As Donald Trump and Xi Jinping prepare to meet later this month, the contrast between how their governments interact with financial markets could hardly be sharper.
One administration treats the stock market as a report card while the other is willing to destroy capital in the short term if it serves the population's long-term interests.
Baillie Gifford's Ben Durrant, who invests across both countries, breaks down what those differences mean in practice – and where the two may be starting to converge.
Difference: The social side of investing
At the root of these differences is politics. China is a communist state with a socialist economic model, albeit one with market forces at play. The US, by contrast, is a capitalist democracy. That distinction shapes everything about how each government relates to its market.
"The first question our dedicated China team asks when doing research is, how does a company contribute to China's societal economic development?" said Durrant. "In the US, you don't need to ask that."
American investors, he argued, are broadly unconcerned with whether a company holds a monopoly – on, say, chicken farming – provided it turns a profit. In China, the government takes a far more active interest in whether dominant businesses are serving the broader population, not just their shareholders.
"The increased importance of the 'S' in ESG [environmental, social and governance] – that's very important in emerging markets and it's maybe less important in other parts of the world," said Durrant.
Difference: Government interest in short-term market moves
Closely related is how each government views the stock market itself. Trump and his administration have frequently pointed to market performance as a measure of their success, giving them a political incentive to keep prices buoyant.
The Chinese government operates without that constraint. Durrant said it is "working for people over the long term and not for equity market valuations", which means it can "take hard, unpopular and very scary decisions for markets in the short term".
He pointed to TAL and New Oriental as an example. Both were education businesses with strong growth prospects that investors considered highly promising. But the Chinese government concluded they were not delivering better outcomes – people were paying for tutoring and still ending up with the same university places. So it “shut those businesses down”.
"The fear from equity market investors is: 'hey, that's a destruction of capital, that's terrible'," Durrant said. "But actually, the underlying point is they are trying to do the right thing for a population as a whole over the long term, rather than for individual owners of capital, individual businesses or short-term market stability."
A growing similarity: Governments and the long-term prospects of shareholders
Despite these differences, one structural shift may be pulling the two countries closer together.
In the US, equity investing is deeply embedded in everyday life as pensions, savings and personal wealth are all tied to market performance. In China, that has historically not been the case.
Property was the primary store of wealth for most people, but the collapse of Evergrande and the wider real estate crisis has sent domestic savers looking elsewhere – increasingly turning to equities.
That matters because it changes the government's incentives. "Historically, owners of capital haven't been relevant to the Chinese government because they've either been very few local individuals who have made enough money they don't need to maximise share prices or they've been foreigners," said Durrant.
"Now, because of increased prosperity and increased asset values, the local population is an equity market participant – and so you're seeing improving alignment where you need to deliver prosperity, stability and incomes, and you also need to deliver rising asset values."