China Inc Under Trump, and a Property Developer’s Rapid Reorganization

What should Chinese companies expect in Trump 2.0? And a mid-tier property developer advances a plan to reorganize its offshore debt at lightning speed.

By Doug Young & Rene Vanguestaine

As the world digests Donald Trump’s return to power, questions abound about what this means for Chinese companies, especially those with interests in the United States. We are seeing a mix of apprehension and opportunity, particularly when it comes to Chinese stocks listed on U.S. exchanges and the broader impact of Trump’s policies on these companies. In this edition, we dive into what’s ahead for these firms and examine the broader context of a new Trump administration.

Trump is not new to controversy when it comes to China. His first presidency saw aggressive moves against Chinese firms, notably the signing of the Holding Foreign Companies Accountable Act, which threatened to delist Chinese companies from U.S. stock exchanges unless they complied with strict audit transparency. Trump also attempted to ban Chinese super apps like WeChat and TikTok, although those efforts largely stumbled.

Chinese stocks listed on Wall Street responded with mixed movements as news of Trump’s election spread. The MSCI China Index seesawed before ending down about 3% over three days. While not a drastic drop, this reaction hints at investors’ uncertainty about what lies ahead. The Chinese economy’s internal challenges, such as stimulus measures that fell short of market expectations, have only added to the pressure.

When it comes to the future of Chinese stocks, it is reasonable to expect more of what we saw during Trump’s first term. He remains focused on U.S. economic interests, national security, and what he considers fair competition. This means that policies around U.S. investment in Chinese companies, particularly those in tech and AI, are likely to tighten further. With the Biden administration already having imposed limitations on tech exports and investments in Chinese AI, Trump’s policies may reinforce or even expand those actions.

The fate of U.S.-listed Chinese companies could become even more restricted. While consumer-focused companies may continue to find their way to U.S. exchanges, sectors like AI and technology face mounting scrutiny. The U.S. stance will be just one part of the equation—Beijing will also decide which companies are allowed to list abroad, especially those handling sensitive data.

E-commerce Giants in the Spotlight

The second part of this equation involves Chinese tech giants that are already major players in the U.S. market. Companies like TikTok, Shein, and Temu have managed to carve out significant market shares, though not without generating considerable controversy. Trump’s previous attempts to ban TikTok and WeChat have left many wondering what the future holds for these apps under his renewed leadership.

The e-commerce players like Shein and Temu operate in a somewhat different context compared to social platforms like TikTok. Shein and Temu benefit from the “de minimis” rule, allowing goods under a certain value to enter the U.S. tax-free, a rule that has largely helped them thrive. However, there has been growing momentum, even among Democrats, to close this loophole, which would primarily impact Chinese companies. Trump’s return could see him either endorsing or allowing such measures to move forward, which could significantly affect these e-commerce firms.

The situation for TikTok is even more complex. Its massive popularity among American youth makes it a high-profile target for scrutiny over data privacy and national security concerns. While Biden has already pushed for measures to limit TikTok’s influence, Trump’s administration is expected to take an even tougher line, especially with strong support from the Republican Party.

Debt Restructuring: A Glimmer of Hope or a One-off Success?

In another significant development, we turn our attention to one of China’s mid-tier property developers, CIFI. The company recently reached an agreement on its offshore debt restructuring, securing support from nearly 80% of its foreign debt holders just a month after beginning negotiations. This rapid progress stands in stark contrast to the prolonged debt restructuring struggles of larger names like Evergrande and Country Garden.

The quick resolution of CIFI’s debt has led some observers to speculate that this could mark a turning point for China’s embattled property sector. There are even rumors that Beijing may be pushing these companies to resolve their offshore debts sooner rather than later, possibly providing some behind-the-scenes support. However, it is essential to maintain a sense of realism here—CIFI is a much smaller player compared to giants like Evergrande, and its situation may not be indicative of a broader trend.

The willingness of CIFI to offer more favorable terms to its creditors might simply reflect the nature of its business and the scale of its issues, which are more manageable compared to those of larger developers. Additionally, this comes at a time when Beijing has been vocal about attracting foreign investment and stabilizing the real estate market, which might be influencing optimism around this case.

Nonetheless, the underlying issues of China’s real estate market remain far from resolved. The oversupply of unoccupied apartments across the country—a problem that has persisted for years—continues to weigh on the market. While CIFI’s rapid restructuring is a positive sign, it would be premature to declare it the start of a new era for Chinese real estate without further evidence of similar successes.

The return of Trump, the challenges facing Chinese companies, and the ongoing restructuring of China’s property sector all paint a complex picture for the future. While there are signs of progress, there are also numerous risks and uncertainties that could derail any positive momentum.