In a letter to BlackRock Chairman and CEO Larry Fink, the National Legal and Policy Center (NLPC) today asked the firm to divest its customer’s money from the 137 Chinese companies currently listed on American stock exchanges.
BlackRock recently divested itself of certain companies that produce thermal coal in response to demands by anti-fossil fuel activists. In the letter, NLPC Chairman Peter Flaherty cites this “precedent” and argues that Chinese companies “that manufacture equipment for Xi’s surveillance state or that are dominated by the People’s Liberation Army raise even bigger ethical questions.” Here is the full text of the letter:
Because BlackRock is the world’s largest asset manager and you have championed the principle of divestment as a moral necessity, we ask that you divest your managed funds from the 137 Chinese companies listed on the three American exchanges.
All are under the influence and ultimate control of the Communist Party of China. At least 11 have 30% or more Chinese government ownership.
The urgency is obvious:
1) China’s response to the coronavirus allowed for its worldwide spread, claiming hundreds of thousands of lives and causing a worldwide recession. China’s Communist leaders knew they were facing a pandemic in January but kept the information secret. They then denied and downplayed its severity. Doctors and journalists who attempted to warn the public were silenced, arrested or have disappeared.
2) China is conducting a worldwide propaganda campaign to blame the United States for the virus. For instance, a spokesman for China’s Foreign Ministry on March 12 tweeted that “It might be the US army who brought the epidemic to Wuhan.”
3) Since June 2019, China has brutally suppressed Hong Kong citizens who seek to exercise their rights under the Basic Law, which guarantees freedom of speech and assembly at least through 2047. In October 2019, China’s president Xi Jinping warned of “bodies smashed and bones ground to powder.” Taking advantage of the pandemic, China arrested Hong Kong protest leaders in April 2020.
4) President Xi Jingping is building a “digital dictatorship.” The ubiquity of surveillance cameras, coupled with Artificial Intelligence technology, allows the government to monitor individual citizens and compile a “social credit” score based on fidelity to the Communist Party.
5) According to government documents leaked to Western journalists, China maintains a system of detention camps in Xinjiang province for one million or more Muslim Uyghurs. Other religious and ethnic groups including Christians, Tibetan Buddhists and Falun Gong members face persecution.
6) Recently-compiled evidence suggests that China relies on extrajudicial killings to supply an extensive organ-harvesting and tourism program. The number of organs available from “legal” executions are insufficient to meet demand.
China is the world’s worst human rights abuser and greatest threat to world peace through its military buildup and increasingly imperial ambitions.
Some investment managers argue that factors like human rights should not be considered in investment decisions because they have a fiduciary duty to investors to obtain the best possible return. Of course, you have specifically rejected this argument by applying a host of ESG litmus tests to BlackRock’s investments.
As you have written, “a company cannot achieve long-term profits without embracing purpose and considering the needs of a broad range of stakeholders.”
If you do not divest from China because it will cost you too much money, your insincerity about “purpose” will be obvious.
China is the world’s most populous nation. BlackRock cannot enlarge the definition of “stakeholders” from shareholders to all of society and then exclude over 1.4 billion Chinese citizens.
You recently wrote a letter to BlackRock shareholders about the pandemic and the future of BlackRock. Not one of your 5,000-plus words was critical of China for its role in the worldwide Coronavirus nightmare. Instead, you wrote, “I continue to firmly believe China will be one of the biggest opportunities for BlackRock over the long term…”
Your letter contains the word “transparency” nine times, yet the Chinese companies in which you invest your customer’s money are opaque. They do not submit to Public Company Accounting Oversight Board audit standards. They are not compliant with Dodd-Frank. Their accounting numbers are whatever they say they are.
The Luckin Coffee fraud and trading halt illustrates the risks of investing in Chinese companies.
Moreover, American retail investors have been repeatedly burned when U.S.-listed Chinese firms have been taken private at lower valuations and relisted on foreign exchanges.
Would not your customers — and our nation — be better served by investing in non-Chinese companies in regulated and transparent markets?
Of course, BlackRock has already divested from certain Chinese companies that produce thermal coal, so there is precedent. Investing in companies that manufacture equipment for Xi’s surveillance state or that are dominated by the People’s Liberation Army raise even bigger ethical questions. It is time for you to face up to them.
In light of your self-appointment as moral arbiter for corporate America, you cannot now pick and choose which moral imperatives you will honor and which you will ignore. Unless Blackrock divests from Chinese companies, your “leadership” will amount to empty virtue-signaling.
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