As the United States celebrates its 250th anniversary, it faces a new world order dominated by its relationship with China. In this wide-ranging series, we explore the pressure points and possibilities in those relationships, from hard technology to soft power. In this article, Sylvia Ma examines the many financial connections between the two economies that make a true separation difficult.
On a historic visit to Beijing in 1986, the chairman of the New York Stock Exchange at the time, John Phelan, received a historic gift from Deng Xiaoping, the chief architect of China’s reform and opening-up: a stock certificate for Shanghai Feilo Acoustics – one of the first public shares issued in the reform era.
But the Wall Street veteran saw a problem. The share certificate, worth 50 yuan when presented at a ceremony in the Great Hall of the People, was not registered in his name, but that of a Chinese bank official.
Eager to own a Chinese share certificate in his own name, Phelan – then chairman of the world’s largest stock exchange – flew his delegation to Shanghai, where ownership was officially transferred to a small trading desk, exactly four years before the city opened its own stock exchange.
Now, as the United States celebrates 250 years since the signing of its Declaration of Independence, America remains home to the world’s largest stock market, while China’s capital market itself has grown exponentially – becoming the world’s second largest by total market capitalization.
But the two countries’ past embrace of economic ties has given way to an era of strategic competition. While Washington has been busy restricting the flow of capital across the border, Beijing has strengthened its financial channels by building alternative payment systems and distancing itself from the US dollar.
However, experts said the basic financial pipelines between the two largest economies in the world remained in a state of confusion.
