NEW YORK -- The trade spat between the U.S. and China appears to be worsening as commentators speak of an economic cold war between the world's two largest economies.
The tit-for-tat tariffs the two countries have imposed are having an effect: Chinese direct investment in the U.S. has begun shrinking.
But the market for initial public offerings for Chinese companies listing shares in the U.S. tells a different story, underscoring how the two countries are bound together by a web of financial and human interactions.
On the morning of July 26, New York's Times Square was festooned with red logos in Chinese characters. The occasion was the listing of Pinduoduo, China's third-largest e-commerce company in terms of the value of shares traded, on the Nasdaq Stock Exchange. The event took place simultaneously in New York and Shanghai, with the action relayed live between the two venues. The IPO valued the three-year-old company at around $20 billion.
Bob McCooey, senior vice president of Nasdaq's listing services unit who handles the exchange's dealings with Asia-Pacific companies, was in Shanghai to celebrate Pinduoduo's U.S. stock market debut with the company's senior executives and employees.
McCooey is bullish about the outlook of Chinese IPOs. Share listings by Chinese companies in the U.S. are on track to double this year, recovering strongly after a period of weakness. One important factor behind the rebound, McCooey said, is Chinese young entrepreneurs' deep understanding of the value of U.S. stock markets.
Pinduoduo founder Colin Huang is one Chinese tycoon who learned firsthand what an IPO in the U.S. can do for a young company. After earning a master's degree from the University of Wisconsin, Huang joined Google in 2004 ahead of its IPO. After listing, Google's operating profit and workforce grew at a dazzling pace, according to a post on Huang's personal blog.
Huang's experience at Google helped prepare him to start his own company, he said. He is among a bevy of young Chinese who have returned home to launch new businesses after developing their ideas and skills in the U.S.
Many of these entrepreneurs later return to the U.S. to raise money for their startups. The new wave of Chinese IPOs in the U.S. points to the personal ties that help anchor the bilateral economic relationship, as well as the pivotal role played by U.S. institutional investors in maintaining it.
The July IPO of Cango, an online marketplace for cars in China, was backed by Warburg Pincus, a private equity fund set up in 1966. Such funds are conduits that channel money from U.S. investors, including pension funds, university endowments and wealthy individuals, into Chinese startups.
In 2005, David Burke, a former managing director at the Stanford Management Company, which oversees investments for Stanford University's endowment, spent four months in Shanghai researching the investment environment in China. Burke went on to launch Makena Capital Management, a California-based investment manager that provides capital to boutique investment companies on behalf of university endowments. He is on the hunt for promising funds in China with which to do business.
U.S. funds are drawn to Asian success stories, partly due to low U.S. interest rates and worries among some investors about pricey domestic stocks.
Many Chinese entrepreneurs raise capital in the U.S., giving investors there the chance to earn high returns. Some of these investors then plow part of the gains into new Chinese startups, creating a cycle of growth.
For all the repercussions of the political struggle between Washington and Beijing, so far, there are few signs that their financial and economic ties are unraveling.