China’s Government modified a decade-old rule that stopped offshore-listed firms’ financial data sharing practices this week. This was seen as a very positive move as it could remove one of the major hurdles for US regulators to get complete access to the auditing reports of the majority of the more than two hundred Chinese companies listed in the US. One of the big sticking points between China and the US in their trade tensions has been the lack of transparency in the financial activity of Chinese firms. The move by China to allow some auditing of Chinese companies is an important step in trade relations. It also signals an important move from China.
In the communist party’s last major annual meeting in 2021, there was a pivot in China’s policy. The phrase ‘common prosperity’ was a key term in that meeting as China seeks to re-distribute some of the wealth created from Western Capitalist practices. China has a very large rich/poor divide with the richest 20% earning more than 10 times what the poorest 20% earn according to Bloomberg. This is a wider gap than in the US, Germany, and France. Furthermore, around half of China’s population earns less than $2,000 per year.
Does this latest move signal that China desperately wants to de-escalate trade tensions between US and China?
It may well show that the idea of common prosperity will not work if China cuts itself off from wealthy Western Trading partners. The best way forward for China may actually be in further integration and co-operation with other nations as that could be the tide that lifts all boats.
Is this a positive sign for more gains in China A50 and 300 indexes over the medium term? See here for our previous piece on why this could be a great time to be buying China A50 index.