US lawmakers reach agreement to restrict American investments in China: Report

In the United States, a bipartisan group of legislators said that they had reached an agreement on legislation that would allow the Joe Biden government to shut off billions invested in China. According to a report published in Fox Business on June 14, the group of lawmakers announced on June 13.

Fox Business reported that the senators in a statement said, "Over the last couple of months, we have engaged in constructive discussions with stakeholders on developing a robust, targeted outbound investment mechanism to ensure the United States is not ceding its manufacturing power in industries critical to our economic and national security to foreign adversaries. The refined proposal released today has bipartisan, bicameral support and addresses industry concerns."

The accord is just one part of a wider bill aimed at protecting US computer chip supply lines. According to the report, if passed into law, the agreement would empower the US government to review approximately half of all direct investment transactions from the US to China. Further, US President Joe Biden is considering removing US tariffs on China imposed by former President Donald Trump.

Notably, the profound slump in China's real estate industries is becoming a big issue for both the country and the global economy. One of the few cherished destinations for household savings was the real estate market. Developers and homebuyers were also willing to take out bank loans, but China's good times came to an end last year. The total household debt has surpassed USD 10 trillion. According to the Policy Research Group (POREG), around 27% of bank loans in China are tied to real estate.

China's housing market has become a national threat: Report

According to a report published in New York Times, China's housing market has become a "national threat" since prices, like the buildings, have risen sky-high. In addition to bank loans, developers borrowed money through onshore and offshore bonds, trust loans, and wealth management products. As a result, lenders ranged from institutions to ordinary people both at home and abroad. Beijing's attack on property debt is interestingly linked to the country's fight against corporate debt.

According to a CNBC report, a meltdown in China might spread to other countries, causing deflation as well as unemployment. The US Federal Reserve was concerned that China's failing economy would hurt the global economy. "Problems in China's real estate industry might put pressure on the Chinese financial system, with potential spillovers to the United States," the Federal Reserve noted in a recent financial stability report.

Image: AP