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Promoting a Stable, Transparent, and Resilient U.S.-China Financial Relationship

Key Takeaways from SIFMA President and CEO Ken Bentsen’s Speech at U.S.-China Symposium

  • U.S.–China capital flows remain significant, with some progress on market access and liquidity through developments such as the Stock and Bond Connect, the Phase One Trade Agreement, and the PCAOB Statement of Protocol.
  • In the U.S., the nexus between national security and capital markets has deepened, as bipartisan efforts to ensure that outbound and inbound investments do not undermine national security interests.
  • SIFMA’s priorities in the U.S.–China financial relationship include ensuring fair market access for U.S. institutions, strengthening investor protections, promoting transparency and trust in financial markets, and supporting a pragmatic approach to data security and cross-border data rules aligned with international standards.

At the recent U.S.–China Symposium on Building the Financial System of the 21st Century, hosted by Harvard Law School, the Program on International Financial Systems (PIFS), and the China Development Research Foundation (CDRF), I had the opportunity to participate in a panel on the future of financial services in the U.S. and China.

SIFMA has been engaged on matters related to market access, cross border investment, and trade liberalization efforts for U.S. based financial services firms in China for many years, working to establish a level-playing field in that market.

By the Numbers: U.S.-China Capital Flows

In 2024, two-way portfolio transactions in securities between the U.S. and China totaled $5.7 trillion. U.S. transactions in Chinese securities totaled $3.7 trillion, including $1.8 trillion in purchases and $1.9 trillion in sales of long-term securities. Chinese transactions in U.S. securities totaled $2.0 trillion, with $1.1 trillion in purchases and $0.9 trillion in sales.

As of May 2025, U.S. institutional investors held approximately $250 billion in U.S.-listed Chinese equities. As of June, China was the third-largest holder of U.S. Treasuries, with $756.4 billion outstanding.

In 2024, U.S. exports of financial services to China were $4.2 billion and imports were $1.1 billion, producing a trade surplus. U.S. direct investment in Chinese financial services stood at $17 billion, with another $13 billion in Hong Kong. By comparison, mainland China and Hong Kong combined held about $4 billion in direct investment in the U.S. financial services sector.

These figures underscore the scale of the U.S.–China financial relationship. At the same time, geopolitical pressures create uncertainties for businesses.

Expanding Market Access: Stock and Bond Connect

China’s efforts to open its markets to foreign financial institutions began in the 1990s. The Stock Connect program, established in 2014, links the Hong Kong and Mainland exchanges, allowing overseas investors to access stocks listed in Shanghai and Shenzhen through Hong Kong and giving Mainland investors access to Hong Kong-listed shares. Upon its launch, our partners at ASIFMA wrote: “Considering its unique structure, Stock Connect is an extraordinary development not only for China’s markets but also for financial markets around the world.” U.S. financial institutions participate in the China Stock Connect program by acting as intermediaries for international investors, providing services like custody, trade facilitation, and data connectivity through their established platforms. This channel has been progressively expanding and by August 2025 the average daily trading had reached RMB 144 billion.

The Bond Connect program offers a similar framework for these fixed income securities, enabling mutual market access between the Mainland Chinese and Hong Kong bond markets and overseas investors to enter China’s bond markets through Hong Kong and vice versa. As of August, there were 831 approved investors, with average daily trading of RMB 44 billion. Starting this year, overseas investors can use Chinese bonds purchased through Bond Connect in offshore RMB repo transactions, allowing investors to pledge these bonds to access liquidity, including foreign currency funding.

In recent years, China has also demonstrated greater openness to foreign financial institutions. After years of discussion and negotiation between 2020 and 2022, China lifted foreign ownership limits in securities brokerage, mutual fund management, insurance asset management, and futures.

Strengthening Financial Services Cooperation: Phase One Agreement and SOP

The U.S.-China Phase One Trade Agreement in 2020 under the first Trump administration was a milestone long sought by prior administrations. It codified China’s elimination of foreign equity limits in securities brokerage, fund management, and futures, a major achievement for U.S. financial service providers. SIFMA commended the Trump administration for recognizing the importance of financial services in the bilateral relationship. In response, many U.S. and global securities firms and asset managers expanded operations in China through acquisitions or wholly owned subsidiaries.

