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Pennsylvania Republican Profited From China Trade Policies He Helped Shape

David McCormick, left, and Dina Powell McCormick arrive for a White House state dinner in 2018. McCormick was boosting trade with China years earlier, when Trump was blasting it.
David McCormick, left, and Dina Powell McCormick arrive for a White House state dinner in 2018. McCormick was boosting trade with China years earlier, when Trump was blasting it. Alex Brandon/Associated Press

David McCormick, the leading Republican Senate candidate in Pennsylvania, helped open up China to U.S. investment as an official in the George W. Bush administration.

Then, as a hedge fund manager, McCormick profited from the lower investment barriers he lobbied for. 

What’s more, he is now railing against politicians who were too eager to open up trade to China, including through certain kinds of U.S. investments.

“To put it bluntly, China poses the greatest threat to our security and our well-being since the end of World War II,” McCormick said while rolling out his China policy agenda in December. “And our nation’s leaders, including career politicians like Pennsylvania’s Senator Bob Casey, have gotten China wrong for more than two decades.”

McCormick is taking on three-term Sen. Bob Casey (D-Pa.) in a battle that could help determine control of the Senate in November. A loss for Casey on a Senate map already tilted against Democrats would virtually ensure a Republican takeover of Congress’ upper chamber.

But as McCormick accuses Casey of being soft on China, the Republican contender’s record as a top Treasury Department official shows he repeatedly worked to open up investment opportunities in China for American financial firms. His work not only helped meld the two countries’ economies in a way many American politicians have come to regret, but also benefited him personally in his subsequent roles as president and CEO of a massive hedge fund. 

McCormick’s campaign did not respond to a request for comment on his tenure in the George W. Bush administration and its relationship to his subsequent business dealings.

Then-Treasury Secretary Henry Paulson, left, and then-Under Secretary for International Affairs David McCormick attend a G8 financial ministers meeting in Japan in June 2008.
Then-Treasury Secretary Henry Paulson, left, and then-Under Secretary for International Affairs David McCormick attend a G8 financial ministers meeting in Japan in June 2008. Koichi Kamoshida/AFP/Getty Images

‘Strengthening Our Economic Relationship With China’

As under secretary of the treasury for international affairs from 2007 to 2009, McCormick played a direct role in fostering increased trade between the two nations, especially by advocating for China to open up its markets to greater investment by U.S. financial firms.

During his tenure, McCormick was one of the most important U.S. liaisons to Chinese economic and finance officials, often representing the U.S. in meetings with then-Chair of the People’s Bank of China Zhou Xiaochuan, and then-Chinese Finance Minister Xie Xuren. An October 2008 report in the South China Morning Post about a diplomatic visit by McCormick paraphrased him as saying that communication between the two countries had “never been stronger.”

“This is a guy that he’s operated, virtually acted like a cabinet officer because he’s needed to,” said then-Treasury Secretary Hank Paulson in a December 2008 profile of McCormick in the Washington Times.

McCormick characterized his work as trying to ensure that China was trading with the U.S. in a reciprocal manner. In practice, that meant a strong focus on advocating for the interests of U.S. financial firms, which actually made offshoring jobs easier.

In December 2007, McCormick touted bilateral talks with China that yielded U.S. financial firms greater access to Chinese markets, while lamenting that they had received vague assurances on lifting the cap on foreign investment in Chinese lenders to 20%. “We wish they would raise the equity caps now,” McCormick said.

The following year, McCormick continued to argue for China to lower barriers to U.S. investment, including through the artificial depression of its currency. He framed those reforms as a key part of growing bilateral trade between the two countries.

Despite the benefits of foreign investment, there is rising protectionist sentiment around the world that poses a dangerous threat to the global economy.David McCormick, Lujiazui Financial Forum, May 2008

“Friction” between the U.S. and China over trade policy disagreements have “caused some in the United States to question the benefits of maintaining an open and expansive economic relationship with China,” McCormick said in January 2008 remarks to the Council on Foreign Relations. “The Bush Administration’s answer to this defining question is unwavering: We are committed to strengthening our economic relationship with China and opening its markets to create new opportunities for American firms and American workers.”

