Tensions between America and China are at a boiling point amid President Biden’s crackdown on US investment in Beijing companies.
The escalation has brought to light an uncomfortable question for most Americans: Would you be happy to have your 401(K) fund Chinese military operations?
For many, this is a reality as major Wall Street investment firms have been exposed for directly and indirectly funding Chinese companies that have been blacklisted by the US government.
In July, Republican Representative Mike Gallagher, chairman of the Chinese Communist Party’s House of Representatives Select Committee, wrote a letter to the heads of major investment groups BlackRock and MSCI raising concerns about their ties to some Chinese companies.
The letter – which was co-signed by Democrat and committee member Raja Krishnamoorthi – accused the two companies of ‘promoting the military advance of the People’s Republic of China’ and ‘facilitating the Party’s human rights abuses’. Chinese Communist.
Last month, President Bident signed an executive order banning new US investment in tech industries that could boost Beijing’s military capabilities. Pictured: Biden with Chinese President Xi Jinping at the G20 summit in November 2022
US investment firms have been linked to “red flag” companies, such as those that make Chinese fighter jets. Pictured: A Chinese military J-11 fighter jet
BlackRock is one of the nation’s largest asset managers, with around $9 trillion in funds, while MSCI is an investment research firm that provides investors with stock indices, portfolio risk and analysis. performance. Some $13.7 trillion in assets are invested in funds indexed to MSCI indices.
Millions of Americans have invested their personal savings and retirement in funds referenced by BlackRock and MSCI.
Gallagher and Krishnamoorthi conducted an “initial review” of the two companies and identified dozens of “red flag” Chinese companies that were part of BlackRock and MSCI’s funds – either directly or through their grants.
The term “red flag” refers to those on the US government’s blacklist. Such activities are technically legal for Wall Street firms.
Yet among the Chinese companies covered by their funds are the Aviation Industry Corp. of China (AVIC), which produces advanced combat aircraft for the Chinese Air Force, according to the Washington Post.
They were also linked to the China State Shipbuilding Corp, which manufactures Chinese Navy warships.
CGN Power Co. – a company accused of trying to funnel US nuclear technology to the Chinese ministry – also has ties to BlackRock and MSCI, according to letters from Gallagher and Krishnamoorthi.
Early last month, President Biden signed an executive order barring U.S. venture capital and private equity firms from investing in tech industries that could boost Beijing’s military capabilities.
China responded by saying it was “very disappointed” by the order and hinted at retaliation.
But critics insist it doesn’t go far enough. Biden’s order related only to U.S. investments aimed at helping China develop artificial intelligence, quantum mechanics and semiconductor technology.
Examples of Chinese companies with ties to BlackRock and MSCI were featured in a letter from Rep. Mike Gallagher and Democrat Raja Krishnamoorthi, who both serve on the Chinese Communist Party’s House of Representatives Select Committee.
Gallagher, pictured, told the Washington Post that it made “no sense” to allow Wall Street to fund Chinese companies developing technologies with “clear military applications”.
Yet this has left a loophole for companies to invest in other sensitive areas such as biotechnology and energy technology.
Representative Gallagher told the washington post“It makes no sense to restrict the export of sensitive technologies to China, but to allow Wall Street to fund Chinese companies trying to outpace us in those same technologies with obvious military applications.”
Similarly, House Foreign Affairs Committee Chairman Michael McCaul accused the White House of “pursuing only half measures that take too long to develop and take effect.”
And the order only covered direct investments in such companies, leaving another loophole that facilitates US investments in Chinese military-related companies via index funds offered by both MSCI and BlackRock.
Krishnamoorthi told the Job“It’s really important that we do things to make sure that we don’t end up funding, voluntarily or involuntarily, a military capability that could be used against us.
“It doesn’t get enough attention, but it’s vital.”
In recent decades, American investors have been encouraged to strengthen their ties with China – in order to unite the two economic superpowers.
But recent government studies have concluded that such investments are fueling China’s military and intelligence-gathering capabilities.
A spokesperson for MSCI told DailyMail.com: “MSCI indices measure the performance of stock markets available to international investors and comply with all applicable US laws. MSCI does not administer, recommend or facilitate investments in any country.
“MSCI is constructively engaging with the House Select Committee.”
Meanwhile, BlackRock said, “Like many global asset managers, BlackRock offers our clients a number of strategies for investing in China or excluding it 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.
“For all of its investments in China and markets around the world, BlackRock complies with all applicable U.S. government laws. We will continue to engage directly with the Select Committee on issues raised.