Soros Slams BlackRock For Investing In China, Exposing Wall Street's ESG Hypocrisy

Tyler Durden's Photo
by Tyler Durden
Tuesday, Sep 07, 2021 - 05:39 PM

To say that George Soros has a mixed reputation in the US would be an understatement: while democrats and progressive love the liberal billionaire and Hillary Clinton supporter, whose one goal in life is to get the maximum number of immigrant possible inside any one given nation to help achieve a glorious "open society" where national identity and culture no longer exist and are replaced by whatever is the woke ideal du jour, republicans view the 91-year-old as Satan incarnate, and the person responsible for the record "mail-in voter turnout" (and associated pandemic) that gave us Joe "look, Afghanistan" Biden.

But while it is Soros' political and ideological leanings that have made him such a controversial figure in the US, it is the Hungarian's financial views that have made him hated by most China, and he appears hell bent on ensuring that the sentiment is unfirom.

Just days after Soros penned an oped in the FT warning that "Investors in Xi’s China face a rude awakening", the billionaire asset manager today lashed out at the largest US asset manager, saying in a new WSJ op-ed titled "BlackRock’s China Blunder" in which he argues that BlackRock investing billions of dollars into China now is a "mistake" and will likely lose money for the company's clients.

"Pouring billions of dollars into China now is a tragic mistake," Soros wrote in the op-ed. "It is likely to lose money for BlackRock's clients and, more important, will damage the national security interests of the U.S. and other democracies."

Last month, BlackRock became the first foreign asset manager to operate a wholly owned mutual fund business in China, tapping the fast-growing $3.6 trillion retail fund market. This also comes after the government scrapped a foreign ownership cap in the industry on April 1, 2020.

Soros notes that the launch came just weeks after BlackRock recommended that investors triple their allocations in Chinese assets, a move which will will push billions of dollars into China, and adds that BlackRock has drawn a distinction between the country's state-owned enterprises and privately owned companies that is "far from reality." Instead, Soros claims - not incorrectly - that "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" Soros sarcastically adds, suggesting that - gasp - a Wall Street firm may be motivated by profits, far and above its own virtue signaling in all other areas including climate change and human rights:

"The profits to be earned from entering China’s hitherto closed financial markets may have influenced their decision. The BlackRock managers must be aware that there is an enormous crisis brewing in China’s real-estate market. They may believe that investment funds flowing into China will help Mr. Xi handle the situation, but the president’s problems go much deeper. China’s birthrate is much lower than official statistics indicate and Mr. Xi’s attempts to increase it have made matters worse. The president recently launched his “Common Prosperity” program, which is a fundamental change in direction. It seeks to reduce inequality by distributing the wealth of the rich to the general population. That does not augur well for foreign investors."

To be sure, Soros is a lone voice when it comes to boycotting China on Wall Street, where the profit potential of the world's most populous nation is enticing enough to make everyone forget and override their ESG pledges, with which they parade in a virtue-signaling procession practically every single day.

The leaders of Western asset-management firms, such as Stephen Schwarzman, co-founder of investment firm Blackstone, and former Goldman Sachs President John L. Thornton, have long been interested in the Chinese consumer market—and in the prospect of business opportunities dangled by Mr. Xi.

As such, "BlackRock is only the latest company trying to engage with China" Soros claims noting that "earlier efforts could have been morally justified by claims that they were building bridges to bring the countries closer, but the situation now is totally different. Today, the U.S. and China are engaged in a life and death conflict between two systems of governance: repressive and democratic."

Soros concludes that "the BlackRock initiative imperils the national security interests of the U.S. 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."

Soros is, of course, correct in his disdain and criticism of China although due to his ideological presence in the US, we expect that his laments will be soundly ignored and mocked, even if his criticism opens a rare schism within the otherwise unbreakable facade among Wall Street's most prominent firms such as BlackRock, Blackstone, Bridgewater and Goldman, where criticism of America is perfectly acceptable and encouraged but any badmouthing of Xi's regime is grounds for an immediate career short-circuit.

The bottom line is simple: if all those who lament America's social and economic shortcomings refuse to extend their criticism to China, their opinions can and should be soundly ignored.