A bipartisan House Committee investigation revealed that U.S. financial firms facilitated investments totaling billions of dollars in index funds containing blacklisted Chinese companies. The report called for legislative measures aimed at restricting investment in these Chinese entities.
According to the investigation revealed on Thursday, U.S. index providers and asset managers directed $6.5 billion last year to 63 Chinese companies flagged by the U.S. government for their roles in advancing China’s military capabilities or supporting human rights abuses.
While the panel emphasized that this activity was not illegal, it urged Congress to enact legislation to limit investment in blacklisted entities. Additionally, it proposed requirements for U.S. public companies to disclose risks associated with China.
The investigation focused notably on two key entities: MSCI, the world’s leading index provider, and BlackRock, the world’s largest asset manager.
It found that MSCI indexes alone directed $3.7 billion, while BlackRock invested at least $1.9 billion in these flagged entities.
“The Committee’s report underscores that BlackRock complies with applicable US laws, and highlights the need for Congress and the Administration to establish clear guidelines for U.S. investors,” stated a BlackRock spokesperson in an emailed response to Reuters.
The strained relationship between the U.S. and China over various issues, including Taiwan, the COVID-19 pandemic’s origins, allegations of espionage, human rights concerns, and trade tariffs, has underscored the significance of this investigation.
