An agreement on legislation that would give the government of the United States the authority to withdraw billions of dollars’ worth of assets from China was announced by a group of politicians from both parties.
According to a report from Fox Business from the 14th of June, the group made an announcement on Monday.
In a statement that was cited by an American media outlet, the senators were quoted as saying, “Over the past couple of months, we have engaged in constructive discussions with stakeholders on developing a robust, targeted outbound investment mechanism to ensure that the United States is not ceding its manufacturing power in industries critical to our economic and national security to foreign adversaries.”
They went on to say that the revised plan that was made public today has support from both parties in both chambers of Congress and answers the concerns of the sector.
The agreement is a small part of a larger bill that is being considered in the US Congress with the purpose of securing supply lines for computer chips. According to one study, the pact would enable the United States government to assess over half of all direct investment deals between the United States and China if it were to be passed into law.
The new strategy toward China comes as President Joe Biden mulls over whether or not to lift tariffs on Chinese imports that were imposed by Vice President Donald Trump’s administration.
The severe downturn affecting China’s real estate industry is becoming an increasingly significant challenge for the economy of both China and the rest of the world.
One of the few places that was considered worthy of people’s life savings was the real estate market. However, these prosperous times for China came to an end one year ago, and developers and homebuyers are no longer willing to accept loans from financial institutions. Over 10 trillion dollars’ worth of debt was incurred by households. According to the findings of a think tank known as Policy Research Group, approximately 27 percent of bank loans in China are linked to real estate (POREG).
According to Think Tank, which cites the New York Times, the real estate market in China is now considered to be “a national danger” as prices continue to soar along with the height of the structures.
In addition to taking out loans from banks, developers obtained financing via the purchase of onshore and offshore bonds, trust loans, and goods related to wealth management. Therefore, people from all walks of life, both domestically and internationally, can be lenders. This includes financial institutions.
It is interesting to note that Beijing’s assault on property debt is a component of the nation’s fight to control corporate debt. The state-owned companies own a significant portion of the corporate shares (SOEs). Over-indebtedness is the source of the issue in SEOs, but there is a key distinction between the two. Because debt held by SOEs is accompanied by government guarantees, there is no immediate danger of the entity being put into liquidation.
China owes money to the international market at this point. It has benefited from the globalisation of the market; its corporations, despite being anchored behind the Bamboo curtain, have spread to all four corners of the world with their unadulterated motto that money has no colour. According to Think Tank, which cites an analysis from CNBC, a financial crisis in China could spread to other countries, resulting in deflation as well as increased unemployment.
The US Federal Reserve was concerned that the weakening economy of China could have a negative impact on the economy of the entire world. According to a recent report on the stability of the financial system published by the Federal Reserve, “stresses in China’s real estate sector could strain the Chinese financial system, with possible spillovers to the United States.”