Investing in our Rivals: Examining U.S. Capital Flows to Foreign Rivals and... (EventID=115192)

Video Description

Connect with the House Financial Services Committee Get the latest news: https://democrats-financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinanci... Follow us on Twitter: https://twitter.com/FSCDems ___________________________________ On Tuesday, November 15, 2022, at 2:00 p.m. (ET) Subcommittee on Investor Protection, Entrepreneurship and Capital Markets Chair Sherman and Ranking Member Huizenga will host a hybrid hearing entitled, “Investing in our Rivals: Examining U.S. Capital Flows to Foreign Rivals and Adversaries Around the World." ___________________________________ Witnesses for this one-panel hearing will be: • Courtney Alexander, Senior Researcher, United Food & Commercial Workers International Union • Claire Chu, Senior Analyst, Janes Group • Jeff Ferry, Senior Economist, Coalition for a Prosperous America • Jeffrey A. Sonnenfeld, Senior Associate Dean of Leadership Studies, Yale School of Management ___________________________________ Background In recent decades, international tensions between the U.S. and China, as well as the U.S. and Russia, have risen steadily. Simultaneously, increasingly autocratic tendencies of the national governments of both China and Russia have produced considerable uncertainty within the business environments of both jurisdictions. Together, these dynamics have produced a number of risks to investor protection, the American economy, and its national security or other interests. As of the end of 2020, U.S. investors held $1.1 trillion in equity and $100 billion in debt securities issued by Chinese entities, but, for over a decade, the government of China had blocked the U.S. Public Company Accounting Oversight Board (PCAOB) from inspecting U.S.-related audit work and the practices of the PCAOB-registered firms in mainland China and Hong Kong, citing national security and state secrecy policies. China was an outlier in this regard. As is detailed below, while PCAOB and China’s regulators have reached an agreement to allow the PCAOB access, this agreement remains to be tested. In the last year, regulators in China have taken significant steps to enforce existing and newly established domestic regulatory requirements for China-based companies—particularly in the technology sector—and have focused specifically on consumer data security and protection as well as anti-monopoly efforts. There is growing concern regarding the collateral impact this activity may have on U.S. investors in China-based firms that have issued securities or listed for trading in the U.S. In addition to China, the flow of U.S. investment into Russia also poses investor protection and national security concerns, due to Russia’s destabilizing actions throughout the world, particularly its illegal, unprovoked 2022 invasion of Ukraine. Since the start of the invasion, the U.S. and its allies in the EU, UK, non-EU European countries, Switzerland, Canada, Australia, New Zealand, Japan, South Korea, Singapore, and Taiwan, among others, have announced sanctions, export controls, or both, in response to the Russian aggression, in addition to previously imposed sanctions against Russian individuals and entities. Most of the new, allied sanctions actions are identical or similar to U.S. sanctions, the result of the Biden Administration’s close coordination with its economic and security partners. Among these are sanctions that have directly limited the ability of U.S. investors to participate in Russian capital markets, including the tightening of restrictions on U.S. purchases of Russian government bonds. The Biden Administration has strengthened sanctions to include prohibitions on new investment in the Russian energy sector and investment in any additional sector of the Russian economy, as determined by the Secretary of the Treasury. There have also been increasingly broad restrictions on relationships with Russian individuals, entities, and government agencies involved with critical economic sectors such as financial services, energy, and technology. Since the start of the war in Ukraine, many U.S. firms have also voluntarily curtailed their activity in Russia: as of November 7, 2022, over 300 U.S. companies have limited or completely withdrawn from business relationships in Russia and Belarus.11 On March 24, 2022, Chairwoman Waters wrote to 31 of the prominent trade organizations representing thousands of U.S. financial, commercial, and technology companies, urging them to divest from Russia. Listed and Public Markets According to data from Ernest & Young, 50 percent of foreign initial public offerings (IPOs) completed in the U.S. during the first half of 2021 were by companies based in China. These offerings represented nearly 15 percent of total IPO proceeds raised in the U.S. during that period. The IPO of the China-based online retail marketplace... Hearing page: https://democrats-financialservices.house.gov/events/eventsingle.aspx?EventID=409886