Jay Clayton, the former chairman of the U.S. Securities and Exchange Commission (SEC), spoke on U.S.-China economic ties in a hearing by the Select Committee on the Chinese Communist Party (CCP). He encouraged policymakers to push transparency and accountability regarding investment in China.
"As markets have become more globally intertwined, in their approach to financial regulation, most countries have embraced, at least to a meaningful extent, the U.S. commitment to transparency and accountability. Starting in the 1990s and for the better part of two decades, we believed that China would recognize that it was in its best interest to join in this approach," Clayton said. "This belief, combined with massive trade benefits, made us comfortable with (and perhaps complacent with) an unprecedented level of investment in, and interdependence with, China. Twenty-five years later, the belief that regulatory and policy norms in China would gravitate toward transparency, accountability and stability remains substantially aspirational."
America is incredibly important to the global economy, according to Clayton's written testimony. The markets of the United States, he said, provide about “half the world’s equity and credit” despite only containing less than 5% of the world’s population. He states that this “leading position” in terms of economics has been achieved through the advancement of various policies that express a general “confidence in government,” evidenced by America’s commitment to the values of transparency, accountability and financial stability. Another factor in this economic supremacy, he said, is the U.S.’s openness to globalization and innovation.
In the testimony, Clayton stated that the current relationship between the United States and China may have cause for modification. He explained that the two countries’ interdependence, tension and “departure from international norms” regarding regulations pertaining to finance pose a risk to economic stability. He went on to assert that in order to address this concern, policymakers must understand both what the risks associated with the current relationship are and what actions can be taken to address them. On this front, Clayton said that the key to obtaining these two objectives is to embrace “transparency, accountability and financial stability.”
In the testimony, Clayton suggested an approach of two main steps. The first step would be to have companies with large investments in China disclose information regarding the quantity and effects of this investment. Step two would involve having the FSOC (Financial Stability Oversight Council) report information on the current U.S.-China economic relationship, and additional information on how changing these ties could affect the economy of the United States.
According to his biography on the SEC’s website, Clayton became the chairman of the SEC in 2017, having been nominated by former President Donald Trump. He also worked on various other councils and boards relating to finance, including the “Financial Stability Board” and the “Financial Stability Oversight Council.”
