The Republican attorneys general of more than a dozen states are probing some of the U.S.’s largest asset managers and financial institutions for what they characterize as their misrepresentations about the risks of investing in China.
BlackRock, State Street, Invesco, J.P. Morgan Chase & Co., Goldman Sachs Group and Morgan Stanley have been asked to respond to questions about their Chinese investment funds. Among the concerns spelled out in a letter to the firms from the state officials are what they say are omissions about the risks of tariffs and investment restrictions on China as well as the risk of a potential invasion of Taiwan.
“Many of the largest asset managers in the world appear to make misrepresentations and omit essential disclosures for funds that include Chinese investments,” the attorneys general wrote. These omissions may make it “impossible” for state pension plans and other investment vehicles to “invest in funds with China exposure without violating their fiduciary duty.”
President Donald Trump announced tariffs on Canada, Mexico and China last Saturday. After saying he had reached a deal with the leaders of Canada and Mexico, a 10% tariff on Chinese goods went into effect at midnight Feb. 4. The U.S. has identified China as a foreign adversary, something the officials say the investment firms aren’t properly disclosing in their materials distributed to investors.
The House Select Committee on Competition With China made investment flows from U.S. fund managers to China the focus of bipartisan reports issued under the tenure of the previous chairman, Mike Gallagher, a Wisconsin Republican who left Congress last year. The committee held a 2023 hearing with fund managers in New York.
The letter from the attorneys general is especially critical of the funds’ statements concerning Taiwan.
“Many BlackRock fund disclosures do not reflect China’s intention to invade Taiwan, and misleadingly compare China’s relationship with Taiwan to that of neighboring countries,” the officials write. “President Xi Jinping is preparing the Chinese military to invade Taiwan by 2027, and the U.S. Navy has announced it is preparing for a potential war with China by that same date. U.S. military officials have stated that a conflict could happen even sooner.”
Xi hasn’t said China plans an invasion by 2027 but that he wants its military to have the capability for one by then.
BlackRock responded to an earlier investigation by the China Committee that it is one of 16 asset managers offering U.S. index funds investing in Chinese companies and that it complies with all applicable U.S. government laws.”
The new letter is led by Austin Knudsen, the attorney general of Montana, and signed by his counterparts from Alabama, Idaho, Indiana, Iowa, Kansas, Missouri, North Dakota, Oklahoma, South Carolina, South Dakota, Texas, Virginia and West Virginia.
The companies have been asked to respond to Montana’s Office of Consumer Protection by March 10.
