After much fear and speculation regarding the possible blocking of Chinese companies from listing in US stock exchanges, the US Treasury Department has clarified that it has no intention of implementing US President Donald Trump's proposed measure.
The statement made by the US Treasury managed to slightly pull up some US stocks, which had tumbled on Friday following the news of the proposed measure.
Treasury spokeswoman Monica Crowley mentioned in a statement released over the weekend that the agency is not seriously considering the move to block Chinese companies from listing in the US. The statement was a direct response to initial reports of possible measures being considered by the Trump administration to limit the flow of investments into China.
The mere mention of the possible measure sent stocks tumbling as the markets reacted to the grim possibility. The S&P 500 Index reacted with a 0.5 percent drop. Meanwhile, Chinese companies that are currently listed in US stock exchanges also suffered. Stocks such as Alibaba and Baidu experienced significant drops following the news.
Apart from blocking Chinese firms from listing in US stock exchanges, other measures that were proposed included the limiting of US investor exposure in Chinese markets through government pension funds. It was also proposed that limited be put in place for Chinese firms listed in stock indexes managed by US firms.
According to reports citing sources with knowledge of the matter, the US Treasury has been part of an inter-agency effort to try and determine ways to limit US investor portfolio flows into China. The agency has reportedly been holding meetings that are chaired by the director of the National Economic Council (NEC), Larry Kudlow.
The same sources also pointed out that the proposal to block Chinese firms from listing in US exchanges likely came from US President Donald Trump's move hard-line advisers such as White House trade adviser Peter Navarro.
The US Treasury and the NEC are likely well aware of the possible reactions of such measures, which is why they did not want news of the proposed measure to become public in the first place. Both agencies likely want to formulate a plan prior to implementing any measure to avoid spooking investors and any unwanted market reactions.
Reports citing sources close to the Trump administration have clarified that the White House has not yet decided on any concrete course of action. However, every possible option has apparently been placed on the table and is still up for discussion.