Speaking at the Lujiazui Financial Forum in Shanghai in May 2008, McCormick continued to emphasize the importance of China lifting restrictions to U.S. investment in its financial sector.

“Increased foreign participation expands the breadth and depth of opportunities for all firms in the market, including domestic Chinese firms,” McCormick declared. “This is not a zero-sum game. Clearly, foreign firms stand to benefit from expanded opportunities in China.”

McCormick also bemoaned growing calls in the U.S. for restrictions on trade with China and noted that the Bush administration was standing up to them by lifting barriers to Chinese investment in the U.S.

“Despite the benefits of foreign investment, there is rising protectionist sentiment around the world that poses a dangerous threat to the global economy,” he said. “We unfortunately see some of these same protectionist forces in our own country.”

Former President Donald Trump, left, cited concerns over McCormick's ties to China when he endorsed Dr. Mehmet Oz in Pennsylvania's GOP Senate primary in 2022. Oz would defeat McCormick in the primary and lose to Democrat John Fetterman in the general election.
Former President Donald Trump, left, cited concerns over McCormick's ties to China when he endorsed Dr. Mehmet Oz in Pennsylvania's GOP Senate primary in 2022. Oz would defeat McCormick in the primary and lose to Democrat John Fetterman in the general election. ANGELA WEISS/Getty Images

The Revolving Door Turns

McCormick’s efforts bore fruit. In June 2008, the Treasury Department touted a number of Chinese reforms making it easier for U.S. companies to invest in the Chinese financial sector, following a Cabinet-level meeting between then-Treasury Secretary Hank Paulson and his Chinese counterpart.

“The Chinese reported on steps they are taking to open their financial services sector and further integrate into global markets,” the Treasury Department stated in a fact sheet about the meeting’s policy achievements.

Those steps included allowing foreign banks to issue bonds in China’s Renminbi currency; expanding opportunities for U.S. credit-rating agencies with joint Chinese ventures to rate bonds in China; and critically, removing an initial “lock-up period” preventing “qualified foreign institutional investors,” such as U.S. hedge funds, that wanted to invest in China from transferring funds abroad.

The latter change built on an earlier reform in McCormick’s tenure when China raised its ceiling on foreign institutional investors’ ability to invest in China from $10 billion to $30 billion.

When the George W. Bush administration ended, McCormick returned to the private sector, becoming president of Bridgewater Associates, a Connecticut-based company that is currently the largest hedge fund in the world.

In April 2018, when McCormick was co-CEO of Bridgewater, the firm launched the China All Weather Offshore Fund for U.S.-based investors to invest in Chinese stocks and bonds. The firm’s initial $1 billion investment — or 10 billion Yuan — made it the largest foreign hedge fund in China.

To practice in China, Bridgewater obtained a license from the Chinese government as a “qualified foreign institutional investor” in May 2018. As under secretary of the treasury for international affairs, McCormick had worked specifically to make it easier for investment funds to get that stamp of approval to operate in China, and be able to move capital freely in and out of the country.

“Mega-millionaire David McCormick is the ultimate shady insider who rigged the rules and then walked through the revolving door he created, selling out our national security to enrich himself and his Wall Street friends,” TaNisha Cameron, a spokesperson for the Pennsylvania Democratic Party said in a statement. “That’s why Pennsylvanians know they can’t trust him.”

Sen. Bob Casey (D-Pa.) talks to a Sheet Metal Workers union member after a forum on trade policy in Wilkes-Barre in August 2017. He has been a trade policy populist.
Sen. Bob Casey (D-Pa.) talks to a Sheet Metal Workers union member after a forum on trade policy in Wilkes-Barre in August 2017. He has been a trade policy populist. Melina Mara/The Washington Post.Getty Images

Making It Easier To Export Jobs

On its face, McCormick’s efforts to expand U.S. firms’ access to the Chinese financial sector might seem like the kind of bid for reciprocity that even populist critics of U.S.-China trade policy would welcome. These trade hawks often bemoan the trade deficit with China; the return of U.S. financial firms’ profits in China back to the U.S. might help close that gap.

