Congress is investigating BlackRock, the world’s largest asset manager, and MSCI, a leading provider of stock market analysis, for allegedly enabling U.S. investment into prohibited Chinese companies.
The House of Representatives’ Select Committee on the Chinese Communist Party has sent letters informing the two U.S.-based giants that they are being probed for investing in Chinese companies that the U.S. government has accused of being tied to the Chinese military and of violating human rights, according to The Wall Street Journal.
The committee alleges that five BlackRock funds totaling $429 million dollars have been invested in the suspect companies.
In 2018, MSCI allegedly bowed to Chinese government pressure to add China-based stocks to its Emerging Markets Index that investors use to direct portfolio funds, reported the WSJ.
In 2021 BlackRock purportedly raised $1 billion for a Chinese mutual fund in a move criticized by billionaire investor George Soros for being financially risky as well as a danger to U.S. national security, per the WSJ.
The committee seeks to gather information on where American capital is going, per the WSJ. The investments reviewed so far have not been illegal, according to the letter the committee sent to the two companies, but they are funding more than 60 Chinese entities that may pose security and human rights risks, reported the WSJ.
Signed by the select committee chair, Rep. Mike Gallagher (R-WI), and the ranking Democrat, Rep. Raja Krishnamoorthi of Illinois, the letters say they are concerned by “massive flows of American capital” to Chinese companies by the U.S. firms, which is “exacerbating an already significant national security threat and undermining American values.”
The letters criticize BlackRock and MSCI for funding and indexing Chinese companies on the U.S. government “red flag lists,” including AVIC (Aviation Industry Corporation), which is state-owned and makes jet fighters for the Chinese military, and companies linked to human rights abuses in China’s Xinjiang province.
BlackRock is no stranger to controversy when it comes to how it chooses to invest the massive funds under its control. The corporation’s CEO, Larry Fink, has in the past boasted of using an investment strategy based on a philosophy of ESG (environmental, social, and governance) that favors renewable energy investments and advancing progressive social policies.
As The Dallas Express has reported, several states, including Texas, have responded to BlackRock’s investment strategy by banning state entities from contracting with the global investment firm.
BlackRock said it has reached out to the committee to better understand the issues, per the WSJ.
In a statement, the company said, “The majority of our clients’ investments in China are through index funds, and we are one of 16 asset managers currently offering U.S. index funds investing in Chinese companies,” per the WSJ.