Billions of investment dollars are going from U.S. financial markets to Chinese companies that have been blacklisted by the U.S. government over links to Chinese Communist Party's military modernization and human rights abuses, according to a new report. The bipartisan House Select Committee on the Strategic Competition between the U.S. and the CCP released a report detailing how asset managers and index providers facilitated investment of more than $6.
Under current law, U.S. government agencies maintain a variety of blacklists and red-flag lists that serve a range of purposes, from barring exports to covered foreign firms and blocking imports due to connections with the use of forced labor, to restricting purchases of equipment that poses a national security risk and more. Most of these lists do not restrict U.S. asset managers or investors from investing in listed companies. One list that does restrict U.S.
Those indexes are then used by asset managers like BlackRock, Vanguard and others to create investment products like exchange-traded funds or mutual funds centered on that index. For example, BlackRock, the world's largest asset manager, offers the iShares MSCI China ETF , which mirrors the MSCI China Index that covers about 85% of Chinese equities. The committee found that the ETF had assets under management of about $7.6 billion, of which about 3.
Of the $6.5 billion that the committee found invested in Chinese firms included on U.S. agencies' red-flag lists, nearly 59% was invested through asset managers Vanguard and BlackRock, which each accounted for about $1.9 billion of the total. "The existing regulations prohibiting investment in certain Chinese companies because of national security risks or human rights violations are insufficient," the committee wrote. "Congress must act to restrict U.S.