U.S. experts say Beijing’s establishment of a new stock exchange catering to China’s small and medium-sized companies (SMS) is unlikely to raise the capital the enterprises had anticipated from listing on New York’s Nasdaq.

That funding step, known as an initial public offering (IPO), allows a company to raise capital from public investors. Chinese IPOs have hit a pause due to Beijing’s increased scrutiny of entities with share listings in the U.S. and new stringent reporting requirements imposed on Chinese companies that want to sell shares in the U.S.

“The impact of the new market is likely to be limited, at least compared to the impact of regulatory challenges to U.S. listing imposed by both Beijing and Washington,” Jennifer Schulp, director of financial regulation studies at the Cato Institute’s Center for Monetary and Financial Alternatives, told VOA in an email.

“While these regulatory challenges may help the market to get off the ground by forcing companies to turn to it to raise capital, it seems unlikely that the market will be a first choice for companies that would have otherwise looked to the U.S. markets for an IPO.”

Authorities registered the Beijing Securities Exchange Limited Co. (BSE) on Sept. 3, a day after Chinese President Xi Jinping announced the plan to raise capital and support innovation and development for SMS at the China International Fair for Trade in Services.

The China Securities Regulatory Commission (CSRC), which oversees the securities and futures industry and reports directly to the State Council, China’s main administrative body, responded by saying its leaders were “excited” at the prospect.

“Small and medium-sized enterprises can do great things,” the CSRC added.

The new exchange would be similar to the Nasdaq in the U.S., which lists technology and biotech behemoths such as Microsoft, Oracle, Google, Amazon and Intel.

State-backed media Global Times said the new stock exchange, which joins two existing boards in Shanghai and Shenzhen, will “play a significant role in the country’s push for innovation-driven high-quality growth,” noting the move comes as the U.S. continues to push for financial decoupling.

But George Calhoun, director of the Quantitative Finance Program at the Stevens Institute of Technology in New Jersey, is dubious.

“There is an interest in creating a Nasdaq-like venue for high-tech startups, but what’s impeding that is not the lack of another exchange, it’s (China’s) regulatory heavy hand, and it’s gotten heavier lately,” he told VOA via phone. Nasdaq is an acronym for the National Association of Securities Dealers Automated Quotations.

A third try

China’s two major exchanges – the Shanghai Stock Exchange and the Shenzhen Stock Exchange – serve blue-chip companies, which are regarded as stable, safe and profitable. Both exchanges also include technology boards that serve younger and riskier tech and science companies.

“There is an interest to create a venue for smaller entrepreneurial tech companies to be able to go public without the same kind of expectations that you have if you’re going to list on one of the major exchanges,” Calhoun said. “That’s where China draws the comparison with Nasdaq and the New York Stock Exchange.”

The New York Stock Exchange (NYSE), founded in 1792, is where established companies are listed, which contributes to its reputation as being safer for investors than the Nasdaq, founded in 1971. At that time, startups such as Microsoft, Intel and Apple didn’t meet the requirements for listing on the NYSE. Nasdaq listed, and thus became known, by comparison with the NYSE, as the tech-friendly exchange for innovative science and technology companies in the U.S.

“I think China has looked at that and said, we should do something similar, and they’ve tried it twice, (the) ChiNext board in Shenzhen and Star Market in Shanghai,” Calhoun said. Both those boards list start-ups and billion-dollar tech unicorns, yet both failed due to China’s sluggish policy process for raising capital, he said.

The new Beijing Stock Exchange (BSE) will be largely based on the existing National Equities Exchange and Quotations (NEEQ), or the Third Board, founded in 2012. Created for SMEs, it failed to generate the cash needed by the majority of small companies listed.

It will adopt the faster IPO registration system rather than an older method of registration that required approval by the CSRC. Regulators will allow BSE shares to rise or fall by 30% per day, a wider range than the 20% limit set for Shanghai’s Star Board and ChiNext in Shenzhen, the tech listings on those exchanges. There will be no trading limit on any IPO shares on the first day of BSE trading.

Jay Ritter, a finance professor at the University of Florida, told VOA Mandarin in an email that the BSE’s primary competitor will be the Growth Enterprise Market (GEM) aunched by the Stock Exchange of Hong Kong Limited in 1999. The existing Third Board in Beijing will lose out, he added.

“There are a few small Chinese companies raising $10-20 million that list in the U.S. each year, in addition to more sizable companies. These small companies might list on the new Beijing exchange in the future,” he said.

Chinese tech firms in impasse

The BSE is opening as Washington and Beijing are increasing scrutiny of Chinese tech companies listed in the United States.

In the U.S., there’s growing pressure to require Chinese companies to delist if their auditors aren’t audited. Gary Gensler, SEC chairman, wrote in a Sept. 13 Wall Street Journal op-ep that unless Chinese companies allow an audit of their auditors by the Public Company Accounting Oversight Board as required under the Sarbanes-Oxley Act of 2002, some 270 China-related companies may be prohibited by early 2021 from continuing their U.S. listings.

