This essay details how the United States has applied coercive financial statecraft tools on China and Hong Kong in 2020-21 and assesses the impact of these punitive measures. The tools include financial sanctions on Hong Kong and Mainland Chinese officials, investment bans on Chinese companies with purported links to China’s military and pushing for Chinese corporate stock delisting from the New York Stock Exchange (NYSE). The analysis shows, however, that large inflows of money from China, Asia and Europe into Hong Kong and Mainland financial markets have acted as offsetting portfolio investment, which have buoyed Hong Kong’s capital markets, and allow the targeted Chinese companies more capital and clout. Even though US divestment in the targeted Chinese assets has occurred, the net effect is that the US coercive statecraft measures are not working, and they are not having the disciplining effect on Hong Kong and Chinese officials, or on the Chinese companies, as intended. The policy recommendation is these coercive financial statecraft measures are actually damaging the relative global position of the United States and undermining the international economic order that has provided peace, growth, and stability across the Asia-Pacific region for the last five decades. The current US presidential administration and US legislators should rethink their policies and adjust.
As the world grapples with the COVID-19 pandemic, one looks for new signs of hope, new options for managing the exposed vulnerabilities. Euromoney wrote recently that COVID-19 is giving the new Asian Infrastructure Investment Bank (AIIB) an opportunity to prove its value to the world. From his office in Beijing, the AIIB president, Jin Liqun, has stated that ‘this is a litmus test of our ability to deal with a crisis and emergency’. But what does this mean?