Blackrock's Chinese Fund Investments: What You Need Know

BlackRock is an American multinational investment management company and the world's largest asset manager. In 2021, it became the first global asset manager to be licensed to operate a wholly-owned onshore mutual fund business in China. BlackRock has since raised over $1 billion from 111,000 Chinese investors and has been criticised for its ties with the Chinese government. The company offers a range of funds for investors, including those investing in precious metals, energy resources, agricultural goods, stocks, bonds, and real estate.

BlackRock's first wholly-owned China mutual fund business

On June 11, 2021, BlackRock Inc. became the first global asset manager to operate a wholly-owned onshore mutual fund business in China. The China Securities Regulatory Commission (CSRC) gave the company's Chinese fund management unit approval to begin operations.

BlackRock is the world's biggest asset manager, and its entry into China came after the country scrapped foreign ownership caps in its mutual fund and securities sectors in April 2020, under a Sino-U.S. trade deal.

BlackRock's Chief Executive Officer, Larry Fink, said the company was "honored" to support more Chinese investors in accessing financial markets. The company's announcement came a month after it received a license to operate a majority-owned wealth management venture in China.

BlackRock's China mutual fund subsidiary raised $1.03 billion from over 111,000 investors during a shortened subscription period for its first fund in the country. The fund, the BlackRock China New Horizon Mixed Securities Investment Fund, launched on August 30, 2021, and stopped taking new subscriptions on September 3, a week earlier than planned.

Rachel Lord, BlackRock's chair and head of Asia-Pacific, said the company was "very proud" of achieving this milestone for its China fund management business and was "grateful" for the investors' support.

BlackRock's entry into China's mutual fund industry is being closely watched as more global players prepare to enter the market. Fidelity International is setting up its mutual fund subsidiary in China, while Neuberger Berman, Schroders PLC, and VanEck have also applied to establish China units to sell retail funds.

BlackRock's first RQFII license in the U.S.A

On December 15, 2016, BlackRock, Inc. became the first asset manager in the U.S.A. and the world to be awarded a Renminbi Qualified Foreign Institutional Investor (RQFII) license by the China Securities Regulatory Commission (CSRC). This license allows BlackRock to invest in mainland China's capital markets, including the A-share stock and onshore bond markets.

The license was granted to BlackRock Fund Advisors, a U.S. subsidiary of BlackRock, Inc., and it marked the fourth RQFII license awarded to BlackRock. The first U.S. RQFII license is a significant milestone for BlackRock and its iShares ETFs, bringing the company closer to its goal of offering direct Chinese stock and bond exposure to clients worldwide.

Ryan Stork, Chairman of Asia Pacific at BlackRock, highlighted the importance of the Chinese market for the company's global clients and its potential for future growth as China continues to transform and internationalize its capital markets. Mark Wiedman, Global Head of iShares and Index Investing at BlackRock, also emphasized the significance of this license in expanding the company's investment capabilities in China.

With this license, BlackRock can now apply for investment quotas from the State Administration of Foreign Exchange (SAFE) for certain BlackRock-managed funds, including iShares ETFs. This development underscores BlackRock's position as a global leader in investment management, risk management, and advisory services, with a presence in 30 countries and clients in 100 countries.

BlackRock's investments in companies involved in fossil fuels

BlackRock has been criticised for investing in companies that are involved in fossil fuels. As of May 2024, BlackRock holds fossil fuel assets worth $431 billion, making it the world's second-biggest fossil fuel investor. In January 2022, BlackRock wrote a letter to Texas officials and local trade groups stating that it would continue to invest in and support fossil fuel companies. The letter, signed by Dalia Blass, BlackRock's head of external affairs, said:

> We will continue to invest in and support fossil fuel companies, including Texas fossil fuel companies... We are perhaps the world's largest investor in fossil fuel companies, and, as a long-term investor in these companies, we want to see these companies succeed and prosper.

BlackRock holds stakes of about 9% in Phillips 66 and Occidental Petroleum, 8% in Valero Energy and ConocoPhillips, and 6% in ExxonMobil. Overall, the company has nearly $260 billion invested in fossil fuel companies around the world, including $91 billion in Texas.

BlackRock has also faced criticism from US states such as West Virginia, Louisiana and Florida, which have divested money away from or refused to do business with the firm because of its ESG policies. In response to the announcement from Florida's chief financial officer, Jimmy Patronis, that the state would be divesting $2 billion worth of investments under BlackRock's management, the company stated that the divestment would place politics over investor interest.

BlackRock's investments in the arms industry

BlackRock, the world's largest asset manager, has been criticised for its investments in the arms industry. As of May 2022, BlackRock was America's largest shareholder in top US gunmakers, including Sturm Ruger, Vista Outdoor, and Smith & Wesson. In 2024, the BlackRock Equity Dividend Fund was given an F grade for investments in military weapons, with exposure to companies including L3Harris Technologies Inc and Leidos Holdings Inc. BlackRock's "U.S. aerospace and defense" fund has billions of dollars invested in major weapons contractors, including Lockheed Martin, Raytheon, Boeing, General Dynamics, and Northrop Grumman. These companies are the top recipients of Pentagon contracts, receiving $100 billion in 2017.

In 2018, BlackRock introduced two new exchange-traded funds (ETFs) that exclude stocks of gun makers and large gun retailers, such as Walmart, Dick's Sporting Goods, Kroger, Sturm Ruger, American Outdoor Brands, and Vista Outdoor. The company has also voted against several directors of gun manufacturers, including one director of Smith & Wesson, citing a lack of "disclosure of material social policies and/or risks". However, BlackRock has faced criticism that its actions do not match its rhetoric on social responsibility, particularly in relation to its investments in major weapons contractors.

BlackRock's investments in companies accused of human rights violations in China

BlackRock, the world's largest asset manager, has been criticised for its investments in companies accused of human rights violations in China. In 2021, the company set up its first mutual fund in China, becoming the first foreign-owned company allowed by the Chinese government to operate a wholly-owned business in the country's mutual fund industry.

In 2023, the US House of Representatives' Select Committee on the Chinese Communist Party launched an investigation into BlackRock's investments in Chinese companies. The committee found that BlackRock had funnelled billions of dollars of Americans' investments into mainland Chinese firms accused of human rights abuses and fuelling China's military. According to the committee, BlackRock invested at least $1.9 billion into these companies, including state-owned Aviation Industry Corporation of China, BGI Group, and Qihoo 360.

In 2021, BlackRock was also found to have invested in two companies that were blacklisted by the US government due to human rights abuses against the Uyghurs in Xinjiang. In one case, BlackRock increased its level of investment in the company (Hikvision) after the blacklisting.

BlackRock has faced criticism and scrutiny from various quarters, including US lawmakers, non-profit groups, and media organisations, for its investments in Chinese companies accused of human rights violations. As a result, several US states, including West Virginia, Florida, and Louisiana, have divested money from or refused to do business with the firm due to its environmental, social, and governance (ESG) policies.

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