On Tuesday, the House Committee on Economic Relations with China, composed of both Democratic and Republican members, announced a comprehensive inquiry into the US investment influx, primarily led by BlackRock and MSCI, into Chinese corporations presently under US sanctions. Mike Gallagher, the Republican committee head from Wisconsin, alongside Raja Krishnamoorthi, the top-ranking Democrat from Illinois, formalized the process by issuing letters to both financial entities, demanding exhaustive particulars about their alleged involvement in channeling investments into prohibited Chinese enterprises.
The initiation of this probe emanates from apprehensions surrounding BlackRock and MSCI potentially aiding the growth of Chinese companies that the US has identified as detrimental to its national security, or as participants in activities in line with the policies of the Chinese Communist Party (CCP) that are seen as encroachments on human rights. The communications to both organizations seek elucidation on the precautionary measures and transparency standards adhered to in prospective dealings.
The committee has underscored the fact that the inquiries must not be construed as allegations that either BlackRock or MSCI have breached US-imposed sanctions. Nevertheless, the members are anticipating prompt and informative responses to further comprehend the extent of China's economic, technological, and security advancements, and how they align or compete with American interests.
The panel highlighted BlackRock's investments exceeding $429 million in businesses within the People's Republic of China (PRC) that are discerned to be incompatible with US security interests. Concurrently, the committee expressed concerns over MSCI, whose products are benchmarked at over $13 trillion, and its inclusion of restricted Chinese companies. This has raised alarms that a vast portion of American citizens' savings may inadvertently support firms engaged in manufacturing armaments for the People's Liberation Army.
BlackRock, reacting to the scrutiny, expressed its commitment to a continued dialogue with the House Committee, underlining that client investment in China or its exclusion is orchestrated through varied strategies. Furthermore, the firm maintained that it conducts its operations in strict adherence to all pertinent US regulations.
MSCI, while acknowledging receipt of the inquiry, accentuated that its indices merely assess the viability of equity markets for global investors, in total compliance with applicable US laws. The company firmly stated that it does not endorse, facilitate, or manage investments in any specific nation.
As the examination unfolds, it may bear substantial consequences on the modus operandi of investment institutions dealing with Chinese entities, and the ramifications it might wield on the international financial landscape.
