China faces risk of global economic backlash

DelhiUpdated: May 07, 2020, 09:15 PM IST


Story highlights

More countries now want to practice economic distancing from China.

The economic backlash against China is intensifying. The United States has joined a growing list of countries to clamp down on Chinese investments.

A bill has been moved in the US Congress. If passed, it would prevent predatory investments by the Chinese in American companies.

The bill has been introduced by Jim Banks. Someone who is seen as an influential lawmaker. He wanted to expand the scope of the committee on foreign investments in the United States.

This is an inter-agency committee which has the right to review foreign investments. Jim Banks wants this committee to review purchases by firms with links to the Communist Party.

Chinese companies have deep investments in America now. As of 2019, 156 Chinese companies were listed on the US exchanges. This includes 11 state-owned companies. 

This bill is something that would suit Donald Trump. At the moment, the US president is considering aggressive economic measures against China.

The White House is planning to respond to China's diplomatic attacks. They are considering moves to curb China's access to supply chains. The Trump administration has taken some steps already. 

Rules to export semiconductors to China have been tightened. Curbs could be placed on government pensions funds to stop them from buying Chinese stocks. 

More countries now want to practice economic distancing from China. Governments are stepping up their protections to guard their companies against hostile takeovers. 

Germany has amended its laws. Now the German government can intervene and open a review into foreign investment.

Spain has enacted a royal decree, any and all FDI now needs a government authorisation there. Italy has brought in similar restrictions too - they call it the "golden powers law".

Australia also plans to screen foreign investments. India recently introduced new rules for investments from China. They must go through the central government.

The new rules were branded as a move to keep investments from the neighbourhood in check, but it was aimed at China.

And now, it looks like America too wants to erect a firewall to block china from its economy.