The world’s largest asset manager and leading index provider are facing congressional probes for facilitating American dollars into Chinese companies that the United States has deemed to be fueling Chinese military growth or human rights abuses.
In letters to heads of BlackRock and MSCI, Larry Fink and Henry Fernandez, the top Republican and Democrat on the House China Select Committee made known their investigation of the firms. A brief review of MSCI indexes and BlackRock funds, they said, showed that the two companies together have directed investments into over 60 Chinese entities already on the U.S. blacklist.
In the case of BlackRock, across five funds alone, the asset manager has invested more than $429 million in red-flag Chinese firms, while nearly 5 percent of the MSCI China A Index are pegged to problematic entities. Such numbers, the lawmakers suspect, are only the tip of the iceberg.
As a “direct result” of BlackRock’s and MSCI’s decisions, Americans who invested savings in their funds are now “unwittingly funding” Chinese companies that build weapons for the Chinese military known as the People’s Liberation Army, giving a hand to “the CCP’s stated mission of technological supremacy,” wrote committee chairman Rep. Mike Gallagher (R-Wis.) and ranking member Rep. Raja Krishnamoorthi (D-Ill.) on July 31.
“It is unconscionable for any U.S. company to profit from investments that fuel the military advancement of America’s foremost foreign adversary and facilitate human rights abuses,” the lawmakers wrote, adding that the “massive flows of American capital” to these entities are “exacerbating an already significant national security threat and undermining American values.”
The probe makes up part of the committee’s ongoing investigation into U.S. investments in China, which in July included venture capital firms that have invested in China-based artificial intelligence, semiconductor, and quantum companies.
A tough stance on China is one of few issues that garner support from both political sides in the deeply divided Congress. The bipartisan House panel, formed in January, makes policy recommendations and has subpoena power, which Mr. Gallagher has said he would use if executives fail to cooperate with the committee probes.
“Both Democrats and Republicans can agree that we should not be funding PLA military modernization, supporting the CCP’s techno-totalitarian surveillance state, nor the CCP’s gross human rights abuses,” a source close to the committee told The Epoch Times.
MSCI has over $13 trillion benchmarked to its products, making it one of the largest index providers globally. BlackRock oversees more than $9 trillion in assets, and is responsible to millions of Americans who depend on its services for their future retirement.
BlackRock told The Epoch Times in a statement that it will continue to engage with the committee on the issues raised and maintained that it “complies with all applicable U.S. government laws” with “all investments in China and markets around the world.”
“Like many global asset managers, BlackRock offers our clients a number of strategies to invest in or exclude China from their portfolios. The majority of our clients’ investments in China are through index funds, and we are one of 16 asset managers currently offering US index funds investing in Chinese companies,” a company spokesperson said.
MSCI, similarly, said it’s reviewing the request for information from the lawmakers.
“MSCI indexes measure the performance of equity markets available to international investors, and comply with all applicable US laws. MSCI does not manage or recommend or facilitate investments in any country,” an MSCI spokesperson told The Epoch Times.
The Chinese entities on MSCI indexes include state-owned aerospace firm Aviation Industry Corporation China, which makes aircraft for the Chinese military; BGI Genomics, a military-linked Chinese gene giant that the United States has found complicit in supporting forced labor; and ZTE, whose telecom equipment the United States banned last year citing national security risks.
BlackRock, meanwhile, has funded a major subsidiary of China General Nuclear Power Group that the U.S. authorities accused of stealing U.S. nuclear technology, as well as that of China North Industries Group Co., producer of artillery shells and munitions for the Chinese military.
The lawmakers said they want to see a list of all the companies on MSCI indexes, and the thinking behind their inclusion, policies, and guidance documents relating to conflicts of interest that BlackRock has applied when engaging with China-linked entities, and details of U.S. investor exposure.
From The Epoch Times
