Co-Founder and Director of the Prague Strategic Studies Institute Roger Robinson Outlines China’s Threat to America’s U.S. Capital Markets
Live from Music Row Friday morning on The Tennessee Star Report with Michael Patrick Leahy – broadcast on Nashville’s Talk Radio 98.3 and 1510 WLAC weekdays from 5:00 a.m. to 8:00 a.m. – host Leahy welcomed Roger Robinson, co-founder and director of the Prague Strategic Studies, Institute to the newsmakers line.
At the top of the second hour, Robinson described the myriad of threats facing American values and individuals’ financial portfolios due to the lack of our government to perform due diligence with the Chinese participation of U.S. capital markets. He later outlined how a Biden administration could undo President Trump’s Executive Order 13959 on military companies being excluded from American investment and that he would then be painted as being in the pocket of Wall Street and Chinese leadership.
Leahy: We’re joined now by our good friend Roger Robinson. He’s currently the co-founder and director of the Prague Strategic Studies Institute in Washington D.C. He served as the Senior Director of International Economic Affairs in the Reagan NASA Security Council Council from 2001 to 2006. He was chairman of the Congressional U.S. China Economic Security Review Commission.
And now he heads up a group that provides its data services research and risk management information to those looking at assessing Chinese and Russian risk factors particularly with regards to their presence in U.S. capital markets. Welcome to The Tennessee Star Report, Roger.
Robinson: Thank you, Michael.
Leahy: So you’re going to tell us about something that our listeners will be scratching their head when you tell us the details that currently our capital markets allow special privileges to Chinese companies where they don’t have to comply with our securities and financial reporting information and giving them a comparative advantage. Describe what they currently do and what you have done to help create the background for these executive orders that the President has put in place and that are now in jeopardy.
Robinson: Well Michael, it’s a very sad case really of neglect and malfeasance. For over 20 years China has enjoyed unfettered and unimpeded access to our stock and bond markets, and our so-called capital markets. And they have been able to raise in that period in the trillions of dollars from unwitting American investors. And many of them listeners on your program.
And there are probably 160 or so million Americans who are in this unknowing category of holding with their investment and retirement dollars in Chinese companies that are known to be involved with the people’s liberation army. Advanced weapons manufacturers. Those companies that are equipping concentration camps in Sinkiang China holding over a million Muslim minority Uyghurs and other beleaguered religious minorities.
And I think the American people would be stunned to learn that we as a government have not taken any steps to screen the types of companies that are enjoying and raising money in our capital markets to bring back to the Chinese Communist Party to strengthen it. And there hasn’t been as I say any so-called due diligence performed and worse still as you pointed out not one of those companies is compliant with U.S. federal security’s laws.
None of them have been through government audits like that of the public company accounting oversight board activities and diligence that is required of American companies. But the Chinese are in violation of those laws that are designed to protect our investors. And yet we’ve turned a blind eye and we’ve given them this preferential treatment.
It’s just inexplicable. But on top of the investor protection problem, as I say you have major national security and human rights concerns as well. And all of this is being financed by average Americans because of Wall Street greed and unwillingness on their part to even look at these categories of material risk.
Leahy: Tell us about the president’s executive order designed to address this and where that stands now.
Robinson: Well, the president has done a couple of very important and even historic things in this connection. For example, the federal thrift savings Plan back in March of this past year was going to add a number of these malevolent Chinese companies to the portfolios of 5.7 million federal employees in their retirement plans.
Anybody that was going to in anything international would automatically be invested in these Chinese companies because of the index that they were going to use that contains them. So luckily we worked on this with the president for a good nine months and two weeks before it was to be enacted and in effect complete, he stepped in and stopped it dead in his tracks and said this isn’t happening on my watch. Later on, there was a unanimous passage by the Senate and the House to stop this preferential treatment and to basically tell the Chinese companies and their Wall Street supporters that they were going to be delisted from the U.S. exchanges if they didn’t comply with federal securities laws.
Leahy: Roger, there is a report in Reuters on December 31, and I just want to read it to you and get your reaction. The New York Stock Exchange is starting the process of delisting securities of three Chinese telecommunications companies after President Trump last month barred U.S. investments in Chinese firms Washington says are controlled or owned by the military. What’s your reaction to that Roger?
Robinson: Well, this has been an extraordinary case. The president, fortunately, took us sweeping action in November by issuing an executive order that basically said that those companies that are on a list generated by the Pentagon as having ties to the Chinese military. It’s the People’s Liberation Army would not be permitted to receive any American investment from individuals or institutions anywhere in the world beginning January 11. Which is coming right up of around the corner and that they need to be fully divested of such Chinese military companies by November 11 of this year.
Which gives folks a chance to wind down the portfolios without undue losses. Now when that happened Wall Street finally reacted after sloughing this off and ignoring presidential concerns for the better part of a year and a half. You see that the New York Stock Exchange first decided to divest these three big telecom companies that are on the New York Stock Exchange and listed there.
Then they listened to Treasury whisper in their ear and then reversed it if you can believe it and said that they were going to relist them. And finally, the White House intervened and they made a third decision to delist them again which is where things stand now. That’s the level of resistance on Wall Street to this kind of thing. Other funds are delisting some of these companies but very very slowly.
