New Trump America First Investment Order Could Boost HK Listings

Issued on February 21, Trump’s America First investment Policy could place additional scrutiny on Chinese companies seeking public listings in the U.S. and on American investors holding stakes in Chinese firms.

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Key Components

The policy introduces heightened audits of foreign companies listed on U.S. exchanges. This includes comprehensive ownership structure reviews and investigations into allegations of fraud to protect American investors and ensure transparency.

More significantly, the policy prohibits pension funds from investing in companies from foreign adversaries, including Chinese firms. This move effectively prevents American workers’ retirement savings from being allocated to Chinese enterprises.

Additionally, the policy directs the U.S. government to consider new or expanded restrictions on outbound investments in critical sectors such as semiconductors, artificial intelligence, quantum computing, biotechnology, and advanced manufacturing. These industries are deemed strategically important, with potential military applications.

Stricter Scrutiny on Chinese Companies

The increased oversight will make it more difficult for Chinese companies to list in the U.S., subjecting them to rigorous financial inspections, governance evaluations, and ownership scrutiny.

The exclusion of pension funds is expected to significantly impact Chinese firms that rely on U.S. capital, particularly in the tech and biotech sectors, which often seek investments from American venture capital funds. By reducing the available U.S. funding pool, the policy may discourage large institutional investors from backing Chinese companies.

Sectors such as biotechnology, semiconductors, artificial intelligence, and aerospace are expected to face further regulatory scrutiny due to their implications for national security and public health.

Shift to Alternative Markets

As a result of these restrictions, many Chinese companies may seek alternative listing venues outside the U.S., such as Hong Kong and European markets. This shift comes just as some Chinese firms were beginning to reconsider the U.S. as a listing destination.

This development represents a setback for U.S. capital markets, which previously served as the preferred listing venue for Chinese biotech firms.

Market Reaction

So far, both Hong Kong and Mainland China stock markets have performed strongly in 2024, driven by a rebound in tech stocks, led by Alibaba, and the AI-driven surge following DeepSeek’s advancements. On February 21, the Hong Kong stock market rose by 4%, contrasting with a broad decline in U.S. markets.

Dual-use technologies—those with both civilian and military applications—may face additional restrictions, further limiting Chinese firms' ability to secure U.S. investments.

While the America First investment order does not explicitly target China, its effects make it clear that Chinese companies seeking to list in the U.S. will encounter heightened scrutiny and increased barriers. Consequently, many of these firms are likely to turn to Hong Kong, where the stock market's recent rally provides further incentive to list closer to home.

What's Next?

Trump administration's trade policy and investment policy are quickly taking shape. In particular, the America First Investment policy will impact companies seeking a U.S. list, setting a higher bar and increasing costs.

Excluding pension contributions to investments in companies from foreign adversaries adds to investor caution and creates uncertainty for currently listed Chinese firms.

The full impact is still unfolding, and its far-reaching consequences may take months to materialize. Stay tuned for further developments.

（leave your comments below or email at brianhxyang @yahoo.com )