Wu Ming-Tse, an associate research fellow at the Chung-Hua Institution for Economic Research in Taiwan, told VOA Mandarin in a phone interview that China’s Xi hopes that the new stock exchange will bring these companies back to Beijing.

“The purpose of this new stock exchange is to slow down the pace of Chinese start-ups going public in the United States,” Wu said.

China’s tech industry crackdown started in December 2020 and has continued since. Several high-profile companies, including Jack Ma’s e-commerce giant Alibaba, its financial services subsidiary, the Ant Group, and the ride-hailing company Didi, have faced investigations, fines or both.

Calhoun from Stevens Institute of Technology said China’s current clampdown has forced its tech companies into a corner.

“China is saying let’s create our own Nasdaq and let those companies come to this exchange, but what they don’t realize is that you really have to have a more liberal regime in terms of allowing companies to go public with a lighter regulation, with less red tape, less of a headwind to float their shares,” he said. “It’s not about having another exchange.”

Norman Yin, a professor of finance at National Chengchi University in Taipei, told VOA in a phone interview that locating the new exchange in Beijing could be seen as reflecting Xi’s desire to grow China’s Nasdaq-like presence under the supervision of political authorities.

“If you take a look at the financial centers around the world, location is usually not a key consideration,” Yin said. “I would argue that China’s decision to set up a third stock exchange in Beijing is to allow President Xi Jinping to supervise the capital market closely by himself.” 

 
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Millions of Americans who were thrown out of work in the early months of the COVID-19 pandemic are now encountering a hot jobs market with businesses eager, even desperate, to hire them.

But amid continued spread of the delta COVID-19 variant, workers are trickling, not rushing, back into the labor market, despite the expiration of augmented federal unemployment benefits and offers of higher wages in some sectors.

Consumers eager to spend money would normally be a boon to the service industry in Charlotte, North Carolina. But businesses here, as in many parts of the United States, can’t find enough workers to accommodate the demand.

Help wanted signs are ubiquitous in storefronts across the city, where, since May 2020, the local unemployment rate has fallen from nearly 14% to less than 5%.

“Oh, there’s business here,” Brixx Wood Fired Pizza general manager Lethr’ Rotherttold VOA. “The restaurant stays busy and we’re making loads of money, but I don’t have the staff to keep up.”

It’s a similar situation at The Giddy Goat Coffee Roasters, an independent outfit with a unique business model of roasting coffee beans in-store and right in front of customers. The coffee shop was launched during the pandemic and has struggled to keep up with demand.

“When we think we’re good [for workers], the volume increases, and we suddenly need more help,” said manager Enzo Pazos. “Two people go to school, that’s two less staff on hand, so it’s kind of like it’s never enough.”

“You’re seeing variations of this same theme of a worker shortage across the country,” economist Matthew Metzgar of the University of North Carolina at Charlotte told VOA.

Metzgar notes that a federal economic stimulus program provided some workers with higher temporary incomes than they had received at their old jobs before the pandemic.

“What’s happening is of course with that higher unemployment compensation, people are less willing to work and people are less willing to accept lower wages,” Metzgar said.

Others who remain unemployed say they are reluctant to take jobs that would put them in close contact with the public at a time when the United States is averaging more than 1,500 COVID-19 deaths a day.

“Most people that have stayed on unemployment have done it for safety reasons, it seems,” job seeker Alex Jordan Ku said. “I have some friends on unemployment, and their safety was their main concern. They haven’t been looking for jobs They kind of just went back home to live with their parents so they can be without jobs for a while until things feel safe to them.”

Yet another problem keeping many people out of the workforce has been a shortage of affordable child care – a problem that was exacerbated by COVID-related school closures and remote learning that have forced many parents to remain at home with their children.

That problem may be easing as schools are reopening across the country this fall, but the parents of younger children are still finding it hard to secure placements in child care facilities, which are themselves impacted by difficulty in hiring enough qualified staff.

In a move partly aimed at getting more people back to work, the Biden administration is promoting enhanced child care subsidies as part of a proposed $3.5 trillion plan to fund infrastructure and social safety net programs.

This month’s expiration of supplemental unemployment benefits should force at least some workers back into the labor pool as their bank accounts run dry. But Metzgar says many potential workers are less than eager to return to jobs that pay less than what they received in benefits.

“From the worker’s point of view, there is resistance to coming back to lower-wage positions, and in some situations, there may not be much to entice them back in,” he said.

Adequate compensation

At a recent jobs fair in the neighboring state of Virginia, securing adequate compensation was on the minds of many prospective applicants, several of whom stressed factors beyond an hourly wage.

