Asset Management

BlackRock Pushes Into China, Soros Warns Of "Tragic Mistake"

Tom Burroughes, Group Editor, 9 September 2021

articleimage

The world's largest investment manager is pushing into the onshore mainland China market, and a number of other Western firms are considering making the same move. A question is whether such strategies will work at a time when Western nations are at odds with Beijing over the latter's policies.    

BlackRock has raised about $1 billion for the first-ever mutual fund solely run by a foreign firm that is allowed to sell to Chinese individuals, the Wall Street Journal and others reported yesterday. 

On 30 August, BlackRock launched a set of mutual funds and other investment products for Chinese consumers. 

The launches of such funds stir controversy over the extent to which Western firms should do business with China at a time when Beijing has been at odds with the US and Europe over human rights, the national security crackdown last year in Hong Kong, and other topics.

The BlackRock China New Horizon Mixed Securities Investment Fund received more than 111,000 orders from individual investors in China during a five-day marketing period last week, the report said, citing a statement. The fund will allocate 60 per cent to 95 per cent of assets in stocks and depositary receipts in such sectors as new energy, consumption, digital economy, healthcare, education and advanced manufacturing, the WSJ report said. 

BlackRock told this publication that the first mutual fund of its China wholly-owned fund management company was officially established on 7 September. 

“We are very proud of achieving this milestone for our China fund management business, and are grateful for investors’ overwhelming support. As a fiduciary to clients, we are committed to helping investors improve their financial well-being. We are excited to be able to contribute our investment and risk management expertise to help make investing easier and more affordable for Chinese investors,” Rachel Lord, BlackRock’s Chair and Head of Asia Pacific, said in a statement emailed to this news service. 

Chi Zhang, BlackRock fund management’s general manager, added: “We are very pleased with the official establishment of our first mutual fund in China. The support and trust from our investors and distribution partners have been extremely encouraging. We are committed to bringing long-term investment opportunities for Chinese investors, leveraging our track record in investing in A-shares and our expertise in investment and risk management to help more investors improve their financial well-being.”

The fund will be distributed by China Construction Bank, Bank of Communications, Ping An Bank, CITIC Securities, Orient Securities, Huatai Securities, Shenwan Hongyuan Securities, Haitong Securities, and Guosen Securities, BlackRock said.

China has been lifting restrictions on foreign wealth managers, such as ending restrictions on US asset managers selling mutual funds to individual investors. BlackRock, which oversees more than $9.5 trillion in assets and is by far the world’s largest fund manager, was the first firm given full approval to sell its own mutual funds to Chinese individuals.

The newspaper report noted that other firms could follow BlackRock’s lead. Fidelity International was granted preliminary approval last month; Neuberger Berman and VanEck are seeking clearance for their China mutual fund operations. As recently as 3 September, Paris-listed BNP Paribas was reportedly preparing for its asset management arm to form a wealth management venture with a unit of Agricultural Bank of China.

Soros, writing in the WSJ, has described BlackRock’s push into the Chinese market as a “tragic mistake”. 

The Hungarian-born financier, whose business is now run as a family office and no longer oversees outside money, said BlackRock's dealings in the Chinese economy will not only lose money for its clients in the long run but will also inflict damage on the national security of the US and other democracies.

Soros wrote on 6 September: “BlackRock takes its responsibilities for its clients’ money seriously and is a leader in the environmental, social and governance movement. But it appears to misunderstand President Xi Jinping’s China. The firm seems to have taken the statements of Mr Xi’s regime at face value. 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.

“This possible misunderstanding could explain BlackRock’s decision, but there may be another explanation. The profits to be earned from entering China’s hitherto closed financial markets may have influenced their decision. 

"The BlackRock initiative imperils the national security interests of the US 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. 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," he added.

Register for WealthBriefingAsia today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes