70 per cent of Chinese companies with military ties included in major global securities indices, State Department says
- Many major stock and bond indices developed by index providers like MSCI and FTSE include malign Chinese companies, State Department says
- While it is understood to be a political move, it may add pressure on the global indices to take action on these firms, says Louis Tse of Wealthy Securities
At least 70 per cent of Chinese companies previously identified by the United States government as having ties to the Chinese military have affiliates whose securities are included on major stock indices, with money from US investors supporting these companies involved in both civilian and military production, the State Department said on Sunday.
As of June, 22 of 31 firms with Chinese military ties had at least 68 distinct affiliated companies whose shares were included on major benchmarks, the State Department said.
“The Chinese Communist Party’s threat to American national security extends into our financial markets and impacts American investors,” the State Department said. “Many major stock and bond indices developed by index providers like MSCI and FTSE include malign People’s Republic of China (PRC) companies, listed on the Department of Commerce Entity List and/or the Department of Defense List of Communist Chinese military companies.”
The State Department said that China National Chemical Corporation and China Communications Construction Company were among the 22 firms that have affiliates included in the MSCI Emerging Markets Index, FTSE Emerging Index and Bloomberg Barclays Global Aggregate Index.
The money flowing into these index funds – often passively, by US retail investors – supports Chinese companies involved in both civilian and military production, the State Department said.