“What I’m looking for is something where there’s long-term stability, and benefits are important,” Lisette Bez told VOA at the Leesburg, Virginia, event. Even though she has run out of unemployment benefits, Bez indicated she is holding out for a job that includes things like generous health insurance benefits.

“The cost of insurance these days continues to go up. And I think for a lot of people that’s a huge concern,” she said. “So it’s not just enough to have a job that will pay you a certain amount. You have to have those other things.”

While employers have no control over the pandemic, they do have leeway in what they offer to entice workers, say labor advocates.

“In all candor, raising wages is the only thing that’s going to be bringing people back to work,” Charlotte labor organizer William Voltz told VOA.

Voltz, president of Unite Here’s Local 23, a union for airport employees, said workers need an hourly wage in the $17-$22 range to get by, far higher than the minimum wage of $7.25 per hour.

“Unfortunately, to live in Charlotte you really have to make a livable wage to be able to afford housing and life’s necessities,” he said.

Message heard

Amid fierce competition for labor, a growing number of U.S. employers big and small are sweetening wage and benefits packages offered to job seekers. E-commerce giant Amazon.com, Inc. recently boosted its average starting wage to $18 an hour, up from a $15 minimum wage the company set before the pandemic.

In Charlotte, Giddy Goat founder Carson Clough said he expects a certain amount of negotiation in determining compensation for new employees.

“If workers do have requests regarding pay and benefits, I am all ears,” Clough told VOA. “My business partner and I started off with the mindset [in] which we’re going to try and meet high-end wage requests, even prior to the pandemic. I’d be very open to hearing different demands, such as ‘How can I go do this’ or ‘How can this be a part of the package’ or something like that.”

Flexibility and creativity will be key to hiring and retaining workers going forward, according to Metzgar.

“Companies may consider thinking about bringing on workers that could contribute in multiple ways, doing something that brings value to the business. This would be a win-win, it would allow the worker to be invested, while the worker receives a higher wage in return,” the economist said.

“The point is to reimagine some of these positions so that the workers have the opportunity to produce more value, so managers set up workers to flourish to produce value for the company, which again comes with higher wages for the worker,” he added.

 
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Unless Congress votes to increase the amount of money the U.S. Treasury is allowed to borrow above its current debt of $28.5 trillion, the United States will default on its financial obligations sometime in the next several weeks, experts warn.

Few experts consider that likely to happen, but if it did, it could trigger an economic catastrophe with effects far beyond America’s shores.

In a letter to members of Congress last week, Treasury Secretary Janet Yellen warned of the damage that would result if the U.S. is unable, even for a short time, to pay its bills.

“A delay that calls into question the federal government’s ability to meet all its obligations would likely cause irreparable damage to the U.S. economy and global financial markets,” wrote Yellen, the former chair of the Federal Reserve Board. “At a time when American families, communities, and businesses are still suffering from the effects of the ongoing global pandemic, it would be particularly irresponsible to put the full faith and credit of the United States at risk.”

With that crisis looming, Democrats and Republicans in Washington are battling over who should take responsibility for the politically unpopular task of raising the cap on borrowing, commonly known as the debt limit. Republicans, led by Senate Minority Leader Mitch McConnell, have vowed that not a single one of them will vote to raise the limit.

For their part, Democrats say that much of the spending the increased debt would finance is the result of policies passed by a Republican-led Congress and signed by a Republican president, Donald Trump. Therefore, they argue, the GOP should participate in raising the limit.

‘America must never default’

The strange thing about the current debate is that there is absolutely no disagreement between the parties about what should happen. In an interview with the Louisville Courier-Journal in his home state of Kentucky last week, McConnell was explicit, saying that “America must never default” and “the debt ceiling needs to be raised.”

However, McConnell said, Republicans will not provide any votes to make that happen. What he is demanding the Democrats do is raise the debt limit unilaterally, using a process called “budget reconciliation,” which would make it impossible for Senate Republicans to block a vote on the measure.

McConnell’s stance has angered Democrats, who point out that enforcement of the debt ceiling was suspended three times during the four years of the Trump presidency, each time with Democratic support for allowing the debt to rise.

Possible House vote next week 

House Speaker Nancy Pelosi, a California Democrat, has ruled out the possibility of including a debt ceiling increase in a reconciliation package, creating what appears to be an impasse on Capitol Hill.

On Friday, House Majority Leader Steny Hoyer, a Maryland Democrat, said the House would vote on a measure to raise the debt ceiling next week. House Democrats could opt to tie the debt limit measure to a must-pass spending bill that would avert a government shutdown when the fiscal year ends on September 30, upping the significance of Republican opposition.

If the House bill passes, it would move to the 50-50 Senate, where Democrats have a bare majority because Vice President Kamala Harris can cast a tiebreaking vote. Such a measure, however, would be susceptible to a Republican filibuster if GOP lawmakers choose to block it.