And they’re waiting to see if the treasury can basically emasculate or otherwise negate this presidential order which they’re working very hard to do I’m sad to say. And also that the Biden administration could come in and try to reverse this and give China the kind of free lunch program with hundreds of billions and even trillions of our dollars to help support the Chinese Communist Party, human rights abuses, and its Advance weapons Systems and military buildup.
Leahy: Roger. What is the likelihood in your opinion that Joe Biden is going to basically revoke the president’s executive order on this?
Robinson: Well, just remember this. I mean normally I would be extremely concerned and I am to be sure because of this soft on China reputation that he’s shown in the South China Sea when we permitted those illegal islands in the South China Sea to be built and terrorized by China on the Obama-Biden watch.
So he has a very poor track record with China as you know. Not to mention his family connections which are a big problem there. So there’s a lot to be concerned about. But on the positive side, this anti-China feeling which is earned by Beijing richly is now a bipartisan feeling in America. It’s almost quite unique in that regard. We witnessed the unanimous House and Senate actions trying to protect American investors from these malevolent Chinese companies.
So I think that if he were to rescind the president’s order and if he tries to dilute it and basically water it down so that it’s no longer effective he is basically saying or would be saying that he is in effect supportive of the American people unwittingly funding. For example, ICBMs targeting their families and the building of those.
Leahy: Intercontinental ballistic missiles.
Robinson: Correct. And he would be for owning the shares of Chinese companies that are equipping and making possible concentration camps that are holding over a million as I said beleaguered Uyghurs and the surveillance state. All of those human rights abuses. the repression of Hong Kong. These are the things that they’re doing with our money. And it would be an utter outrage if the new administration comes in and has basically says that’s okay with me in order to placate and protect Wall Street fees and greed and the vital interests of Beijing and not our own.
Leahy: Let me ask you this. Has Chuck Schumer who’s about to become the majority leader in the Senate it looks like depending on the outcome. Kelly Loeffler has conceded. So that makes it what 52-49. And right now Perdue hasn’t conceded but he’s behind significantly against John Ossoff. Let’s say they’re both in and it’s a 50-50 Senate on January 20. And Kamala Harris is named vice president. Do you have any indication that Chuck Schumer or Nancy Pelosi agree with you or do they agree with the Chinese on this?
Robinson: They have to watch their step very carefully because this is not an abstract issue. This is literally the hard-earned retirement and investment dollars of roughly 170 million Americans including any of your listeners with an investment portfolio. So when they turn a blind eye to this they are implicating indeed half or roughly half of our country in this kind of funding of activities perilous to our well-being and the undermining of everything we hold dear.
So I think that they’ll be careful about this. They’ll use technical means. they’ll do watered-down loopholes. They’ll do dilutions. And I don’t put it past Senate majority leader Schumer if this comes to pass. And further he is from New York after all and Wall Street has tens of billions trillions of dollars on the line here that are implicated in this China portfolio. There’s going to be the most ferocious lobbying and more money spent trying to negate our efforts on the capital markets because Michael this is the area of China’s single greatest vulnerability, which is dollar financing.
And our single greatest strength, our capital markets are the size of the rest of the worlds combined. we have over 60 percent of the world’s liquidity. Our dollar is the world’s reserve currency. We have an utter dominant position in global finance. China on the other hand has a non-convertible currency. They need our dollars desperately. And without it, the CCP can’t function.
Leahy: So let’s pretend you and I are little flies on the wall, and we’re in the conversation. Joe Biden has been named president. They have a little conference. It’s an hour after he’s been nominated. They’re back in the Oval Office. He’s got Chuck Schumer in there. He’s got Nancy Pelosi. They’re going through the list of executive orders they are going to they’re going to change.
And he comes up to them and he says, okay give me your recommendation. I’m thinking of canceling this executive order that would cause all this delisting of these bad actor Chinese companies. What is your advice? What does Chuck Schumer say to him? What does Nancy Pelosi say to him at that time? Well, I can’t speak to Nancy Pelosi because it’s she’s a hard one figure on this. (Leahy chuckles)
And she’s she has been both a supporter of Tibetan freedoms on the positive side, but she gives China a pass elsewhere as we’ve found out. Chuck Schumer, I can tell you this. He should understand and say candidly to the president if you think you’re known as Beijing Biden now and if you cancel or rescind this presidential executive order 13959 on military companies being excluded from American investment you are going to be painted as being in the pocket of Wall Street and Chinese leadership.
And that’s all there is to it. I mean nobody’s going to basically see a more nuanced view of this than that. So that is going to be what Schumer should say. The question is will he do so. And that’s going to depend on how much concern he has over his own donor base on Wall Street and so forth. I mean American values are on the line here and not to mention our security and our financial well-being because of these tremendous risks of non-transparent Chinese companies that don’t disclose their financials that aren’t audited.
That have no scrutiny of who they are or what they do with our money. Whether they’re going as I say to the Peoples Liberation Army or who these folks are. So we would never permit American companies to be in our markets with such an opaque non-disclosure attitude. So there we are. And I can tell you that they better think carefully because as I say, this is going to be an enduring legacy for anyone who tries to reverse course on this. It is bipartisan. It is an American issue. It is not just a republican Democrat thing as you know. And it’s a time for us all to come together. And as far as your listeners, they need to go to their brokers and fund managers and insist on knowing if I am holding Chinese companies in my investment portfolios.
Leahy: Roger Robinson is our China expert and a very good friend. Perhaps the leading expert on this topic and clearly articulate and knows his stuff.
Listen to the full second hour here:
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