China Cashes In

0 Comments | Insight on the News, Jan 24, 2000 | by J. Michael Waller

The Republicans weren't alone. Sen. Christopher Dodd, a Connecticut Democrat and a major political fundraiser for his party, echoed his GOP counterparts' concerns. That was 1997, and though the Gazprom offer was withdrawn, the transparency and disclosure efforts went nowhere legislatively. By its inaction, however, Congress paved the way for CNPC to issue its IPO.

Granting more power to the SEC gives many investors and conservative economists the creeps. Yet some state officials in Iowa and Tennessee say it's up to the federal government, not the states or Wall Street, to warn them of national-security problems. That's the constitutional argument Bachus and Kucinich are trying to address while keeping government out of the capital markets.

"To be sure, market analysts do not lack the expertise to perform the necessary economic and financial evaluations," the William J. Casey Institute of the Center for Security Policy argues in a recent paper. "The problem is that they have, until now, seemingly failed to grasp the fact that governments and companies of concern to the United States from a defense and foreign-policy perspective are increasingly cloaking themselves as benign commercial/civilian enterprises, only too delighted to find that they can get away with exchanging paper promises to repay (in the case of bonds) or to provide return on investments (in the case of equity offerings) for hundreds of millions, or even billions, of dollars."

And here is the constitutional argument: As this is a defense and national-security issue involving a foreign power, it is appropriate for the federal government to take the initiative to ensure sufficient transparency and disclosure.

"We have no interest in creating capital controls or implementing other broad measures that could damage the competitiveness and attractiveness of the U.S. capital markets" according to Bachus, who says he and Kucinich seek to preserve the free flow of foreign capital into and out of the United States. "Rather, we are concentrating on strengthening disclosure and transparency requirements so that fund managers, Wall Street players and average American investors can make more-informed investment decisions." Their bill was aimed not at foreign private companies but foreign government-affiliated entities. They commissioned the General Accounting Office to examine all Chinese and Russian enterprises in U.S. markets and identify those with ties to military or espionage structures. The GAO study has not yet been initiated.

"We understand full well that the free flow of capital is a pillar of our leadership and competitiveness in the world," says the Casey Institute's Roger W. Robinson, a former Reagan National Security Council senior director of international economic affairs who is widely credited as being behind the global transparency and disclosure initiative. "Undue government intervention would likely cast a pall over the markets and impede that flow. We're not remotely looking to replicate COCOM [a U.S.-led international body to restrict militarily relevant technology sales to the Soviet bloc during the Cold War] in the financial arena or have the U.S. government determine what investors can or cannot buy," Robinson tells Insight. "But we think American investors have a right to know the true identity, affiliations and activities of those foreign entities whose stocks and bonds they are purchasing."