CPA Report Details How Vanguard and FTSE Russell Funnel Billions of U.S. Investor Capital to the CCP and PLA -Linked Companies

WASHINGTON — The Coalition for a Prosperous America (CPA) today released a new “case study” report to Congress that details the alarming extent to which U.S. asset managers and index providers are actively funneling billions of dollars of U.S. investor capital to Chinese Communist Party (CCP) companies, including Chinese firms that have been sanctioned by the U.S. government for human rights abuses and that are helping to modernize China’s People’s Liberation Army (PLA).

The report, titled “Case Study for Congress: Vanguard & FTSE Russell – How Wall Street Funds the CCP & PLA with U.S. Investor Capital,” provides analytic evidence that Vanguard, which has roughly $8 trillion in global assets under management, is investing the retirement and investment dollars of the American people in bad actor Chinese “A-Share” companies at a level unmatched in the U.S. As first reported by the Financial Times, “Vanguard, the world’s second-largest asset manager, is acting as a pipeline through which US investment dollars are being funneled into Chinese military companies and corporations sanctioned over human rights abuses.”

CPA’s research findings show that Vanguard has invested tens of billions of dollars across more than two thousand China “A-share” equities traded on mainland stock exchanges. These corporate stocks are non-compliant with American federal securities laws as well  regulatory and accounting standards designed to protect U.S. investors. Some of the stocks included in FTSE Russell indices and Vanguard investment products are those of, in effect, PLA-controlled companies that are building advanced weapons systems that could be used in any coming conflict with the U.S. and/or our allies. Others are in Chinese companies sanctioned by the federal government for human rights abuses.

Specifically, CPA’s report identified the following holdings in Vanguard’s flagship emerging markets index fund (ticker VWO):

  • 60 subsidiaries of Chinese Military Industrial-Complex Companies (CMIC);
  • 56 subsidiaries of Chinese Military Companies operating in the United States to obtain advanced technologies and expertise in support of the People’s Liberation Army’s (PLA) modernization goals;
  • 20 companies denied access to U.S. technology because they are deemed a “Military End Users” (MEU) or other Chinese entity attempting to acquire items in support of the PLA’s modernization program;
  • 8 Chinese companies excluded from U.S. commercial markets for violating the Uyghur Forced Labor Prevention Act (UFLPA); and
  • Numerous Chinese companies specializing in quantum information technologies, artificial intelligence, and microelectronics, the enhanced capability of which a new Presidential Executive Order calls “an unusual and extraordinary threat to the national security of the United States.”

The CPA report provides specific examples of China’s PLA-linked companies held by Vanguard, as well as lists of Chinese companies denied access to U.S. technology/equipment and UFLPA offenders. While Vanguard index funds exclude a very narrow set of Chinese companies that are expressly restricted by the federal government, CPA found no evidence sought to exclude many other known corporate national security and/or human rights abusers. Indeed, it appears to have adopted a policy of, “If it’s not illegal, we’re okay with it.”

Read the full report here: “Case Study for Congress: Vanguard & FTSE Russell – How Wall Street Funds the CCP & PLA with U.S. Investor Capital

“China continues to exploit America’s capital markets, and firms like Vanguard help make that possible by funneling American dollars to Chinese companies. Put another way, retirees, union workers, military service members, and others are unknowingly funding companies using slave labor, stealing our jobs, and building weapons to destroy our military. Exposing these unpatriotic investment patterns is the first step to bringing some commonsense back to our laws.” — U.S. Senator Marco Rubio (R-FL), Vice Chairman of the Senate Select Committee on Intelligence 

“This report underscores Wall Street’s addiction to funding malign Chinese companies that are enabling the CCP’s military and economic threats to the U.S. and our allies. It’s clear that Wall Street will continue to use American investor dollars to underwrite the CCP’s military aggression and human rights abuses unless Congress acts.” — U.S. Representative Mike Gallagher (R-WI), Chairman of the House Select Committee on the CCP

“This report underscores the severity of the problem of Wall Street actively funding CCP companies that are directly aiding China’s actions that threaten the national and economic security of the U.S. and our allies. It’s clear that Wall Street will continue to use American investor dollars to fund the CCP, which is why Congress must act.” — U.S. Representative Mike Waltz (R-FL)

“The urgency of addressing Wall Street’s support for CCP-affiliated enterprises cannot be overstated. By financing companies that directly bolster China’s actions and endanger the national and economic interests of the U.S. and its allies, Wall Street perpetuates a perilous cycle. It is imperative for Congress to take decisive action to safeguard American investments from further bolstering the CCP’s agenda.” — U.S. Representative August Pfluger (R-TX)

“This case study, like the BlackRock/MSCI pairing on Chinese corporate investments currently under House China Committee investigation, is troubling from an investor protection, national security and human rights perspective. There is more to diligence than legality.” — Roger Robinson Jr., former National Security Council (NSC) Senior Director of International Economic Affairs for President Ronald Reagan, and former Chairman of Congressional U.S.-China Economic and Security Review Commission.


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