In reality though, expanding the presence of U.S. banks and other investment firms in China actually expedited the offshoring of domestic U.S. manufacturing jobs. A greater U.S. financial presence in China enabled companies that wanted to outsource in China to work with more familiar U.S. financiers, and increased the pool of capital available to those companies to scale up their production.

“McCormick’s approach at Treasury during the Bush administration was classic corporate race-to-the-bottom, pro-outsourcing, free-trade ideology where he was keen to get U.S. financial institutions like investment banks to be able to provide capital for more factories and more production from China that ended up being the enormous trade deficit slamming American companies and workers,” said Lori Wallach, director of the Rethink Trade program at the American Economic Liberties Project, a liberal, antimonopoly think tank.

Robert Scott, a former senior economist at the pro-labor Economic Policy Institute, had a similar assessment — and highlighted another way in which McCormick’s goals would provide political scaffolding for the larger offshoring regime.

“You get domestic banks, domestic investors saying they have an interest in China trade,” he said. “They get their lobbyists involved, and so that helps reduce pressure on the administration because it shows they are getting something out of the deal.”

Lest Wallach and Scott be dismissed as left-of-center policy advocates with an ideological ax to grind, they often had nuanced views on former President Donald Trump’s efforts to renegotiate trading relationships in the interest of domestic manufacturers. Scott has spoken up against repealing the tariffs that Trump levied on China — and that President Joe Biden has subsequently kept in place. Wallach is a friend of Trump’s U.S. Trade Representative Robert Lighthizer, and has praised Trump’s U.S.-Mexico-Canada Agreement (USMCA) as an improvement on NAFTA.

McCormick's approach at Treasury during the Bush administration was classic corporate race-to-the-bottom, pro-outsourcing, free-trade ideology.Lori Wallach, director, Rethink Trade

McCormick, by contrast, was a conventional cheerleader for expanded trade with China at a time when Scott, Wallach, Lighthizer, and Trump were all warning about its costs. “It is especially important now, during a time of turmoil in global markets, that we remain steadfast in our commitment to an open and expanding trade and investment relationship between the United States and China,” McCormick said in his January 2008 remarks.

McCormick showed no concern about the loss of an estimated 2.4 million U.S. jobs from 1999 to 2011 due to the 2001 normalization of trade with China. The net outflow of jobs has had a particularly harsh — and lasting — impact on regions and communities that relied on manufacturing, leading to growing financial hardship, unemployment and accompanying social ills in those areas.

As a candidate, McCormick has focused on another problem: the potential for U.S. investment in China to benefit the Asian nation’s national-security state. One plank in McCormick’s China-focused “Keystone Plan to Reclaim America” would prohibit “U.S. investment in all technologies in China critical to national security and in those companies that work with the People’s Liberation Army.”

“All publicly traded companies and investment funds should also disclose their investments and exposure in China in public filings,” his campaign added.

McCormick has already been on the defensive about his time at the helm of Bridgewater, which included layoffs that resulted in Connecticut clawing back tax benefits.

During the 2022 Republican Senate primary, when McCormick was locked in a tough race against Trump-endorsed rival Dr. Mehmet Oz, Trump repeatedly blasted him for his work investing in China. Claiming that McCormick’s firm had “managed money for communist China,” Trump declared at a May 2022 rally for Oz, “[McCormick] may be a nice guy, but he’s not MAGA.” (Oz would defeat McCormick in the primary and lose to Democrat John Fetterman in the general election.)

McCormick has tried to inoculate himself from those kinds of attacks this time by attacking Casey for having “gotten China wrong.”

But since Casey has been an outspoken critic of China’s trade practices while in the Senate, and hailed Trump for placing tariffs on Chinese steel and aluminum, it’s unclear what McCormick means.

As treasurer of Pennsylvania in 2006, Casey oversaw a $31 million investment of the state employees’ pension fund in the Chinese firm China Mobile, though the investment did not appear in the fund’s financial report the following year.