"BlackRock’s China Blunder" By George Soros

[reporter2]

BlackRock’s China Blunder

Pouring billions into the country now is a bad investment and imperils U.S. national security.

By George Soros

Sept. 6, 2021

BlackRock, the world’s largest asset manager, has begun a major initiative in China. On Aug. 30 it launched a set of mutual funds and other investment products for Chinese consumers. The New York-based firm is the first foreign-owned company allowed to do so. The launch came just weeks after BlackRock recommended that investors triple their allocations in Chinese assets. This will push billions of dollars into China. “The Chinese market represents a significant opportunity to help meet the long-term goals of investors in China and internationally,” BlackRock Chairman Larry Fink wrote in a letter to shareholders.

BlackRock takes its responsibilities for its clients’ money seriously and is a leader in the environmental, social and governance movement. But it appears to misunderstand President Xi Jinping’s China.

The firm seems to have taken the statements of Mr. Xi’s regime at face value. It has drawn a distinction between state-owned enterprises and privately owned companies, but that is far from reality. The regime regards all Chinese companies as instruments of the one-party state.

This possible misunderstanding could explain BlackRock’s decision, but there may be another explanation. The profits to be earned from entering China’s hitherto closed financial markets may have influenced their decision. The BlackRock managers must be aware that there is an enormous crisis brewing in China’s real-estate market. They may believe that investment funds flowing into China will help Mr. Xi handle the situation, but the president’s problems go much deeper. China’s birthrate is much lower than official statistics indicate and Mr. Xi’s attempts to increase it have made matters worse. The president recently launched his “Common Prosperity” program, which is a fundamental change in direction. It seeks to reduce inequality by distributing the wealth of the rich to the general population. That does not augur well for foreign investors.

Pouring billions of dollars into China now is a tragic mistake. It is likely to lose money for BlackRock’s clients and, more important, will damage the national security interests of the U.S. and other democracies. Mr. Xi faces an important hurdle in 2022. Many believe he intends to overstep the term limits established by Deng Xiaoping and make himself ruler for life. He is bound to have enemies, whom he must prevent from uniting against him. Thus, he needs to bring to heel any entity rich enough to exercise independent power.

This process has been unfolding in the past year and reached a crescendo in recent weeks. It began with the abrupt cancellation of a new issue by Alibaba’s Ant Group in November 2020. Then came the disciplinary measures against Didi Chuxing after it floated an issue in New York in June. Things culminated with the banishment of U.S.-financed tutoring companies from China. This had a profoundly negative effect on offshore markets, hammering New York-listed Chinese companies and shell companies. Chinese financial authorities have tried to reassure markets ever since.

The leaders of Western asset-management firms, such as Stephen Schwarzman, co-founder of investment firm Blackstone, and former Goldman Sachs President John L. Thornton, have long been interested in the Chinese consumer market—and in the prospect of business opportunities dangled by Mr. Xi.

BlackRock is only the latest company trying to engage with China. Earlier efforts could have been morally justified by claims that they were building bridges to bring the countries closer, but the situation now is totally different. Today, the U.S. and China are engaged in a life and death conflict between two systems of governance: repressive and democratic.

The BlackRock initiative imperils the national security interests of the U.S. and other democracies because the money invested in China will help prop up President Xi’s regime, which is repressive at home and aggressive abroad. Congress should pass legislation empowering the Securities and Exchange Commission to limit the flow of funds to China. The effort ought to enjoy bipartisan support.

Mr. Soros is founder of the Open Society Foundations.

https://www.wsj.com/articles/blackrock-larry-fink-china-hkex-sse-authoritarianism-xi-jinping-term-limits-human-rights-ant-didi-global-national-security-11630938728

[New Reporter]

George Soros says BlackRock’s China investments ‘tragic mistake’

BlackRock is the world’s largest money manager; last month it began offering investment products to Chinese individuals.

