BOSTON- Total investments between the United States and China are much bigger than official figures reflect, a report released on Tuesday found, underscoring the challenge facing US President Joe Biden’s foreign policy team at a cold point in relations between the two countries.
“All sorts of people stand to lose a lot” should leaders continue to split apart the world’s two largest economies, said Adam Lysenko, associate director of research firm Rhodium Group.
It wrote the report released by the National Committee on US-China Relations, an influential Washington group of business and diplomatic leaders. Ties between the two countries are under strain on a host of issues, including human rights and trade rules.
The report estimates US investors held $1.2 trillion in equity and debt securities issued by Chinese entities at the end of 2020, five times the levels shown in official data from the US Treasury Department. Most of the differencewas due to Chinese firms “using complex legal structures to issue shares out of tax havens that trade on US exchanges,” according to the report.
Chinese holdings of US securities, meanwhile, were as much as $2.1 trillion at the same point, 36 percent more than official figures suggest.
Most of the difference was due to “equity investments misclassified in official sources due to investor efforts to circumvent Beijing’s capital controls or the use of Hong Kong as an investment intermediary,” according to the report.