U.S. Financial Services Industry Emerges As A Winner Of U.S.-China Trade Deal
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Farmers and factory owners hope to benefit from the phase one trade agreement President Trump signed this week with China. But at the White House signing ceremony, many of the people in the audience were hedge fund billionaires and Wall Street CEOs. Up until now, the U.S. financial industry has been largely locked out of China. The industry is hoping to make big inroads in the world's second-biggest economy. NPR's Scott Horsley reports.
SCOTT HORSLEY, BYLINE: The backdrop for the signing ceremony in the White House East Room was traditional. The president stood before an array of American and Chinese flags, looking out at an audience packed with Cabinet members, lawmakers and a lot of corporate executives.
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PRESIDENT DONALD TRUMP: We have a who's who of the world of business with us today.
HORSLEY: China's Vice Premier Liu He stood stiffly at the president's side. But there was nothing formal about Trump's own manner. He cheerfully called out to the invited guests as if he were working the ballroom at Mar-a-Lago or the locker room of one of his golf clubs.
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TRUMP: Ajay Banga, Mastercard, thank you.
Alan MacDonald - Citibank, Citibank.
Al Kelly - Visa.
Ken Griffin - Citadel. What a guy he is. Where are you, Ken? Where the hell is he? He's trying to hide some of his money.
HORSLEY: Taking in this spectacle was Kenneth Bentsen. He heads a trade group for U.S. financial markets and the securities industry.
KENNETH BENTSEN: I was in the back row on the cheap seats.
HORSLEY: Bentsen's being modest. He's the chairman of something called the Engage China Coalition. That's a group of financial industry heavyweights who've been trying for years to pry open the door to the Chinese market. Up until now, they haven't had much luck. Even though China's the world's second-largest economy, Bentsen says U.S. financial firms make only about $2 billion a year there, less than a third what they make in Brazil and about 1.5% of what they make in Europe.
BENTSEN: The Chinese, to be frank - they've protected their markets, and they've been clear about that in the past because they want to see their markets develop and market participants develop. And they have.
HORSLEY: But the new Phase 1 trade agreement calls on China to give the American financial industry fair and effective market access. The industry's hoping for a chance to offer banking services and insurance policies, as well as wealth management to the growing ranks of Chinese millionaires and billionaires. Bentsen says there's a big opportunity there.
BENTSEN: We think it'll actually be beneficial not just to U.S. firms, you know, wanting to do business in China but will be beneficial to the Chinese economy by further modernizing their capital market system. And that'll enhance their banking system as well.
HORSLEY: Bentsen says right now China is overly dependent on loans from its own banks to finance economic growth. He says both countries stand to benefit if China starts using more Western-style capital. Finance professor Chester Spatt of Carnegie Mellon University also thinks a lot of wealthy Chinese citizens would like more access to American banks and other places to park their money outside the country.
CHESTER SPATT: These firms might be kind of a good vehicle for that. Now, on the other hand, you could imagine that the Chinese government might have some concerns.
HORSLEY: This is not the first time China's promised to provide more market access, and Bentsen says in the past, Beijing hasn't always delivered. Still, he's optimistic about the Phase 1 trade agreement, which includes some firm deadlines and a procedure to resolve disputes. While the financial section covers just four of the deal's 86 pages, Bentsen calls it a positive development.
BENTSEN: We think it addresses a lot of what we had been asking for and, in some cases, goes a little bit further.
HORSLEY: President Trump's already taking a victory lap. As he introduced the head of JP Morgan's wealth management division during the signing ceremony, Trump crowed about that bank's record profits last year - more than $36 billion.
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TRUMP: Will you say, thank you, Mr. President, at least?
TRUMP: Huh? I made a lot of bankers look very good.
HORSLEY: Those bankers will look even better if China really does open its doors to the American financial industry.
Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright NPR.