Billionaire investor George Soros lambasted BlackRock for endangering clients' money and U.S. security by pouring billions of dollars into communist China.
BlackRock recommended that investors triple their allocations in Chinese assets after becoming the first foreign-owned company to launch a set of mutual funds and other investment products for Chinese consumers, Soros wrote in a Wall Street Journal opinion column on Monday.
Soros, who has been a major Democrat donor, said BlackRock "appears to misunderstand President Xi Jinping’s China."
"The firm seems to have taken the statements of Mr. Xi’s regime at face value," Soros wrote. "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."
BlackRock is the world's largest money manager, with $9.5 trillion under management.
Soros, known for supporting liberal causes through his Open Society Foundations, said it is a mistake for U.S. banks and financial institutions to expand their presence in China despite the communist country embracing foreign investment.
BlackRock defended its position in a statement to the New York Post.
"The United States and China have a large and complex economic relationship," BlackRock said. "Total trade in goods and services between the two countries exceeded $600 billion in 2020. Through our investment activity, US-based asset managers and other financial institutions contribute to the economic interconnectedness of the world’s two largest economies."
Soros said BlackRock's motivation to invest in China might be due to several factors.
"The profits to be earned from entering China's hitherto closed financial markets may have influenced their decision," Soros wrote. "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."
Soros said 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," Soros wrote.
"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."
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