Should the U.S. reconsider investing in China?

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Shelter costs drive U.S. July inflation
The U.S. consumer price index rose 3.2% from a year ago in July, slightly less than expected — a sign that inflation has lost at least some of its grip on the U.S. economy. Almost all of the monthly inflation increase came from shelter costs, which rose 0.4% and were up 7.7% from a year ago. Prices accelerated a seasonally adjusted 0.2% for the month, in line with the Dow Jones estimate, the Bureau of Labor Statistics reported Thursday. Here’s the inflation breakdown for July, in one chart. Markets reacted favorably, expecting July’s tame inflation reading to mean no more interest rate hikes from the Federal Reserve.

Asian markets have somber finish to the week
Asian shares are poised to end the week on a weak note, with all major benchmarks trading lower on the day — extending weakness overnight in U.S. markets. Japan markets were shut for the Mountain Day public holiday on Friday. Hong Kong’s Hang Seng Index shed 0.6%, as a sell-off in Chinese real estate developer counters deepened. On Thursday, the blue chip Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all closed higher, but notably off session highs.

What does Biden’s order mean for U.S. investors in China?
U.S. President Joe Biden on Wednesday signed an executive order aimed at restricting U.S. investments into Chinese semiconductor, quantum computing and artificial intelligence companies due to national security concerns. While the Biden administration has set out some perimeters of its intended goals, its 45-day public comment period gives U.S. investors significant potential to influence any final regulation. Here’s what to expect next.

Fires and hurricanes
Hawaii is burning. Biden on Thursday declared a major disaster in Hawaii, vowing immediate assistance for Maui residents who have lost loved ones and their homes in devastating wildfires. At least 53 people have died so far. The fires are the worst natural disaster to hit Hawaii in recent memory, but they’re not likely the last for the U.S. this year. National Oceanic and Atmospheric Administration scientists on Thursday increased the chance that this year will be an above-normal Atlantic hurricane season to 60% because of record hot ocean temperatures.

[PRO] Buy Nvidia?
Investors may want to consider using the recent weakness in chipmaker Nvidia to snatch up shares of the artificial intelligence darling, some Wall Street analysts are saying.

A new reality beckons for American private equity and venture capitalists.

President Joe Biden finally dropped his long-awaited executive order late Wednesday, curbing fresh U.S. technology investment in China — it’s the first time the U.S. government is imposing restrictions on how U.S. capital flows out of the country, according to Elena McGovern, co-head of the national security practice at private equity advisory firm Capstone.

And more could be in store, given the priority on national interest and security.

Biden’s order specifically targets new U.S. investment and transfer of expertise in semiconductors and microelectronics, quantum computing, and certain AI capabilities in China, Hong Kong and Macao.

The U.S. Treasury Department is still in the process of firming up specific details before the measure can be fully enforced, maybe sometime next year.

But it’s a clear signal that the world’s second-largest economy is no longer a clear-cut option for American capital.

As it stands, U.S. firms have generally held back from investing in China in the past few years due to a weakening growth environment and the fraught prevailing geopolitical environment.

That’s bad news for Beijing, which needs foreign capital and technological transfers to bolster sagging growth momentum and elevate its economy up the value chain.

There are other ways to accomplish that, but Biden’s executive order just made things more difficult for some. More ingenuity lies in store.