Over a dozen Republican state attorneys general in the United States are currently investigating major asset management companies and financial institutions, believing that these companies have made misleading statements regarding the risks of investing in China.
According to Bloomberg, companies such as BlackRock, State Street Corp., Invesco, JPMorgan Chase & Co., Goldman Sachs Group Inc., and Morgan Stanley have been requested to provide detailed responses regarding their funds investing in China.
The attorneys general pointed out in letters to these companies that these institutions have not fully disclosed key risks of investing in China, including changes in tariff policies, investment restrictions, and potential risks of conflict in the Taiwan Strait.
“Many of the world’s largest asset management companies appear to have made misleading statements and omitted key risk information regarding funds including investments in China,” the attorneys general wrote in the letters. They warn that these omissions may make it difficult for national pension plans and other investment tools to fulfill fiduciary duties when investing in funds involving Chinese risks, thereby increasing compliance risks.
The 10% tariff imposed by the United States on Chinese goods officially took effect on Tuesday at midnight.
Furthermore, the U.S. government has officially categorized the Chinese Communist Party as a “foreign adversary,” with the attorneys general believing that many asset management firms have failed to fully disclose this risk in investor materials.
The United States is further strengthening scrutiny of investments in China, with more restrictive measures potentially being introduced in the future. Investment institutions and companies must strictly adhere to the new regulations to avoid compliance risks.
A final rule by the U.S. Treasury Department, which took effect on January 2, imposes strict restrictions on American individuals and businesses investing in Chinese companies, covering semiconductor and microelectronics, quantum information technology, and artificial intelligence.
This rule stems from an executive order signed by President Biden on August 9, 2023, aimed at preventing U.S. funds from enhancing the Chinese Communist Party’s military, intelligence, surveillance, and cyber capabilities. While former President Trump ordered a review of the rule, it remains in effect.
The executive order specifically targets private equity investments, venture capital, joint ventures, and greenfield investments.
Some former Trump administration officials predict that the Trump administration may further expand the scope of technology controls.
Former Assistant Secretary of Commerce Nazak Nikakhtar told The Washington Post that it is expected the new administration will establish stricter rules to further limit the export of advanced technology to China. The focus of control may expand from AI chips to emerging technologies such as quantum computing, robotics, and biotechnology.
Under U.S. law, penalties for violating the Treasury Department’s final rule include:
– A fine up to twice the value of the violating transaction or $368,000
– Up to 20 years imprisonment and a criminal fine of $1 million.