U.S. pulling investments will result in “‘unmitigated disaster”

The trade talks between the U.S. and China might be running into another roadblock. The White House is said to be restraining U.S. investments in China.

This issue is currently in its earliest stages and the White House has not decided on anything yet. According to a source, there is also no definite time frame for the implementation of this plan.

If the U.S. restricts its financial investments in China, it would be seen as a move to protect U.S. investors from high risks brought about by the lack of regulations. The contemplation by Washington over this matter comes as it tries to find more additional leverage in its trade talks with China.

In response to the news, the Nasdaq Composite finished the day at 7,939.63 after dropping 1.1%. The Dow Jones Industrial Average also plunged by 150 points. Shares of Chinese companies like Alibaba, Baidu, and many others fell. Alibaba had its worst day since May after it fell 5.1%. The yuan weakened against the dollar, closing at 7.15.

According to a senior fellow at Yale University and former chairman of Morgan Stanley Asia, Stephen Roach, if the United States pushes through with its plans, it would be an unmitigated disaster.

“Open access to each other’s markets is really important, especially with China likely to be the biggest consumer market in the world in the first half of this century,” Roach said.

Roach has also mentioned how China and the United States have been in a bilateral investment treaty for about a decade now. This was before the trade war between the two countries started. This bilateral investment treaty is built on opening the United States’ markets to China and vice versa.

“We got really close, but now it’s been stalled out. We have bilateral investment treaties with 42 countries. China has them with 145. Free and open investment is the best way to enhance cross-border opportunities for multinational corporations, so we’re going the wrong way. This really would concern me if we were to make progress on it,” adds Roach.

The Yale professor is also wary of the delay in the trade talks between two of the world’s biggest economies. The proposal by Washington to pull U.S. investments from China is also not making things any easier. The longer the trade issues between the two countries go, it would be even harder for the U.S. markets and American workers.

“The only progress that we have seen is in the so-called soybean strategy, where China could be counted on to buy more agricultural products, but the U.S., given its savings problem, has big trade deficits with over 100 countries right now, so there’s no bilateral fix to our multilateral problem,” claimed Roach.

On Thursday, there were reports that the trade talks between the U.S. and China will resume on October 10 to 11 in Washington. China’s delegation will be headed by Vice Premier Liu He.

Just last week, U.S. Treasury Secretary Steven Mnuchin said that he and U.S. Trade Representative Robert Lighthizer will be meeting with Chinese Vice Premier Liu He for trade talks in two weeks.

There has been no word confirming the recommencement of the trade talks from the Office of the U.S. Trade Representative, Treasury Department, and the White House.

While speaking to the United Nations General Assembly in New York earlier this week, President Donald Trump said he will not be accepting a bad deal from China.

“Hopefully we can reach an agreement that will be beneficial for both countries. But as I have made very clear I will not accept a bad deal for the American people,” Trump said.

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