| Don't tell Donald Trump: America's largest fund managers are leading a new gold rush into China. Even as the U.S. president calls for American companies to pull out of the country, the likes of BlackRock and Vanguard are piling in—though with as little fanfare as possible so as not to incur the wrath of America's tweeter-in-chief. The prize these financial giants can't resist? A trillion-dollar asset management market that's opening up to foreign players. For Wall Street, it's clear that Chinese money trumps Trump.  U.S. President Donald Trump This week in the New Economy The delicacy of this moment suggests we may have reached a new equilibrium between the U.S. and China on economic matters, albeit an uneasy one. Try as he might, Trump can't persuade U.S. businesses to disengage from one of the few major economies that's still growing. A survey this week from the American Chamber of Commerce in Shanghai showed that 79% of its members have no intention of relocating investments out of China. Why? Because the vast majority are still making money there, even if profits aren't growing as fast. Despite fears that Beijing will retaliate over Trump's effort to force economic "decoupling" (the TikTok battle being the latest and most shocking move in that direction), Chinese leaders have so far resisted the nationalist urge to lash out (diplomats, however, are another matter). China has good reason to stay cool when it comes to hard cash. The nation is still in economic catch-up mode; it can't join the ranks of the richest nations without U.S. technology. Indeed, China has far more to lose than the U.S. from a complete rupture. In that scenario, China's potential economic growth in 2030 would fall to 3.5% from the current forecast of 4.5%. And if the U.S. persuaded its allies to walk away from China, that figure could sink to 1.6%. These cold realities have placed a floor under the U.S.-China economic relationship. And although Trump still has a nuclear option—cutting China off from the global payments system—doing so could blow up the entire global economy.  BlackRock recently got the green light for a partnership with a Chinese state-owned bank. Photographer: Jeenah Moon/Bloomberg For BlackRock and other U.S. fund managers, there's no way to hedge against that kind of financial Armageddon as they eye the China market. They're all-in or all-out. The world's biggest asset manager, BlackRock has made its choice: Last month, it got the green light for a partnership with a Chinese state-owned bank. Citibank won the first license among U.S. banks for a fund custody business. JPMorgan landed another first—a futures operation. And giant asset manager Vanguard plans to relocate its regional headquarters—to Shanghai. There are echoes here of a previous gold rush. I moved to Shanghai soon after the city reopened its stock exchange in 1990, joining a stampede of investment bankers, lawyers, accountants, financial analysts and others all touting the place as Asia's next financial center. It was impossible to find an apartment: whole families camped out in tiny hotel rooms. Morgan Stanley commandeered the tennis courts of the upscale Shanghai Center to build a suite of offices. Other financial institutions took up residence in Art Deco buildings in the old French concession. The results were mixed. The investment banks did well enough underwriting the international stock market listings of Chinese state enterprises, and later setting up joint venture securities brokerages. The commercial banks didn't get very far, though: only a few of them, including HSBC, managed to build a national network of branches. Collectively, they captured less than 1% of domestic Chinese banking assets. Foreign insurers didn't do much better.  A man walks past HSBC's Shanghai offices. Photographer: Qilai Shen All of those players faced immense hurdles—a mix of onerous regulation, geographical limitations, joint venture mandates, high capitalization requirements and entrenched state-backed competitors. In the end, China was never going to hand over its financial sector to foreigners. The interlopers could join the game, but the referee would never let them win. This time, the optimists contend, things are different. As China transitions to a growth model increasingly fueled by domestic consumption, its trade surpluses will shrink, necessitating ever larger capital inflows to fund development. U.S. financial companies have unrivaled ability to mediate those flows. There's a lot riding on this new U.S. business enthusiasm. The disillusionment of those American companies that tried and failed in previous gold rushes laid the groundwork for the current crisis in U.S.-China relations. China should make sure these latest prospectors hit pay dirt.
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