‘Our adversaries, like Communist China, benefit from a complete lack of transparency, allowing them to hide and fund bad behavior.’
Sens. Bob Casey (D-Pa.) and Rick Scott (R-Fla.) on Nov. 9 introduced legislation that requires U.S. investment firms to disclose their private equity, hedge funds, and venture capital investments in foreign adversaries, such as China, in an effort to enhance transparency into how U.S. dollars are invested.
The bill, the “Disclosing Investments in Foreign Adversaries Act,” requires private investment funds to inform the Securities and Exchange Commission (SEC) annually of any investments in China and other “countries of concern,” including Iran, North Korea, and Russia.
The legislation also requires the SEC to publish an annual report of private funds that invest in these countries and the percentage of those investments.
Firms offering and selling stock exempt from SEC registration requirements in the private market must also disclose information about the investment’s recipient, the planned destination of the investment, and the intended purpose of the investment.
“Americans deserve to know where and how their savings are being invested,” Mr. Casey
said in a statement. “It is vital to know if our money is being used to boost the economies of our adversaries who steal our technological know-how and steal our jobs.”
U.S. private investment firms have injected more than $80 billion into China from 2018 to 2022. These include investments in Chinese high-tech firms, helping Beijing enhance its key technologies, according to Mr. Casey’s
office.“Our adversaries, like Communist China, benefit from a complete lack of transparency, allowing them to hide and fund bad behavior—especially when it comes to financial markets,” Mr. Scott said in a statement. “It is time to stop sending American dollars to these countries of concern.”
The American Securities Association and FDD Action, advocacy groups that promote U.S. national security, supported the bill.
The bill is the latest action to track U.S. investments in China amid concerns that U.S. dollars can help the Chinese regime strengthen its military.
In June, Reps. Mike Gallagher (R-Wis.) and Jim Banks (R-Ind.)
introduced the “Protecting Americans’ Retirement Savings Act,” which restricts private pension funds from making future investments in firms from foreign adversaries such as China. The bill also requires these investment funds to disclose current investments in such entities.
In July, the Senate
backed a bill that requires U.S. firms to notify the Department of Treasury if they have investments in Chinese firms with sensitive technologies—including semiconductors, artificial intelligence, quantum computing, and hypersonics—over national security concerns.
In August, President Joe Biden signed an
executive order banning outbound U.S. investments in critical technologies that “significantly advance the military, intelligence, surveillance, or cyber-enabled capabilities of countries of concern.”
‘Passive Flows’ of Investment
Last month, in a
letter to Treasury Secretary Janet Yellen, the House Select Committee on the Chinese Communist Party called on the Department of the Treasury to address the United States’ “passive flows” of investment into Chinese firms via public markets, such as mutual funds, exchange-traded funds, or index funds.
In July, the House committee
opened an investigation into asset management firm BlackRock and index provider MSCI, alleging that these firms facilitated a passive flow of investments into blacklisted Chinese companies, even though they may not directly involve Chinese companies in their portfolios or indexes.
In
letters on July 31, the House committee expressed concerns that BlackRock’s and MSCI’s activities funnel U.S. capital into more than 60 Chinese companies flagged by U.S. agencies for security or human rights reasons. Although these activities are not illegal, the committee contends that they exacerbate national security threats and “undermine American values.”
BlackRock had invested more than $429 million from five funds in such companies, according to the House committee. The company manages more than $9 trillion in assets and handles investments for millions of Americans.
MSCI told
Reuters that it was “reviewing the inquiry” from the committee, and BlackRock
told The Epoch Times that it “complies with all applicable U.S. government laws” regarding “all investments in China and markets around the world” and noted that it is one of 16 asset managers offering U.S. index funds that invest in Chinese companies.
Eva Fu and Reuters contributed to this article.