By Russell Ward

7 Sep 2021

George Soros criticized BlackRock Inc.’s China push as a risk to clients’ money and U.S. security interests, in the billionaire financier and philanthropist’s latest broadside against investment in the world’s second-largest economy.

“Pouring billions of dollars into China now is a tragic mistake,” Soros wrote in an op-ed in the Wall Street Journal. “It is likely to lose money for BlackRock’s clients and, more important, will damage the national security interests of the U.S. and other democracies.”

BlackRock is leading a global foray into China’s asset management industry. The world’s largest money manager last month began offering investment products to Chinese individuals, two months after winning approval to become the nation’s first wholly foreign-owned mutual fund firm.

The commentary was one several that Soros has written in recent weeks to warn against closer economic ties to Xi Jinping’s China amid a wave of market-roiling crackdowns. Soros denounced Xi in another Journal op-ed last month as “the most dangerous enemy of open societies in the world” and subsequently argued in the Financial Times that Congress should pass legislation limiting asset managers’ investments to “companies where actual governance structures are both transparent and aligned with stakeholders.”

In the latest piece, Soros said BlackRock appeared to misunderstand Xi, whose administration he said regarded all Chinese companies as “instruments of the one-party state.”

The divergent views from two of the world’s most influential money managers underscore the increasingly fraught environment confronting financial firms in Asia’s largest economy. While Xi has made it easier for foreign investors to participate in domestic markets, his government is also tightening its grip on the private sector and clashing with the U.S. on everything from cybersecurity to human rights abuses in Xinjiang.

Soros said the curbs that began with the sudden cancellation of Ant Group Co.’s initial public offering last year have since “reached a crescendo.” He cited the actions against ride-hailing company Didi Global Inc. days after its New York listing, and the crackdown on “U.S.-financed” Chinese tutoring companies. Soros also said BlackRock managers must be aware of an “enormous crisis brewing in China’s real estate market.”

Although Soros remains an influential backer of U.S. President Joe Biden’s Democratic Party, he no longer manages outside money and is a minority voice for now on Wall Street. BlackRock, Goldman Sachs Group Inc. and most of their major peers in money management and banking have decided the opportunities in China outweigh the risks.

“Today, the U.S. and China are engaged in a life and death conflict between two systems of governance: repressive and democratic,” Soros said.

[New Reporter]

George Soros says BlackRock is on wrong side of ‘life and death’ conflict with China

Sept. 7, 2021

By Steve Goldstein

Legendary investor George Soros has criticized index powerhouse BlackRock for a second time, blasting the fund manager over its stance on Chinese investments.

In a Wall Street Journal op-ed, the billionaire called it a “tragic mistake” to pour billions of dollars into China now. BlackRock BLK, -1.33% recently launched a fund for Chinese consumers, and has recommended that investors triple their allocations to Chinese assets.

“It is likely to lose money for BlackRock’s clients and, more important, will damage the national security interests of the U.S. and other democracies,” said Soros, the founder of Soros Fund Management and the Open Society Foundations. In an earlier op-ed in the Financial Times, Soros criticized BlackRock for effectively forcing U.S. investors into Chinese companies whose corporate governance doesn’t meet required standards.

In the WSJ item, Soros mentioned not just Larry Fink, BlackRock’s chairman, but also Stephen Schwarzman, co-founder of Blackstone BX, -1.50% and John Thornton, former Goldman Sachs GS, -0.24% president, as being interested in the business opportunities “dangled” by Chinese President Xi Jinping.

“Earlier efforts could have been morally justified by claims that they were building bridges to bring the countries closer, but the situation now is totally different. Today, the U.S. and China are engaged in a life and death conflict between two systems of governance: repressive and democratic,” said Soros.

Fears over China’s increased regulatory scrutiny of its companies has left the Hang Seng HSI, -0.12% 15% lower than its February highs. The Shanghai Composite SHCOMP, -0.04% has dropped 6% this year.