In a move that has caught the financial world’s attention, the House Select Committee on the Chinese Communist Party has launched an investigation into BlackRock, the world’s largest asset manager, and index provider MSCI, over their alleged involvement in facilitating U.S. investment in blacklisted Chinese companies. This investigation comes amidst growing concerns about national security and the implications of American funds inadvertently supporting Chinese companies involved in military activities.
Chairman Mike Gallagher (R-WI) and ranking member Raja Krishnamoorthi (D-IL) have demanded that BlackRock CEO Larry Fink turn over documents related to the allegations. The committee asserts that BlackRock’s investments or facilitation of U.S. savings into Chinese companies blacklisted by the United States have unintendedly resulted in funding for firms developing weapons for the Chinese military.
“The consequences of decisions made by BlackRock and MSCI are troubling, as Americans are unknowingly investing in PRC (People’s Republic of China) companies that pose significant national security risks,” stated the committee in a letter to Fink. “Such actions undermine American values and exacerbate the threats to our nation.”
The committee’s concerns center around the flow of U.S. capital into these blacklisted Chinese companies, which it believes may be fueling the military advancement of a nation considered the United States’ foremost foreign adversary while facilitating human rights abuses.
As part of the investigation, the House committee has demanded that BlackRock and MSCI provide a comprehensive list of companies included in MSCI indexes, detailed descriptions of the criteria for their inclusion, and information about policies and procedures regarding conflicts of interest.
The committee, although lacking lawmaking authority, holds subpoena power, and BlackRock is required to submit the requested information by Aug. 14.
In response to the investigation, BlackRock has denied any wrongdoing and emphasized its commitment to complying with all applicable U.S. government laws in its investments worldwide. The asset manager stated that it would cooperate with the Select Committee on the Chinese Communist Party to address the concerns raised.
BlackRock’s history of ties with China has attracted scrutiny in the past, with criticism from conservative nonprofit group Consumers’ Research. The group has previously accused BlackRock and its CEO Larry Fink of being too closely associated with China. Last year, Consumers’ Research launched a substantial ad campaign targeting the firm’s activities in the Chinese market.
The investigation’s announcement has already had some impact on BlackRock, as its stock experienced a slight decrease of about 0.9% following the news.
As the investigation progresses, the financial industry will be closely watching how BlackRock responds to the House committee’s demands and addresses the concerns surrounding its investments in China. The outcome of this inquiry may have broader implications for the investment landscape and further discussions on national security risks associated with international investment activities.