‘Who blinks first?’ 

Many in Washington believe the debt ceiling will be raised before the U.S. defaults, but they aren’t sure of the mechanism. Yet lawmakers have come dangerously close to defaulting in the past. In 2011, when House Republicans battled with Democratic President Barack Obama over the federal debt, the bond rating firm Standard & Poor’s issued the first-ever downgrade of U.S. sovereign debt, sparking a major stock market sell-off.

“We know what’s going to happen, but we don’t know how it’s going to happen,” said Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget, a government spending watchdog. “At the end of the day, one way or another, politicians will raise or suspend the debt limit. The United States cannot and will not default on its obligations. And so somebody is going to budge. But the question is, who blinks first?”

There are multiple ways this could play out, said Richard Kogan, a senior fellow at the Center on Budget and Policy Priorities.

“Congress could enact a debt limit increase or a new suspension, and the amount of that increase or the duration of the suspension could be debatable,” he said. “Congress could choose to add other conditions, but doing so has not been the standard in recent years, for good reason. And it is possible that for political reasons Republicans in Congress will allow this to be done, but only with Democratic votes.”

New borrowing necessary

Until August 2, the country had been operating under the latest of a series of suspensions of the debt ceiling that allowed the Treasury to issue new debt without restrictions. When the suspension was lifted, the government’s debt stood at an estimated $28.5 trillion.

That represented an increase of about $6.5 trillion since 2019, the last time the limit was suspended, and about $8.6 trillion since a suspension that took effect in the first months of the Trump administration.

Most of the increase in federal debt since 2017 happened under the Trump administration, but a significant part of it, mainly in pandemic relief legislation, was signed into law by President Joe Biden.

Since August, the Treasury Department has engaged in a series of “extraordinary measures” to avoid defaulting on obligations without additional borrowing. However, Treasury officials have said those measures will become unsustainable sometime next month.

Pressure campaign 

The Biden administration has been trying to increase the political pressure on McConnell and congressional Republicans to force them to participate in a debt limit increase.

On Wednesday, Yellen spoke with McConnell on the phone. The White House said the purpose of the call was to “convey what the enormous dangers of default would be.” But a spokesperson for McConnell made it clear that the conversation had not moved the Republican.

“The leader repeated to Secretary Yellen what he has said publicly since July,” the spokesperson said. “They will have to raise the debt ceiling on their own, and they have the tools to do it.”

On Friday, The Associated Press reported that the administration had been reaching out to state and local government leaders to warn them about interruptions in federal funding that could result if the limit wasn’t raised.

Debt limit history 

The debt limit was not designed to be used as a political cudgel. Its origins go back to World War I, when Congress pre-authorized a certain level of debt so the Treasury would not have to seek congressional authorization every time it needed to issue new bonds.

Since 1917, when it was created, the debt limit has been raised many times. According to the Treasury Department, since 1960, Congress has acted to “raise, temporarily extend, or revise the definition of the debt limit” 78 times.

It is only in recent decades, as federal borrowing has accelerated, that raising the debt limit has become a political weapon.

 
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Taiwan’s government called on the European Union to quickly begin trade talks after the bloc pledged to seek a trade deal with the tech-heavyweight island, something Taipei has long angled for.

The EU included Taiwan on its list of trade partners for a potential bilateral investment agreement in 2015, the year before President Tsai Ing-wen first became Taiwan’s president but has not held talks with Taiwan on the issue since then.

Responding to the EU’s newly announced strategy to boost its presence in the Indo-Pacific, including seeking a trade deal with Taiwan, Taiwan’s Foreign Ministry said on Friday talks should start soon. The European Parliament has already given its backing to an EU trade deal with Taiwan.

“We call on the European Union to initiate the pre-negotiation work of impact assessment, public consultation and scope definition for a Bilateral Investment Agreement with Taiwan as soon as possible in accordance with the resolutions of the European Parliament,” it said.

“As a like-minded partner of the EU’s with core values such as democracy, freedom, human rights and the rule of law, Taiwan will continue to strengthen cooperation in the supply chain reorganization of semiconductors and other related strategic industries, digital economy, green energy, and post-epidemic economic recovery.”

EU member states and the EU itself have no formal diplomatic ties with Taiwan due to objections from China, which considers the island one of its provinces with no right to the trappings of statehood, so any investment deal could be tricky politically for the EU.

But the EU’s relations with China have worsened.

In May, the European Parliament halted ratification of a new investment pact with China until Beijing lifts sanctions on EU politicians, deepening a dispute in Sino-European relations and denying EU companies greater access to the world’s second-largest economy.

The EU has also been looking to boost cooperation with Taiwan on semiconductors, as a chip shortage roils supply chains and shuts some auto production lines, including in Europe. 

 
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