In 2022, the U.S. Public Company Accounting Oversight Board (PCAOB) signed a Statement of Protocol (SOP) with the China Securities Regulatory Commission and Ministry of Finance to enable cooperation in the oversight of PCAOB-registered accounting firms in China and Hong Kong. The agreement established a specific and accountable framework for inspections and investigations of PCAOB-registered public accounting firms. This was a critical development to allow Chinese companies to continue listing and trading in the U.S., but compliance remains the critical factor.

These should be positive developments for China’s capital markets and the Chinese economy by deleveraging bank balance sheet and promoting capital formation. Further, foreign direct investment can help Chinese markets develop through enhanced market discipline, business practices, and compliance that foster and promote investor participation and, by extension, raise demand for U.S. exports. Foreign market access also helps maintain the U.S.’s position as the world’s leader in financial services, benefiting our economy and supporting the U.S. dollar’s reserve currency role, critical to the stability of the global financial system.

Barriers to Fair Market Access

Challenges remain for fair market access. Foreign market share of China’s banking sector remains below 2% and has decreased in recent years. Another ongoing issue is the treatment of IPOs in mainland China, where new rules and lengthy approval times have made it more difficult for U.S. and European firms to compete on a level playing field. This underscores the importance of reciprocal and transparent market practices in the relationship moving forward.

Notwithstanding the PCAOB’s ability to inspect China-based registered accounting firms, some Chinese companies list and issue shares in the U.S. that become subject to apparent stock manipulation and can result in significant investor losses. This type of activity is to the detriment of investors and if left unresolved could undermine Chinese access to U.S. investors. SIFMA and our members are closely monitoring this issue, and we support the SEC’s recent announcement that it is forming a cross-border task force to identify and combat this activity.

The Convergence of National Security, Technology, and Finance

In recent years, the nexus between national security and the capital markets has increasingly converged. In the U.S., there have been bipartisan efforts to ensure that outbound and inbound investments do not undermine U.S. security interests.

The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) expanded the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS), broadening the transactions subject to review and allowing CFIUS to address national security concerns arising from certain non-controlling investments and foreign real estate. This marked a significant shift in how the U.S. evaluates inbound investment.

In 2021, the U.S. prohibited investment in certain Chinese companies tied to the military, aiming to prevent American capital from supporting firms that could advance China’s military or surveillance capabilities and threaten U.S. national security.

In January 2025, the U.S. enacted the world’s first comprehensive outbound investment regime, introducing formal oversight of certain outbound investments into China, focusing on critical sectors such as semiconductors, quantum technologies, and artificial intelligence. Designed to prevent U.S. capital, technology, and expertise from strengthening potential security threats, the framework marks a shift in policy by extending scrutiny to the flow of capital abroad. It reflects growing consensus in America that U.S.-China strategic competition extends beyond protecting market access and trade to also encompass the intersection of finance, technology, and national security.

SIFMA Priorities: Fair Market Access, Investor Protections, and Data Transparency

SIFMA recognizes that the evolving U.S.–China economic relationship is occurring alongside technological and security developments that could pose potential risks to U.S. interests. We support continued efforts to ensure a level playing field in China and in markets where discriminatory treatment against U.S. institutions persists. SIFMA also supports strengthening investor protections in foreign jurisdictions where it is warranted. Financial markets depend on trust, transparency, and integrity of the information available to all market participants. We believe that a more constructive and pragmatic approach should be considered regarding data security and information sharing.

ASIFMA’s annual capital markets survey found that data localization is the number one regulatory impediment to conducting business in China. Within the finance industry, sectoral rules impose more detailed requirements on the protection of financial data, including personal financial information. While the industry is supportive of data protection, we believe that the cross-border data rules in China should align with international best practices and better balance the free flow and security of data.

In China, foreign bank subsidiaries cannot issue financial or government bonds, which are limited to licensed domestic banks. Foreign bank branches face even tighter restrictions, such as being barred from RMB related business with Chinese nationals except for fixed-term deposits above RMB 1 million. Licensing challenges and other barriers continue to hinder foreign banks’ ability to compete with China’s state-owned institutions. It is in the interests of both the U.S and China that these impediments are addressed.

Looking Ahead

The U.S.-China financial relationship is among the most consequential in the world, shaping our financial systems and the stability of the global economy. SIFMA is a resource to policymakers and regulators to ensure this relationship supports global economic growth, resiliency, and transparency.

Author

Kenneth E. Bentsen, Jr. is President and CEO of SIFMA. From 1995 to 2003, he served as a Member of the United States House of Representatives from Texas. Prior to his service in Congress, Mr. Bentsen was an investment banker specializing in municipal and housing finance.

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