Chinese State Capitalism and the Holding Foreign Companies Accountable Act

Abstract

This essay examines market blacklisting—a term the essay uses to describe extraordinary government restrictions that limit a corporation’s ability to trade freely in U.S. markets—as a regulatory tool used to deny the benefits of U.S. markets to Chinese firms. Analyzing and recharacterizing the recently enacted HFCAA as a foreign-policy-oriented regulation, this essay argues that jarring and serious accounting frauds such as Luckin’s are not the most important—or even primary—target of the Act. While capital markets blacklisting operates in opposition to the traditionally open posture of U.S. financial markets, blacklisting can also serve to achieve strategic foreign policy goals. In particular, the passage of the HFCAA demonstrates that, in response to recent Chinese investment activity, the U.S. increasingly considers its financial markets as a rivalrous national resource and is becoming less willing to share that resource with its greatest economic competitor.

Keywords: Foreign investment, state capitalism, state-owned enterprises, HFCA

JEL Classification: K2