Sorry China, No Chicago Stock Exchange For You

Ever since America was founded, China and America have had a relationship that can be described as inconveniently convenient.. Fast forward to 2018 and the Chicago Stock Exchange is for sale at the bargain basement price of $ 25 Million to some Chinese Investors. The deal, initially proposed in February 2016, would have had China’s Chongqing Casin Enterprise Group Co. as the lead investor in the exchange through a subsidiary, North America Casin Holdings. “The privately held” Chongqing Casin Enterprise Group attempted to introduce himself to a U.S. audience in March with a blog post, “Hello America, We Are the Casin Group.”

The plan was initially approved by the Obama administration as posing “no security risk.” Wisely, The SEC (Securities and Exchange Commission) refused to give its approval thus scuttling the deal. The regulators clearly understood the risk posed to America should this deal be approved. I have heard many say that this was a breach of the basic principles of free enterprise. This is a hallow argument. There can be no free enterprise when a foreign power is known for currency manipulation and its unfair trade practices which harm America is allowed to be “free” to America’s determinant.

The reality is that Chicago Stock Exchange, or CHX, is for all intents and purposes a bit player in the Stock Exchanges it only controls a minuscule 0.5 percent of the $22 trillion U.S. equities market. So, given that reality, one can see why its governing body wanted to go from bit-player to kingmaker. With the Chinese investment, CHX — one of the nation’s oldest exchanges — might have been able to open an exchange in China. Its CEO made no secret of that. And of course, CHX eventually wants to list Chinese companies in the U.S. So, what’s wrong with a Chinese purchase of an American Stock Exchange you ask? The answer is everything.

First, the argument that the Chinese Government will have no control over this “private entity” is laughable. Since when is there private enterprise in China? The government controls everything and everyone in China. There is no such thing as private enterprise in China.

This is not about stereotyping China as the politically correct and simply uninformed, as one might believe. Think for a moment about the access that the Chinese will have to Americans financial data and to its ability to use that and other data to inflict cyber warfare?

China’s cyber spies were accused of hacking into dozens of workstations and servers at the Federal Deposit Insurance Corp. Chinese hacking was blamed for the massive data breach at the US Office of Personnel Management which compromised the data of over 21 million people.

And in May 2014, US federal prosecutors indicted members of the People’s Liberation Army (PLA) for cyber-espionage for economic gain. China has all along denied the allegations of state-sponsored hacking. But analysts say China’s cyber operations are an active threat.

“Military intelligence has rapidly moved from cloak-and-dagger to bits-and-bytes over the last fifteen years… and China’s no exception to that,” says Bryce Boland, Asia-Pacific CTO of FireEye, a cybersecurity firm. Yet we are expected to believe that there was ever a good reason to approve this deal?

To put China’s attempts to grow its influence on the world economic stage in context, China is becoming a world-class buyer. Chinese investors and companies snapped up 171 companies last year in deals worth more than $65 billion, more than triple the 45 acquisitions, worth $5 billion, done in 2010, according to data from the analytics firm Dealogic.

Second, there is no evidence that the purchase of The Chicago Exchange would have listed stocks that were safe bets for American investors. While the prior administration glossed over these concerns, the current SEC clearly and carefully considered and analyzed these concerns and rightfully decided to block the sale.

Finally, When it comes to intellectual property (IP) theft, there’s the rest of the world, and then there’s China, a new report says. In 2015, mainland China and Hong Kong accounted for 87% of counterfeit goods seized by the U.S. Customs and Border Patrol. China’s share of trade secrets theft, though harder to track, is not far behind, claims the Commission on the Theft of American Intellectual Property in Washington, D.C., a bipartisan nongovernmental group co-chaired by former Utah Governor Jon Huntsman Jr., who served as U.S. ambassador to China from 2009 to 2011.

Stolen trade secrets, pirated software, and counterfeiting cost the United States between $225 billion and $600 billion per year, the commission estimates. The report singled out as suspect China’s targeting of biotechnology and quantum communications technology. “The massive theft of American IP… threatens our nation’s security as well as vitality,” said former Director of National Intelligence Admiral Dennis Blair, co-chair of the commission, in a press release.

The decision by The SEC shows why we need sensible regulation when it comes to protecting America’s vital interests.


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