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HomeMarketWall Street Is Hopeful About China. Washington Is Getting Tougher.

Wall Street Is Hopeful About China. Washington Is Getting Tougher.

The U.S. has expressed concern that U.S. user data could be collected by China through the video-sharing app TikTok.

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While investors have become more upbeat about China’s near-term prospects as the country reopens after three years of strict Covid restrictions, Congress and the Biden Administration are still moving toward increased restrictions on China.

House Republicans, for example, have stepped up scrutiny of video-sharing app TikTok, owned by China’s ByteDance, amid concerns U.S. user data could be collected by China, and how China could influence U.S. teens and other users through TikTok’s content.

TikTok has been in the spotlight since the Trump administration threatened to ban it, and last year the app was prohibited on federal devices and local governments and public universities in about 19 states.

The company has been in discussions with Washington, D.C. for years to find ways to address security concerns. TikTok’s Chief Executive Shou Zi Chew volunteered to appear in front a congressional panel in March, The Wall Street Journal reported on Monday.

Veda Partners’ Henrietta Treyz advised clients in a recent note to pay more attention to the newly formed Select Committee on the Strategic Competition Between the U.S. and the Chinese Communist Party. A holistic ban on TikTok is among the list of priorities for the incoming chairman Rep. Mike Gallagher (R-Wis.), Treyz says.

Treyz expects more bipartisan bill proposals coming out of the committee that range from tackling Chinese nonmarket forces to ways to bolster “friend shoring” to diversify U.S. supply chains away from China, coming on top of the export restrictions out this fall on semiconductors.

On Friday, the Biden administration signed a pact with Netherlands and Japan to impose export restrictions on advanced semiconductors, a move that Beacon Policy Advisors’ analysts see as more effectively isolating China and hampering its capabilities to make its own versions of the restricted advanced chips.

The new rules, for example, would prevent
ASML Holdings
(ASML) from selling to China some of its deep ultraviolet lithography machines, and Japan will likely put similar restrictions on
(7731.Japan) for the most advanced technology, Beacon analysts write in a client note on Monday.

These moves will help create a more level playing field for U.S. chip companies globally, alleviating one of the concerns that it would hurt domestic companies’ market share if their rivals weren’t subject to the same restrictions, Beacon analysts said.

More moves are expected, with the next set of restrictions likely focused on outbound investments. Beacon analysts see such an executive order still months away. But the analysts see possible restrictions on outbound investments made in companies making advanced chips that were already restricted under last fall’s export controls. The focus is likely to start with joint ventures and direct investments.

While restrictions on capital flows from American banks and financial firms investing in Chinese state-owned enterprises are also being floated, the analysts see the comments potentially part of political gamesmanship.

Even as the U.S.-China relationship found a floor in recent months as their leaders tried to reopen diplomatic channels of engagement, the moves in Congress and within the administration is a reminder that the relationship has fundamentally changed as China is seen as a strategic rival and potential threat to the U.S. 

Though these tensions are unlikely to derail the near-term rally in Chinese stocks on the back of improving economic prospects, they will likely hover over the longer term outlook and potentially provide bouts of volatility. Already, China is warning against a potential trip to Taiwan by newly selected U.S. House Speaker Kevin McCarthy, just as Secretary of State Antony Blinken is set to meet his counterparts in China next week.

Write to Reshma Kapadia at


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