US House panel probes BlackRock, MSCI on China investment flow

US lawmakers are probing American investment flows facilitated by BlackRock and MSCI to Chinese companies that Washington has sanctioned, a congressional panel announced Tuesday.

The investigation followed a discovery that asset manager BlackRock and investment index provider MSCI "invest or enable the investment of Americans' savings into dozens of blacklisted Chinese companies," the bipartisan House Select Committee on the Chinese Communist Party (CCP) said on its website.

These firms are targeted over what Washington says is their threat to US national security or support of the CCP's human rights abuses.

Letters from the committee's chairman Mike Gallagher, a Wisconsin Republican, and ranking member Raja Krishnamoorthi, an Illinois Democrat, to the firms seek details about BlackRock and MSCI's facilitation of investments to Chinese firms.

They also ask for an explanation of the due diligence on prospective investments, as well as details on the transparency of investments to investors and the public.

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The letters, dated Monday, do not assert that BlackRock or MSCI violated US sanctions.

But the committee seeks a "prompt reply" from both parties to inform the panel's understanding of the CCP's "economic, technology and security progress and its competition with the United States," said the letters.

BlackRock "has invested more than $429 million in PRC companies that pose national security risks to and act against the interests of the United States," according to the committee, using the official acronym for the People's Republic of China.

With over $13 trillion benchmarked against MSCI products, the inclusion of sanctioned Chinese firms means that millions of Americans' savings "are now unwittingly funding PRC companies that develop and build weapons for the People's Liberation Army," the committee noted.

BlackRock said it will "continue engaging" with the House panel on the issues raised, a spokesperson said.

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"Like many global asset managers, BlackRock offers our clients a number of strategies to invest in or exclude China from their portfolios," the company said, adding that the majority of investments are through US index funds.

"With all investments in China and markets around the world, BlackRock complies with all applicable US government laws," BlackRock said.

MSCI said it was reviewing the request from the committee.

"MSCI indexes measure the performance of equity markets available to international investors, and comply with all applicable US laws," the firm said. "MSCI does not manage or recommend or facilitate investments in any country."

Source: AFP