Lutnick's China ties draw fire after Trump taps him to lead US in trade war
November 21, 2024
Howard
Lutnick, Chairman and CEO of Cantor Fitzgerald, gestures as he speaks
during a rally for Republican presidential nominee and former U.S.
President Donald Trump at Madison Square Garden, in New York, U.S.,
October 27, 2024. REUTERS/Andrew Kelly/File Photo Purchase Licensing Rights
- Summary
- Companies
- Democrats, ethics expert raise questions about nominee's China business ties
- Lutnick's BGC has joint venture with Chinese state-owned firm
- Lutnick's Fitzgerald Cantor has helped Chinese firms trade on US exchanges
WASHINGTON,
Nov 20 (Reuters) - Investment banker Howard Lutnick's exposure to China
came into sharp relief on Wednesday, after Republican President-elect
Donald Trump tapped him to lead the agencies that have become the tip of the spear in the U.S.-China trade war.
The
financial services firms helmed by Lutnick have profited from ties to
China: from BGC Group, which has a joint venture in Beijing with
Chinese-state owned China Credit Trust, to Cantor Fitzgerald, which has
helped take Chinese firms public in the United States.
The
financial ties raise questions about whether Lutnick could be unduly
influenced by Beijing when making decisions about whether to impose
fresh tariffs and export curbs on China as United States Trade
Representative and Commerce Secretary, lawmakers and ethics experts
said.
“Mr.
Lutnick’s conflicts of interest in China appear to be substantial. How
can the American people expect someone who is on the Chinese
government’s payroll to help level the playing field with China for
working Americans?” asked Democratic Senator Ron Wyden, who chairs the
Senate finance committee.
A
spokesperson for Lutnick could not be immediately reached for comment.
Cantor Fitzgerald, BGC group, and the Trump campaign did not immediately
respond to requests for comment.
Democratic
Senator Tim Kaine, who serves on the foreign relations and armed
services committees, said he expected Lutnick "will be pressed about his
financial connections to U.S. adversaries. It's crucial that our
Commerce Secretary's top priority be the American people, not their
personal business dealings."
Lutnick's
financial services firm BGC Group has a 33% stake, valued at nearly $28
million, in a joint venture with China Credit Trust, a "financial
state-owned enterprise" whose largest shareholder is state-owned China
People's Insurance Company (PICC Group), according to the joint
venture's website.
PICC
group has ties to Huawei, the Chinese telecoms equipment giant heavily
sanctioned by Washington amid fears it could spy on users. In November
2022, PICC Group signed a contract with Huawei to establish a joint
innovation laboratory to deepen collaboration in financial technology,
according to a statement by Huawei.
The
joint venture, known as China Credit BGC Money Broking Company Limited,
was licensed to operate in Beijing in 2010, as the first currency
brokerage company there, according to the website, and provides
brokerage and data services for domestic and foreign exchange markets as
well as money, bond and derivatives markets.
The
tie-up, according to a BGC press release, marked "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."
'BUSINESS PARTNERS'
Lutnick
is essentially "business partners" with the Chinese government, said
Kathleen Clark, a professor of government ethics at Washington
University in St. Louis. "This raises the specter of the Chinese
government having leverage over the commerce secretary," she said.
"Worst case scenario, it is surrendering control to a foreign
government."
U.S.
law bars any executive branch official from participating "personally
and substantially" in a "particular matter" that would affect their
financial interest.
According
to Clark, Lutnick may not be seen as running afoul of that law, because
any trade or export policy change he might impose would likely only
have an indirect impact on his financial interest.
However,
the emoluments clause of the constitution, she said, aims to keep
foreign governments from having undue influence over U.S. policy via
financial benefits for a U.S. official from a foreign source.
"That is why we have the foreign emoluments clause in the first place," she added.
Cantor
Fitzgerald has also helped Chinese companies gain a foothold among U.S.
investors. The firm underwrote Chinese biotech firm Adlai Nortye's (ANL.O)
NASDAQ IPO last year, the first successful Chinese company to list
since Beijing implemented new rules requiring Chinese firms to obtain a
special filing before listing shares overseas.
Cantor
Fitzgerald was the lead underwriter in two other deals in 2015 and 2019
that allowed Chinese companies GD Culture Group, a holding company for
digital marketing and AI technology firm AI Catalysis Corp, and
Aesthetic Medical International to trade on U.S. exchanges, according to
the U.S. China economic and security review commission. Aesthetic
Medical International was delisted by NASDAQ earlier this year.
The
challenges faced by Lutnick in twinning his business and policy
portfolios are highlighted by BGC's own September financial filing,
which notes that U.S. China trade relations, which could be partially
controlled by Lutnick, could impact company results.