Posted on 10/16/2023 8:12:14 AM PDT by SeekAndFind
The Vanguard Group, one of the world’s largest asset managers, invests in Chinese military groups and companies linked to forced labor through index funds, a new report says. The report comes as the Treasury Department finalizes the rules pertaining to a White House executive order prohibiting certain outbound investments to China.
Vanguard’s $70 billion flagship emerging markets index fund includes 60 companies on the Chinese military company sanction list by the Office of Foreign Assets Control (OFAC) under the U.S. Department of Treasury, according to the report released by the Coalition for a Prosperous America (CPA) on Oct. 13. CPA is an advocacy organization representing exclusively manufacturers that have productions in the United States.
In addition, the flagship and other Vanguard funds also hold shares of eight Chinese companies sanctioned over human rights abuses in China’s Xinjiang region, where the persecution of Uyghurs has been identified by the U.S. State Department as “genocide.”
he report didn’t provide a tally of all Vanguard investments in Chinese military companies but listed a total of $100 million in three such groups.
While noting that Vanguard’s fund holdings are legal, CPA urged Congress to take urgent action on the “long-festering, structural problem” that “a weak public policy response by the U.S. government has allowed greed within the asset management industry to supersede urgent American investor protection, national security, and human rights concerns.”
“Congress must turn off the tap of American capital flowing to China and stop private and public market investments into blacklisted CCP-connected companies,” Rep. Mike Gallagher (R-Wis.), chair of the House Select Committee on the Chinese Communist Party (CCP), told The Epoch Times in an emailed statement.
“Americans do not want firms like Vanguard and BlackRock to invest their retirement savings in companies building the Chinese Communist Party’s military and implementing its ongoing genocide against the Uyghur people. If we accept the status quo, we are willfully fueling our own destruction,” he added.
Congressional scrutiny over Wall Street’s role in financing Chinese military companies has been on the rise.
Three months ago, Mr. Gallagher's committee launched an investigation on BlackRock, another leading asset manager, and global index provider MSCI over their role in channeling money to Chinese companies involved in building weapons for the Chinese military. The committee estimated $429 million of such investment against American interests by BlackRock.
In a letter dated July 31 to BlackRock and MSCI, Mr. Gallagher and committee ranking member Rep. Raja Krishnamoorthi (D-Ill.) wrote that, through the companies’ funds, Americans were “unwittingly funding” Chinese companies that fuel the CCP’s military and the two companies were “exacerbating an already significant national security threat and undermining American values.”
Two months later, BlackRock closed its China-focused offshore fund. All shareholders would have to redeem any outstanding shares by Nov. 7 before the fund’s liquidation. BlackRock previously told The Epoch Times that its products “comply with all applicable U.S. government laws” and it’s one of 16 asset managers offering U.S. index funds with investment in Chinese companies. The company didn’t directly comment on the closure of the China fund.
In an emailed response, a Vanguard spokesperson told The Epoch Times, “Vanguard maintains the highest levels of compliance with all applicable laws and regulations, including sanctions law. We welcome additional clarity from policymakers who are in a position to determine sanctions through the formal OFAC process.”
“As one of many asset managers offering investors a range of funds to invest internationally, our clients’ investments in China are primarily through U.S.-based passive index products that provide diversified exposure to many developed and emerging economies,” the spokesperson added.
In August, President Joe Biden issued an executive order (EO), prohibiting U.S. outbound investments to China in industries such as semiconductors and quantum computing. The Treasury Department has published preliminary rules, which listed index funds as excepted transactions under the EO. The public commentary period closed on Sept. 28.
Americans should send vanguard packing
Americans should send Vanguard management to jail.
Currently, it is composed of 5753 stocks.
Any Chinese company is part of CCP and Chinese military…. There is no difference, CEOs may where suits, and talk a good game, but in the end it is Xi who calls the shots and benefits
BTW, just a little while ago, Chinese real estate companies like evergreen were the golden Childs, now you will be lucky to get 5 cents on the dollar, and I doubt even that
This post is for the ignorant probably to help sell gold or active funds.
First, Vanguard was the leader in index funds. Today virtually, every investment firm provides index funds. This means that Vanguard is not the sole holder of Chinese shares.
Second, indexes are established by third parties, not those following the index. Investors are attracted to index funds because they tend to out perform active investments after expenses.
Third, there are two primary ways to invest in stock. The first is when the company issues the stock. This is when the actual funds are invested in the company. Ordinarily, the index fund only includes stocks that have been listed for a period of time. The second way an investor invests is to purchase the stock from another investor. The money invested does not go to the company.
To summarize, the investors in Vanguard hold the stock not Vanguard. Vanguard is following an index created by third parties. Vanguard is not alone in following indexes. The cash from purchases of index funds are not deposited in the companies bank account.
You’re effectively saying that Vanguard is not capitalizing Chinese military groups. But it’s certainly facilitating stakeholder ownership to its Western clients which raises many ethical questions — assuming sovereignty still matters.
So, I have purchased shares in Vanguard Total international Stock index. It follows an index that is created by and owned by the London Stock Exchange. The index contains 8,529 different companies throughout the world (except USA) on a weighted average basis which includes Chinese companies.
I will receive dividend income from all the shares including the tiny portion that is from the Chinese companies even though my investment went to another shareholder when I purchased the fund and not to any Chinese company.
Can you explain to me how my investment in this fund helps China when the money from profits (if any) is flowing to me and other shareholders while my money never flowed to China ?
As far as Vanguard is concerned, they will receive .11% of the total value of this fund to cover their expenses.
Because Vanguard is owned by its investors, any part of the .11% that is in excess of their costs returns to all of the investors. There is no owner other than all the investors to profit from any of their investments.
She freaking stalked me.....LOL!!!
My understanding of the index concept based on weighted averages is that as an investor we are agnostic about any one investment in the index. There is no judgement being made other than diversity. One of the theories that supports indexing is based on diversifying your investments over the worlds capital markets.
For example, if the China stocks were removed from the index tomorrow I and others would probably not notice the change in our total values because other changes would outweigh it.
As such it is not a contradiction to desire the failure of the China companies and at the same time for the index to hold those shares. If those companies went bankrupt, other companies would take up the slack.
Of course, that all makes sense.
The ethical aspects are mainly the responsibility of the investment managers. But still, the client investors shouldn’t turn a blind eye as to what’s in their portfolio.
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