Following his appointment by Republican President-elect Donald Trump to head the agencies that have emerged as the tip of the spear in the US-China trade war, investment banker Howard Lutnick’s exposure to China came into stark light on Wednesday.
From BGC Group, which has a joint venture in Beijing with China Credit Trust, a Chinese state-owned company, to Cantor Fitzgerald, which has assisted in bringing Chinese companies to the American market, Lutnick’s financial services companies have benefited from their connections to China.
According to lawmakers and ethical experts, the financial connections raise concerns about whether Lutnick could be unfairly swayed by Beijing when deciding whether to impose new export restrictions and taxes on China in his capacity as U.S. Trade Representative and Commerce Secretary.
“Mr. Lutnick seems to have a number of conflicts of interest in China. How can the American people expect a person employed by the Chinese government to help level the playing field for working Americans dealing with China? The Senate finance committee’s chairman, Democratic Senator Ron Wyden, was questioned.
Requests for comment were not immediately answered by the Trump campaign, Cantor Fitzgerald, or the BGC group.
Senator Tim Kaine, a Democrat and member of the armed services and international relations committees, stated that he anticipates Lutnick “being pressed about his financial connections to US adversaries.” The American people, not their private corporate affairs, must be our Commerce Secretary’s first responsibility.
According to the joint venture’s website, state-owned China People’s Insurance Company is the main shareholder in a joint venture with China Credit Trust in which Lutnick’s financial services company BGC Group holds a 33 percent stake, valued at around $28 million.
According to the website, China Credit Trust will aggressively carry out the duties and obligations of a financial state-owned company in 2023.
According to the website, the joint venture, China Credit BGC Money Broking Company Limited, was the first currency brokerage firm to be granted a license to operate in Beijing in 2010. It offers data and brokerage services for the money, bond, and derivatives markets in addition to the domestic and foreign exchange markets.
The partnership was “the first Sino-foreign joint venture inter-dealer broking company to have been granted a business license by the China Banking Regulatory Commission to operate in Beijing,” a BGC press release stated.
“Business associates”
According to Kathleen Clark, a professor of government ethics at Washington University in St. Louis, Lutnick and the Chinese government are effectively “business partners.”
“This gives rise to the possibility that the Chinese government could exert influence over the commerce secretary,” she stated. “In the worst situation, it is ceding authority to a foreign government.”
Any executive branch official is prohibited by US law from taking part “personally and substantially” in a “particular matter” that would significantly impact their financial interests.
According to Clark, any changes Lutnick would make to trade or export policy would probably only indirectly affect his financial interest; therefore, he might not be considered to be breaking that statute.
But according to her, the constitution’s emoluments provision works to prevent foreign governments from unduly influencing US policy by providing financial incentives to US officials from overseas.
“That is the primary reason for the foreign emoluments clause,” she continued.
Additionally, Cantor Fitzgerald has assisted Chinese businesses in attracting US investors. Last year, the company underwrote the Nasdaq initial public offering (IPO) of Chinese biotech startup Adlai Nortye, which became the first Chinese company to list successfully after Beijing imposed new regulations requiring Chinese companies to acquire a special filing before listing shares overseas.
According to the US-China economic and security review commission, Cantor Fitzgerald was the lead underwriter in two other transactions in 2015 and 2019 that permitted trading on US exchanges by Chinese companies Aesthetic Medical International and GD Culture Group, a holding company for digital marketing, and AI technology firm AI Catalysis Corp. Earlier this year, Nasdaq delisted Aesthetic Medical International.
BGC’s own September financial statement, which mentions that US-China trade relations, which Lutnick may have some power over, could affect company performance, highlights the difficulties Lutnick faces in balancing his business and policy portfolios.
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