The U.S. Treasury Department and the People’s Bank of China (PBOC) have reached an agreement to collaborate during times of financial stress, as announced by the U.S. Treasury on August 19th. This marks the fifth meeting between the two parties since they established the joint Financial Working Group in September of last year, with the goal of establishing a regular and structured communication channel led by Treasury Secretary Janet Yellen.
Deputy Governor Xuan Changneng from the People’s Bank of China and Assistant Secretary Brent Neiman from the U.S. Treasury held meetings on August 15th and 16th to discuss various matters. According to a statement released by the Treasury, they exchanged important points of contact related to financial crisis management and plan to conduct additional technical exercises in follow-up.
During their discussions, both parties addressed several issues including countering money laundering, international financial institutions, cross-border payments and data, as well as climate change and sustainability concerns.
Chinese state-run media reported that both sides expressed concerns about potential financial instability resulting from regulatory changes.
In recent times, there have been calls from U.S. lawmakers for increased scrutiny of Chinese goods and services in consumer markets due to concerns over transparency regarding data collection practices and labor issues such as forced labor avoidance measures.
Conversely, China has implemented new restrictions on critical mineral exports used in technology manufacturing for electric vehicles and military weapons production. This move is seen as an effort by China to strengthen its control over supply chains.
These developments coincide with volatility in the Chinese market which has led foreign investors to withdraw their investments.
Furthermore, on August 19th, it was announced that daily real-time data on foreign equity moving into China will no longer be released by Chinese stock exchanges; instead it will be made available quarterly. This decision means that investors will no longer have access to this key market indicator.
Earlier this year, Chinese regulators had hinted at this change which comes at a time when Bloomberg reported that China is expected to experience its first annual outflow since tracking purchases began in 2016.
Additionally, MSCI Inc., a major index provider based in the United States removed 60 Chinese companies from its index recently - marking its third large-scale removal this year – following quarterly data released by China’s State Administration of Foreign Exchange showing more money being pulled out than invested into China for only second time since records began being collected in 1998.
Foreign investment into China has also declined significantly with a 20 percent decrease observed during January-February period compared to previous year figures.