Consumers' Research, an educational nonprofit that shares consumer information, sent a letter to 10 governors warning of BlackRock's ties to China on Thursday morning.
Consumers' Research executive director Will Hild sent a letter to the governors of Washington, Florida, New York, Nevada, South Carolina, Oklahoma, Pennsylvania, Montana, Nebraska and West Virginia, the top 10 states with the top 10 state pension fund investments with BlackRock to raise awareness among American consumers that BlackRock is taking their money and betting on China. BlackRock's funneling of billions of US capital to China carries risks not present in other markets, risks that threaten the large wagers the company is placing on steep returns from the Middle Kingdom, Hild wrote.
He said that Chinese firms are not held to the same transparency standards as their western counterparts, so foreign investors are hard pressed to appreciate the real risk profile of what they are investing in.
Hild urged governors to do their due diligence in educating themselves and staff about the risks posed by BlackRock investments in Chinese companies, both from an ethical standpoint as well as the fiduciary responsibility owed to U.S. pension holders and retirees. After the introduction of mutual funds into China, the company told its clients to invest in the country, pushing billions of dollars into the world's second-largest economy. According to In 2020, BlackRock CEO Larry Fink said that despite the uncertainty and decoupling of global systems we are seeing today, China is the first foreign-owned asset management company based outside of China that has been approved by Chinese President Xi Jinping to start a mutual fund business in the country. Consumers' Research says that BlackRock has turned a blind eye to the CCP's malign behavior and sent American pensions to China to support the company, while a good relationship with China may be lucrative for the company. Despite China s status as a significant threat to American security, BlackRock has poured large capital investments into companies that are closely linked to the Chinese military, the Consumer Warning reads. BlackRock has shown that its relationship with the CCP is more important than America s national security interests. While it is illegal for U.S. investors to own direct shares of Chinese firms, investors in BlackRock's funds own shares of shell companies set up in places like the Cayman Islands that have profit sharing agreements with Chinese companies, the Consumer Warning reads.
Under a Chinese law introduced by President Xi Jinping in 2017 the country's companies must comply with government requests for intelligence information. Chinese companies aren't subject to the same reporting requirements as U.S. companies.
Consumers' Research recommends retail investors with exposure to BlackRock consider the risks associated with its services, BlackRock employees consider contacting their human resources department to find out if BlackRock manages their company's 401 k accounts or pensions funds, and those with state or municipal pension contact state officials to do the same.
The letter comes after the U.S.-China Economic Security Review Commission issued its annual report to Congress recognizing the Chinese Communist Party's uneniable success in its 100th year of existence but warning that CCP leaders publicly express confidence that China will prevail in an ideological and civil war with the United States and other democracies. A summary of the report notes that China is facing a number of economic challenges, including increasing debt, income inequality, demographic decline, and technological dependence on the United States.