U.S. Lawmakers Accuse Investment Firms of Funding Chinese Companies Linked to Human Rights Abuses

A congressional committee has accused U.S. investment firms, including BlackRock, of "funnelling billions of dollars" to Chinese companies allegedly involved in human rights abuses. The report examined the broader U.S. financial industry and found that index providers effectively give a "stamp of approval" to these companies, signaling that they are investable. Once listed in indexes, investment firms like BlackRock channel investments into these companies.

The committee urged Congress to act and restrict U.S. investment in entities tied to the Chinese military, critical technology sectors, or forced labor and genocide. BlackRock and MSCI, an index provider, disputed the report's claims, stating that they comply with applicable U.S. laws and that indexes do not channel investments. China's embassy in Washington also criticized the report, accusing the U.S. of "abusing and generalizing the concept of national security" and "politicizing and weaponizing economic and trade issues."

Why this matters: The findings highlight the complex entanglement between U.S. financial institutions and Chinese companies accused of human rights violations. It raises questions about the role and responsibility of investment firms in addressing these concerns while navigating geopolitical tensions and regulatory challenges.

A congressional investigation found that Wall Street used billions of dollars of American retirement savings and other investments to buy shares in index funds that included more than five dozen blacklisted Chinese companies. The probe, conducted by a bipartisan House committee, focused on BlackRock, the world's largest asset manager, and MSCI, a compiler of stock indexes. The investigation represented a broad review of how American financial institutions facilitated investment in Chinese companies accused by the U.S. government of bolstering China's military and violating human rights.

The report called on Congress to restrict U.S. investments in companies linked to the Chinese military, critical technology sectors, or forced labor and genocide. BlackRock and MSCI, the index provider, disputed the report's claims, stating that they are complying with applicable laws and that the report contained misleading information. The Chinese Embassy in Washington also criticized the report, accusing the U.S. of "misusing and generalizing the concept of national security" and "politicizing and weaponizing economic and trade issues."

Key Takeaways

• Congressional committee accused US firms of funneling billions to Chinese firms linked to rights abuses.
• Report claims index providers give "stamp of approval" to these firms, enabling investment by firms like BlackRock.
• Committee urged Congress to restrict US investment in Chinese firms tied to military, tech, or forced labor.
• BlackRock, MSCI disputed claims, saying they comply with laws and indexes don't channel investments.
• China accused US of "misusing national security" and "politicizing economic issues" in response to the report.