A new report says that tons of money from U.S. investors is going to Chinese companies that the U.S. government has put on a "blacklist" because they are linked to the Chinese Communist Party's (CCP) efforts to modernize the military and abuse human rights.
There was a report released by the House Select Committee on the Strategic Competition between the U.S. and the CCP. It talked about how asset managers and index providers helped 63 companies in the People's Republic of China (PRC) that the U.S. government has put on a "blacklist" or "red flag" receive more than $6.5 billion in investments.
"These companies develop advanced fighter jets and nuclear weapons for the People's Liberation Army (PLA) and create technology used to perpetrate the ongoing genocide against the Uyghur people," the group wrote. "What may surprise a lot of Americans is that what these U.S. banks are doing is not against the law." Capitol Hill needs to do something.
"When Americans buy things from our own financial industry, they are spending their hard-earned savings and retirement funds on things that help a foreign enemy improve its military and make tools that the Chinese Communist Party can use to violate human rights." The two-party panel warned, "Many investors do not know."
According to current law, different U.S. government agencies keep different blacklists and red-flag lists. These lists are used for many things, such as blocking exports to certain foreign companies and importing goods that may have been linked to forced labor, as well as limiting purchases of equipment that could threaten national security, and more.
Many of these lists do not stop U.S. asset managers or investors from putting money into businesses that are on them. The NS-CMIC list from the Treasury Department is one list that does limit U.S. investment in listed companies. It only limits investment in listed companies, not their subsidiaries, so those businesses can still get U.S. capital.
Leading index providers like MSCI have made indexes that fund managers and other buyers use to try to replicate Chinese financial markets. In that process, they can choose to leave out companies if they want to, but they can also choose to include as many companies as possible in a given market or use the most common standard index.
About $6.5 billion was invested in Chinese companies on U.S. government "red flag" lists. About 59% of that amount was put in through asset managers Vanguard and BlackRock, which together made up 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," it said. "Congress must act to restrict U.S. investment in entities tied, directly or indirectly, to the PLA, critical technology sectors, or forced labor and genocide."
In order to fix the problems with U.S. limits on investing in some Chinese companies, the committee suggested that Congress take action on three policies. These are
(1) Limit investments in U.S. government-blacklisted businesses, such as their branches, affiliates, parents, and holding companies. One way to do this is to take PRC companies off the blacklist that are subject to human rights penalties or are thought to be using Uyghurs as slave labor.
(2) Make U.S. public companies tell investors about the main risks of investing in PRC stocks, such as differences in shareholder rights.
(3) Make sure that the U.S. financial system can handle changes in the PRC market by telling buyers more about the risks that come with the PRC market.
"Short of such action, billions of dollars of Americans' life savings will continue funding the PRC's military and human rights abuses, including the Uyghur genocide," it said.
There was a report released by the House Select Committee on the Strategic Competition between the U.S. and the CCP. It talked about how asset managers and index providers helped 63 companies in the People's Republic of China (PRC) that the U.S. government has put on a "blacklist" or "red flag" receive more than $6.5 billion in investments.
"These companies develop advanced fighter jets and nuclear weapons for the People's Liberation Army (PLA) and create technology used to perpetrate the ongoing genocide against the Uyghur people," the group wrote. "What may surprise a lot of Americans is that what these U.S. banks are doing is not against the law." Capitol Hill needs to do something.
"When Americans buy things from our own financial industry, they are spending their hard-earned savings and retirement funds on things that help a foreign enemy improve its military and make tools that the Chinese Communist Party can use to violate human rights." The two-party panel warned, "Many investors do not know."
According to current law, different U.S. government agencies keep different blacklists and red-flag lists. These lists are used for many things, such as blocking exports to certain foreign companies and importing goods that may have been linked to forced labor, as well as limiting purchases of equipment that could threaten national security, and more.
Many of these lists do not stop U.S. asset managers or investors from putting money into businesses that are on them. The NS-CMIC list from the Treasury Department is one list that does limit U.S. investment in listed companies. It only limits investment in listed companies, not their subsidiaries, so those businesses can still get U.S. capital.
Leading index providers like MSCI have made indexes that fund managers and other buyers use to try to replicate Chinese financial markets. In that process, they can choose to leave out companies if they want to, but they can also choose to include as many companies as possible in a given market or use the most common standard index.
About $6.5 billion was invested in Chinese companies on U.S. government "red flag" lists. About 59% of that amount was put in through asset managers Vanguard and BlackRock, which together made up 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," it said. "Congress must act to restrict U.S. investment in entities tied, directly or indirectly, to the PLA, critical technology sectors, or forced labor and genocide."
In order to fix the problems with U.S. limits on investing in some Chinese companies, the committee suggested that Congress take action on three policies. These are
(1) Limit investments in U.S. government-blacklisted businesses, such as their branches, affiliates, parents, and holding companies. One way to do this is to take PRC companies off the blacklist that are subject to human rights penalties or are thought to be using Uyghurs as slave labor.
(2) Make U.S. public companies tell investors about the main risks of investing in PRC stocks, such as differences in shareholder rights.
(3) Make sure that the U.S. financial system can handle changes in the PRC market by telling buyers more about the risks that come with the PRC market.
"Short of such action, billions of dollars of Americans' life savings will continue funding the PRC's military and human rights abuses, including the Uyghur genocide," it said.
