Economist Stephen Roach warns that Beijing’s crackdown on US-listed Chinese stocks will have far-reaching effects on the market.
Roach, who is considered one of the world’s leading Asia experts, sees the actions as the beginning of a Cold War.
“I’m an innate optimist when it comes to China. But I find these actions really quite worrying,” the former chairman of Morgan Stanley Asia told CNBC’s “Trading Nation” on Friday. “China is following the core of its new, entrepreneurial economy, and it is following their business models.”
According to Roach, tensions between the world’s two largest economies could reach levels not seen since the early 1970s.
“Even if US companies don’t deal directly with China, virtually everything they touch goes through global supply chains,” said Roach. “So a slowdown in US-China relations has a significant impact on US companies and investors investing in US companies.
CNBC’s Jim Cramer warns investors similarly. He thinks it is too risky to invest in Chinese stocks, which are traded on US stock exchanges due to the threat of regulation.
On Friday, Beijing regulators targeted China’s education stocks TAL Education and New Oriental Education and Technology. Their stocks fell. The same thing happened earlier this week with Didi, China’s leading ride-hailing company.
Roach, now a Senior Fellow at Yale, has been sounding the alarm for months on the controversial background. On “Trading Nation” in April he warned that relations between the US and China were eroding and that the two countries were on the brink of a Cold War. Now Roach indicates that a limit has been crossed.
“These are measures that really get to the heart of what has been exciting about China for a number of years,” said Roach. “You keep me very busy.”
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