If you are wondering why China is suddenly back in the news on various political and economic fronts, look no further than the November elections. America needs a scapegoat for all the pain and suffering we have endured during this pandemic. The world's second-largest economy is an easy target.
There is no dispute; if we want to cast blame on the country that originated the coronavirus, we know it originated in Wuhan, China. At the time, the World Health Organization, the U.S. Centers for Disease Control (CDC), the federal government, the White House, and the world at large, all applauded China's efforts to contain the virus. Back then (a few short months ago), President Trump actually applauded President Xi's efforts and said so many times publicly.
Since then, more than 5 million cases of COVID-19 and 330,000 deaths have been reported worldwide. Untold damage has been done to world economies. The United States, one of the worst-hit nations, has suffered massive unemployment and a big decline in economic growth that has led to our first recession in more than a decade. And all of this has occurred in an election year.
Whether warranted or not, President Trump and his administration have taken the lion's share of the blame for America's poor showing in combating the virus. A late and disorganized response, lack of medical equipment, and a continued paucity of testing, are some of the accusations directed at the White House. Donald Trump, however, believes that the best defense is a good offense. Who better to direct our angst and unhappiness at than China?
No never mind that Trump announced a "historic" but feeble trade agreement with that nation less than six months ago. Today, with Chinese promised purchases falling short as a result of their own virus-weakened economy, Trump is threatening to break the deal; but there is more.
Today, it's about preventing U.S. companies from doing business with Huawei Technologies, a Chinese leader in 5G technology for wireless networks. Last week, a new rule bars the Chinese company and its suppliers from using American technology and software. The escalation will hurt a number of American semiconductor companies that are already reeling from the present recession, but I am sure that somehow, someway, they will be compensated for their losses.
This week, the U.S. Senate voted (by unanimous consent) a bill that would expel Chinese companies from all U.S. stock exchanges if they continue to deny inspectors access to their accounting audits. The argument is that China has continued to ignore American demands that if they want to list their companies on an American exchange, they are required to submit to a U.S. audit and the Securities and Exchange Commission (SEC) will have access to those financials.
This bill, which will now go to the House, follows on the heels of an order by the president that the federal retirement board, called the Thrift Savings Plan, which invests retirees' stock portfolios, hold off on any new investment plans that might include buying Chinese companies, or any index funds that might include them in their offerings.
The estimated $4 billion in potential new investments, while small in comparison to the hundreds of billions in tax-deferred savings managed by the plan, is now off the table. The explanation for the move, provided by the White House, was that the national security and humanitarian risks of those investments were significant and violated U.S. sanctions rules.
I believe all of these actions appear to be an effort to refocus America's attention away from blaming those in charge for their COVID-19 response. They are doing so by escalating tensions and continuing the blame game, started three years ago, with what now appears to be America's number-one arch enemy, China.
Bill Schmick is now the 'Retired Investor.' After working in the financial services business for more than 40 years, Bill is paring back and focusing exclusively on writing about the financial markets, the needs of retired investors like himself, and how to make your last 30 years of your life your absolute best. You can reach him at firstname.lastname@example.org or leave a message at 413-347-2401.
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