Forget Trade Wars. Capital Wars Are Easier to Win.
An effort by Senators Marco Rubio and Jeanne Shaheen to steer pension investments away from China could have damaging repercussions.
Rubio and Shaheen understand that the road to limiting capital flows to China lies through indexes.
Photographers: Al Drago & Sarah Silbiger/Bloomberg
Trade wars, we are now learning, aren’t easy to win. But there is far more to globalization than trade in goods, and there are many more ways to hurt an economic adversary than with tariffs.
These days, flows of capital matter at least as much as flows of goods. In fact, capital protectionism might pose a far greater threat to China, or to any other economic competitor, than trade protectionism. On Tuesday, China made it clear just how important overseas funds are to its growth and stability by announcing the removal of a decades-old hurdle to foreign investment. Many Western investors had long hoped for just such a development.