Institute of International Relations at China Foreign Affairs University, said, "President Trump is unleashing a final frenzy," adding, "With less than two weeks left in his term, President Trump is overestimating his abilities."

The Global Times stated, "Before the executive order goes through legal procedures and is formally enacted, President Trump will leave office," and described it as "a political show to block the political and economic policies of President-elect Biden."