BlackRock, the world's largest asset manager, and index provider MSCI are being investigated by a U.S. congressional committee for facilitating "massive flows of American capital" into Chinese companies that have been blacklisted by the U.S. government, according to letters sent to the companies on Monday.
In letters sent to the leaders of both financial institutions, the U.S. House of Representatives' Select Committee on the Chinese Communist Party accused BlackRock and MSCI — through inclusion in indexes — of funneling investments into dozens of "red flag" Chinese companies that either "fuel the military advancement" of China or help its government "facilitate human rights abuses," including forced labor in the Xinjiang Uyghur Autonomous Region.
Some of the companies listed in both letters — like software company Qihoo 360 and BGI Genomics Co. Ltd. — have been tied to what the committee describes as the Chinese Communist Party "techno-totalitarian surveillance state" and the genocide of Uyghurs, an ethnic minority in China. Beijing has denied accusations of genocide.
Though the Congressional committee blasted the investments as "deeply troubling," neither BlackRock nor MSCI has been accused of breaking the law.
The committee's review of BlackRock alone found that the asset manager, which had $9.43 trillion in assets under management as of June 30, has invested more than $429 million into blacklisted Chinese companies — though they add that "the true scale is likely much larger."
In the letters, signed by committee Chairman Mike Gallagher (R-Wisc.) and Ranking Member Raja Krishnamoorthi (D-Ill.), the committee blasted both BlackRock and MSCI for making investment decisions that are "exacerbating an already significant national security threat and undermining American values."
The new probe into BlackRock and MSCI comes on the heels of a separate investigation by the same committee, launched in July, into the investment activities of four American venture capital firms — GGV Capital, GSR Ventures, Walden International and Qualcomm Ventures — for investing in Chinese artificial intelligence and semiconductor companies.
Like BlackRock and MSCI, the four VC firms were accused of contributing to China's military development and human rights abuses.
The committee has said that the probe into the VC firms was the first in a series of investigations into the connection between the U.S. investment world and the Chinese Communist Party.
In response, the companies issued the following statements: “MSCI indexes measure the performance of equity markets available to international investors, and comply with all applicable U.S. laws. MSCI does not manage or recommend or facilitate investments in any country," said an MSCI spokesperson. "MSCI is currently reviewing the request for information from the House Select Committee."
"Like many global asset managers, BlackRock offers our clients a number of strategies to invest in or exclude China 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 U.S. index funds investing in Chinese companies," said a BlackRock spokesperson. "With all investments in China and markets around the world, BlackRock complies with all applicable U.S. government laws. We will continue engaging with the Select Committee directly on the issues raised."
Brian Croce contributed to this story.
