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Chinese businesses are taking advantage of the capital markets in the United States.

Shein, the Chinese fast-fashion giant, has filed for an IPO in the United States, with leading underwriters including Morgan Stanley, JP Morgan Chase, and Goldman Sachs. The anticipated IPO, expected to bring in billions, is marred by controversies ranging from trademark infringement to labour violations, tax evasion, and unsustainable production methods.

Disturbance between Market Reality and Policy Narrative

The Shein IPO underscores a significant divide between Washington, D.C.’s policy narrative and the perspective of Wall Street and Silicon Valley. It exposes the limitations of U.S. attempts to counterbalance the Chinese Communist Party (CCP) and its global ambitions. The involvement of major U.S. financial players, despite policy efforts, raises questions about the effectiveness of measures against CCP influence.

The United States’ policy toward China is callous.

Despite the U.S. designating China as a great power rival and attempts to restrict investments in Chinese military companies, Shein’s IPO indicates the limited impact of these policies. Chinese companies, including Shein, froze IPOs briefly, but a surge in listings suggests a lack of tangible results. The Biden administration’s executive order imposing restrictions on outbound investment has shown minimal effectiveness.

A Wave of Chinese Initial Public Offerings and Current Market Conditions

Contrary to policy intentions, the Shein IPO is part of a larger trend of Chinese companies listing on U.S. stock exchanges. The increase in Chinese IPOs challenges U.S. efforts to reduce financial support for the Chinese system. The seeming inconsistency between policy rhetoric and market realities points to the inefficacy of current U.S. strategies.

Concerns Over Chinese Companies Going Public in the U.S

The concerns surrounding Chinese companies going public in the U.S. extend beyond Shein. Accusations of forced labor against Shein, along with other companies’ potential ties to military applications, raise human rights and national security issues. The inherent risks to investors, as seen in the case of Didi’s forced delisting, emphasize the need for a reassessment of current policies.

Ineffectiveness of U.S. Policy and the Way Forward

The apparent inconsistency in U.S. policy calls for a reevaluation of Washington’s approach. The focus should shift from voluntary disclosure to more stringent enforcement. American exchanges, underwriters, and regulators must prioritize national interests, avoiding exposure to politically sensitive and potentially problematic investments. A reassessment of U.S. financial markets’ role in supporting Chinese businesses is crucial for the nation’s security and economic prosperity.

Urgency in Action for U.S. Leadership

The competition between the U.S. and China is critical for national security and prosperity. Urgent action is needed to align policy rhetoric with effective measures, ensuring that American leadership takes a central role in shaping the trajectory of U.S.-China relations.”

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