Estimating the Impact of a US Outbound Investment Screening Mechanism

Over the past year, US lawmakers have rekindled the idea of creating a mechanism to screen outbound investment for national security and resilience purposes. This week, senators moved to include the National Critical Capabilities Defense Act, one such measure, in a must-pass defense spending bill. This note estimates the bill’s potential impact on US investment in China and outlines implications for businesses.

Posted July 22, 2022
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A Step Back for Global Financial Integration

In recent months, Chinese officials have launched an abrupt crackdown on Chinese companies’ offshore financing. Reports from last week suggest they may ban data-heavy firms outright from listing in the US. This note explores how the crackdown affects Chinese companies listed abroad. It also discusses the potential effects of further regulatory action on China’s financial account and broader US-China financial decoupling.

Key Takeaways:

  • Restrictions on offshore financing are painful to Chinese companies that sell bonds and equity abroad, but the macro impact is relatively limited. Offshore financing is heavily concentrated in a few companies and is small compared to financing from China’s domestic financial system.
  • Foreign investors will continue to invest in China, but the pace and scale of inflows could diminish. This would have significant implications for exchange rates and China’s financial system efficiency.
  • The crackdown is strengthening calls in the US for greater scrutiny of and restrictions on financial ties with China. Beijing’s push for financial decoupling is gaining steam as well, given new scrutiny of overseas listings.
Posted July 22, 2022
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An OECD For a New Era

September 30th, 2021, marks the 60th anniversary of the creation of the OECD—the Organisation for Economic Cooperation and Development. The organization was the post-WWII flagbearer for market economics, offering a positive vision of the benefits of cooperation among market democracies. By emphasizing analytical expertise to find pathways to policy alignment, the OECD achieved success and helped define the character of post-war liberal political systems in competition with authoritarian statism. Today, market economies are struggling to agree on a competition model with non-market statecraft again. Rather than invent a new institution, they should take a fresh look at this existing one.

Posted July 22, 2022
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