By Alan Murray and Tom Huddleston Jr.
January 4, 2018

Good morning.

Yesterday’s CEO Daily took note of news that Jack Ma’s Ant Financial has dropped its $1.2 billion bid for MoneyGram because of opposition from CIFIUS. If you aren’t familiar with CIFIUS, it’s time to start paying attention. It’s a government committee created to review foreign investments for their impact on “national interests.” Historically, its focus has been defense technology and critical infrastructure. But the Ant decision is a sign that focus has expanded. CIFIUS also seems to have put the brakes on Anthony Scaramucci’s sale of his hedge fund-of-funds, Skybridge Capital, to China’s HNA. (Critical infrastructure?) Gordon Orr, director emeritus of McKinsey and long-time China hand, wrote recently that many Chinese investors now “simply assume that they could not get approval for investment in the United States, and so won’t try.”

Optimists may hope this is a negotiating tactic that will be used to negotiate market opening with China. But count me as one who sees it as a dangerous turn toward protectionism. Ma’s Alipay, from which Ant Financial was created, has been a cutting-edge innovator in financial services. Blocking Ant from the U.S. market will only slow innovation here. Moreover, Orr notes U.S. obstacles are pushing Chinese tech companies to focus their investments elsewhere— Israel, Scandinavia, the U.K. Is that in America’s interest?

The Trans Pacific Partnership—which Trump axed—was an effort to surround China with open trade arrangements that would ultimately pressure it to follow suit. Now, with TPP dead and Washington building trade walls, China has taken the initiative, pushing a Belt and Road initiative that envisions closer economic ties with virtually every country in the world except the U.S. Hard to see how that makes America great.

Separately, apologies for including the wrong link yesterday to Ian Bremmer’s list of the top ten foreign policy risks of 2018. (I linked to the 2017 list by mistake. The correct link is here.) But it’s worth noting that number one on that list is “China rising.” “At a moment of policy incoherence in Washington,” Bremmer writes, “China’s government has redefined the country’s external environment, set new rules within it, developed the world’s most effective global trade and investment strategy, and uses Chinese tech companies to advance state interests.” His bottom line: “U.S.-China conflict, particularly on trade, will become more likely in 2018.”

News below.

Alan Murray


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