BlackRock, the world’s largest asset manager, is in political hot water for its ties to China. According to letters seen by the Wall Street Journal, the US House of Representatives‘ Select Committee on the Chinese Communist Party notified BlackRock and MSCI on August 1 of an investigation into their China-linked activities.
As reported in the WSJ story, BlackRock has ties to more than 60 Chinese companies that US agencies have flagged on security or human rights grounds. Technically, the asset manager’s relationship with these firms may be legal. However, China hawks in Congress are concerned about Americans unknowingly funding firms with close links to the Chinese Communist Party (CCP).
BlackRock Clients Unknowingly Investing in CCP Client Firms
BlackRock has plenty of reason to be nervous about the lawmakers’ probe. The asset manager is waiting for the Securities and Exchange Commission (SEC) to approve its Bitcoin spot ETF. If the SEC gives its approval, it will be the first spot Bitcoin ETF in the United States.
But that is looking like a very big “if” right now.
Firms in China that operate under partial or total state ownership often have a role in supplying and/or developing China’s military resources and capabilities. Including the provision of weapons and technology that Beijing might use to invade Taiwan, for example. Or for spying on enemies. Or the long-running persecution, and genocide, of the Uyghurs of western China.
The House committee found that BlackRock has invested more than $429 million in such Chinese companies across five funds.
By steering “massive flows of American capital” to these Chinese firms, BlackRock’s clients are “exacerbating an already significant national-security threat and undermining American values,” according to the letters.
The sharp tone of the letters is not a surprise. One of their signatories is Republican Rep. Mike Gallagher of Wisconsin. As chair of the House Select China Committee, Gallagher took the lead in urging sanctions against China-linked firms in the aftermath of the spy balloon incident last February.
BlackRock’s China Ties Spell Trouble
Links to China are particularly controversial in the United States, which has become increasingly anti-Beijing since the Trump administration. Long after President Joe Biden’s inauguration in January 2021, the country has kept up an antagonistic stance with the Asian superpower. Especially after last February’s spy balloon shootdown.
But the United States is far from the only superpower to object to the treatment of the Uyghurs. The governments of Canada, Britain, Australia, and Lithuania also boycotted the Beijing 2022 Olympics on human rights grounds.
The committee itself was established only this year and is a sign of growing China skepticism among America’s political class.
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The two firms at the center of the new probe are both financial powerhouses. MSCI is a top provider of financial market indexes and analytics used by investors to track market performance. MSCI’s products are benchmarked to over $13 trillion in assets.
On the other hand, BlackRock is the world’s largest asset manager, with $8.59 trillion in assets under management as of December 31, 2022. Both are headquartered in the United States.
On July 19, the same House committee opened an investigation into American venture-capital firms for funding Chinese tech companies.
Members of Congress notified GGV Capital, GSR Ventures, Walden International, and Qualcomm Ventures for investing in Chinese firms involved in semiconductors, artificial intelligence, and quantum computing.
China No Longer in a Productive Relationship With the West
The regime in Beijing, which once enjoyed positive relations with the Western world, has seen its reputation torpedoed in recent years.
On December 9, 2021, an independent tribunal in London ruled the Chinese regime had committed genocide against the Uyghur people. Uyghurs are a largely Muslim people from the Xinjiang region in China’s far west. Their culture and identity remain distinct from China’s ethnically Han majority.
Western powers are not silent in the face of Beijing’s myriad abuses. Officials in many countries, including the United States, United Kingdom, and Canada, have publicly accused China of committing genocide against the Uyghurs.
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