Why Trump’s New York Fraud Case Matters in Beijing
By Chris Devonshire-Ellis
The ongoing saga of former US President Donald Trumps’s fraud case – in that the Trump Organisation deliberately inflated the value of assets it held in order to gain preferential loan rates – will be of intense interest in Beijing and many other countries. At stake is not just the question of fraud, but of the entire American asset-valuation culture and system in the United States.
With Judge Arthur Engoron having previously ruled that fraud was committed, the current hearings are to evaluate the extent of this, and a financial punishment. Trump has denied the accusations. Yet what really matters is the extent of any fraudulent behaviour.
Here, the United States finds itself in a quandary – the political winds pushing for the Trump Organisation to be found massively guilty – against the significant credibility damage concerning how the US system apparently colludes to permit substantial asset appreciation way over the true value.
This will be of interest to Beijing, in addition to other political and financial centres, and especially in the aligning non-Western nations. Beijing’s interest will be two-fold – one because the United States has long locked horns with China concerning the auditing of its state-owned companies, insisting that the US has the right to look at their books when examining their US-based subsidiaries.
A significant ruling against Trump implies that the United States entire financial auditing system – everything from banks, other investors, insurance companies, lawyers, accountants, auditors and even government officials – have been complicit in a massive amount of asset inflation. That potentially affects all businesses who used the same services. It also implies that the entire American institution is based upon inflated assets.
Beijing will have a field day in criticizing the US financial system, with aspirations that if Trump significantly overvalued assets – who and what else has? Such a ruling undermines the entire United States valuation system. That is extremely pertinent right now as another US Government shut down could potentially occur from November 17, and as Congress battles to fund both Ukraine and Israel.
Meanwhile, the US national debt is at US$33.17 trillion, or 121.6% of its annual GDP. Washington will hit another debt ceiling just after the next elections, on January 1, 2025.
Alternatively, a lesser punishment for the Trump Organisation will rally suspicions – already voiced by Russian President Putin – and possibly in Beijing as well – that the entire case has been bought to damage Trump’s own prospects for running for US President next year. Such a prognosis would fuel Trump’s campaign against Biden – he has already claimed that the process is a ‘witch hunt’.
This means that the American Democratic establishment is caught between two stools – removing Trump as a potential candidate; or exposing massive collusion in how the US financial services sector apparently cooperates to inflate corporate assets.
How Beijing, Moscow, or the non-Western politicians – and their US invested businesses respond to this will be an interesting dynamic – especially as China and other countries are calling for a re-organisation of global geopolitics against what is perceived as a US-led, unfair, and self-serving unipolar system. How Trump’s case pans out could seriously damage US financial credibility and the entire apparatus supporting it.
Foreign governments and businesses financially involved in that structure might care to assess any potential risk as questions will be immediately asked as concerns exposure should Trump’s alleged misdemeanors prove substantial.
Chris Devonshire-Ellis is the Chairman of Dezan Shira & Associates
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