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Our updates will keep you informed about the investments made by BlackRock and MSCI, which have been accused by the US House of Representatives’ China committee of supporting the Chinese military and undermining American values and security.
The China committee of the US House of Representatives has accused BlackRock and MSCI of profiting from investments that support the Chinese military and undermine American values and security.
In letters to BlackRock CEO Larry Fink and MSCI head Henry Fernández, the committee’s top Republican and Democrat expressed concern that American investors in their funds were unintentionally financing Chinese companies involved in developing weapons for the People’s Liberation Army.
The committee condemned the firms’ investments in blacklisted Chinese companies with PLA connections or ties to human rights abuses, and criticized BlackRock and MSCI for exacerbating the national security threat and undermining American values by facilitating significant flows of US capital into Chinese army-related groups.
The committee, established in January to focus on the Chinese Communist Party, is investigating Chinese activities and US investments in Chinese groups.
While the committee lacks the legislative authority, its actions are being closely monitored by companies, who hope to avoid being called to testify.
The Biden administration continues to implement policies to limit China’s access to advanced US technology.
President Joe Biden plans to issue an executive order that will increase scrutiny on US firms investing in sensitive areas in China, including microchips, quantum computing, and artificial intelligence. The order will require companies to notify the government of certain investments and establish investment prohibitions in specific sectors.
BlackRock stated that it complies with all applicable US laws and engages with the China committee on the issue. MSCI is reviewing the inquiry from the lawmakers.
Gallagher and Krishnamoorthi revealed that BlackRock had facilitated investments in over 20 blacklisted Chinese entities and had invested at least $429mn into Chinese groups that directly opposed US interests. They also found that more than 40 blacklisted Chinese companies were included in various MSCI indices, accounting for nearly 5% of the value of MSCI’s China A shares index.
The committee urged the firms to explain their investment decision-making process regarding China, including consideration of factors such as inclusion on US blacklists, national security, and human rights. The Wall Street Journal first reported on the letters.
Todd Rosenbluth, head of research at VettaFi, questioned why the investigation targeted only BlackRock and MSCI, suggesting that all funds tracking similar indices should be examined.
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