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Gallagher highlights Wall Street Executives’ recognition for the necessity of regulating US capital flow to China

Wall Street executives have indicated a willingness to reduce investment in China, according to House China Committee Chairman Rep. Mike Gallagher. During a tabletop exercise in New York, Gallagher and other committee members discussed the implications of an economic competition with China over Taiwan. Even executives who were more inclined towards China expressed a recognition of the need for restrictions on US capital flowing into certain areas of China. President Joe Biden recently signed an executive order to regulate outbound investment tied to China in sensitive technologies that could aid Beijing’s military advancements. Gallagher believes that these restrictions should cover a broader scope, including anything associated with China’s military-industrial complex. He emphasized the importance of addressing the funding of China’s military ambitions, as it increases the likelihood of conflict in the Indo-Pacific region. Gallagher also warned of the financial consequences for the US if China were to invade Taiwan, stating that the losses would be significant. He hopes to engage with Wall Street executives to prevent such a scenario. The business climate in China has become increasingly hostile, with state secrets and anti-espionage laws putting businesses at risk. US companies have expressed concerns about the level of risk in China, leading some to consider it “uninvestable.” Hedge funds and Fortune 500 CEOs have reduced their exposure to the Chinese market due to political and reputational risk. Even BlackRock, a global asset manager, closed a China-focused fund following scrutiny over its investment ties. Former SEC Chairman Jay Clayton suggested that companies disclose their China risk if they meet certain criteria. Both Clayton and Gallagher stressed the need for a lasting government solution to protect the US from financial risks associated with China. They believe that if Congress establishes clear guidelines, the majority of the financial community will comply.

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