AP Photo/Andrew Harnik
- A former top aide to Treasury Secretary Steve Mnuchin warned over the weekend against a White House proposal to restrict investments in China.
- The comments reflected a longstanding divide in the administration over how to address a yearlong dispute with the second-largest economy.
- White House officials were discussing plans to limit portfolio inflows into China as recently as October, according to an administration official.
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A former top aide to Treasury Secretary Steve Mnuchin warned over the weekend against a White House proposal to restrict investments in China, reflecting a longstanding divide in the administration over how to address a yearlong dispute with the second-largest economy.
“If Secretary Mnuchin was here, I’d tell him that was a terrible idea,” Phillips said of the potential punitive measures Sunday at the China Finance Association conference in New York. “If you limit the movement of capital, you’re really just cutting off your nose to spite your face.”
White House advisers were discussing plans to limit portfolio inflows into China as recently as October, according to an administration official. The White House declined to comment on whether those policies are still under consideration.
“I would be extremely wary of that tool because of the escalation and retaliation,” added Phillips, who left the Treasury Department after two years in June. “You would have lower equity prices, higher interest rates, and a fragmented market.”
The administration had separately looked into ways to increase financial scrutiny of Chinese companies on various fronts, according to the New York Times. That could include shifts toward more severe — or even criminal — punishments for financial-disclosure violations and broader criteria for a company to be blacklisted.
Proposals to restrict capital flows within and outside mainland China were also outlined in a circulated memo on the plan, which was drafted by the informal White House adviser Michael Pillsbury.
The White House announced in early October the first part of a mini trade agreement with China, which included unspecified commitments on agriculture and rules around intellectual property and currency movements.
But uncertainty over the fate of that agreement has mounted in recent days as the White House sent out a series of conflicting messages.
Over the weekend, Trump denied a recent announcement from China that the US had agreed to lift some tariffs. That pushback came even after several of the president’s advisers appeared to confirm that the tariff rollback would be included in the first part of a deal.
“There was a lot of incorrect reporting, but you will see what I’m going to be doing,” Trump told reporters Saturday at Joint Base Andrews.
“China very much wants to make a deal,” he added. “They’re having the worst year they’ve had in 57 years. Their supply chain is all broken, like an egg, they want to make a deal, perhaps they have to make a deal, I don’t know, I don’t care, that’s up to them.”
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