PSSI Perspective #28: Europe Falls Perilously Behind U.S. in Addressing Elevated “China Risk” in the Capital Markets
Elias Sköld / 16 Aug 2023
There is a growing momentum within the U.S. legislative landscape to counter the risks associated with investments in Chinese companies - and Europe would be wise to pay attention to this. PSSI’s Elias Sköld highlights the growing concerns about U.S. investors funding Chinese state-controlled companies, including those supplying the Chinese military and committing egregious human rights abuses.
The direction in which the legislative and political bodies of the U.S. are moving is clear: U.S. investors should not be permitted to continue to fund malicious Chinese companies, in particular those corporate "bad actors" currently sanctioned and blacklisted by the U.S. government. Four prominent and recent examples of this legislative and political momentum are:
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The Congressional Investigation of BlackRock and MSCI, in which two major financial actors are under formal congressional investigation for their involvement in facilitating investments in Chinese corporate "bad actors" through their investment products;
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The Bipartisan Support to Remove Chinese Firms from the Federal Thrift Savings Plan, signaling significant political support for such actions in the future;
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The SEC Scrutinized for Inadequately Addressing China's Deceptive Financial Practices, in which Senator Rubio urged the SEC to enforce U.S. securities laws and regulations on Chinese firms; and
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The New Bill Targeting Tax-Exempt Entities Investing in Chinese Companies tied to the CCP.
Alarmingly, despite the growing awareness of risks in the U.S., there is a complete lack of similar public discussion, let alone legislative momentum, in Europe. European lawmakers must seek to harmonize their legislative efforts with those of the U.S. to protect European investors against national security, human rights, and investor protection concerns related to Chinese investments. As the situation stands today, Europe is falling perilously behind the U.S. in addressing "China Risk".
Recently, PSSI’s Chairman, Roger W. Robinson Jr., delivered an extensive evaluation of President Biden’s Executive Order on outbound investment and unwillingness to take on China’s presence in the U.S. capital markets. You can watch the whole interview below: