Instead of holding China accountable for exploiting American capital markets, this so-called Phase 1 agreement will make sure American capital continues to directly fund China’s state-run economy. American financing will increase to state-owned enterprises like China Shipbuilding Industry Corporation, which produces about 80 percent of the Chinese Navy’s main equipment, and Hikvision, whose products Beijing uses to surveil Uighurs in Xinjiang.
Another appalling example of how good this part of the agreement is for China is the provision authorizing American financial companies to purchase Chinese nonperforming loans. These are loans that the borrower is struggling to pay off. This makes them a favorite of Chinese state-owned enterprises and other companies with large capital expenditures but little revenue growth expected in the near term.