A storm is brewing on Capitol Hill as two financial behemoths, BlackRock and MSCI, face Congressional scrutiny over their ties to companies endorsing the Chinese Communist Party.
In a letter issued on Monday, the House of Representatives Select Committee on the Chinese Communist Party announced an investigation into the firms, calling on them to divulge their Chinese investments. The committee’s Chairman, Rep. Mike Gallagher of Wisconsin, and Ranking Member Rep. Raja Krishnamoorthi penned the letters, which underscored a worrisome reality. The Committee expressed concerns about U.S. companies profiting from investments that empower China’s military advancements and foster human rights abuses.
The Committee committed to protecting American citizens, the U.S. economy, and our core values, cites a concerning alignment of American capital and Chinese interests. As per the official release, BlackRock manages over $9 trillion in assets, primarily through pension plans and savings. The firm, responding to the Committee’s concerns, has declared its cooperation with the inquiry.
On the other hand, MSCI is responsible for the selection of securities, shaping indexes that form the basis for many investment portfolios. With more than $13 trillion in assets benchmarked to MSCI products, the firm’s influence is substantial. MSCI is currently reviewing the Committee’s communication.
The letter to BlackRock revealed that several of its funds direct American capital to over 20 blacklisted People’s Republic of China (PRC) companies. “Across just five funds, we approximate that BlackRock has invested more than $429 million in PRC companies that pose national security risks to and act directly against the interests of the United States,” the letter declared.
In a shocking revelation, the Committee expressed concerns that average American citizens, investing through BlackRock, could unwittingly be funding PRC companies linked to the People’s Liberation Army (PLA) and advancing the Chinese Communist Party’s mission of technological supremacy.
The letter to MSCI echoed these concerns, revealing that the company was directing American capital to multiple blacklisted PRC companies.
These unsettling revelations have prompted the Committee to demand full disclosure from both firms, seeking detailed information on their investments and whether they performed due diligence before engaging with red-flagged companies.
These developments form part of a broader Congressional initiative to scrutinize American support for Chinese companies, exemplified by the proposed DITCH Act. This legislation, if passed, would block funds from tax-exempt entities, like universities, non-profits, and public pensions, from supporting China.
Championed in the House by Gallagher and supported in the Senate by Republican Sen. Josh Hawley of Missouri, the DITCH Act epitomizes a commitment to preserving American values and security interests. As stewards of conservative principles, we must acknowledge the potential risks and ethical dilemmas that such investment ties present, reinforcing the need for due diligence and transparency in our economic activities.