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BlackRock responds to George Soros' criticism over China investments

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George Soros, billionaire and founder of Soros Fund Management LLC, pauses while speaking at an event on day three of the World Economic Forum (WEF) in Davos, Switzerland, on Thursday, Jan. 23, 2020.

Simon Dawson | Bloomberg | Getty Images

LONDON — BlackRock, the world’s largest asset manager, has responded to sharp criticism from billionaire investor George Soros over the firm’s investments in China.

Writing in The Wall Street Journal on Tuesday, Soros described BlackRock’s initiative in China as a “tragic mistake” that would “damage the national security interests of the U.S. and other democracies.”

The op-ed, entitled “BlackRock’s China Blunder,” said the firm’s decision to pour billions into the country was a “bad investment” likely to lose money for its clients.

It comes shortly after BlackRock launched a set of mutual funds and other investment products for Chinese consumers. The initiative saw BlackRock become the first foreign-owned company to operate a wholly owned business in China’s mutual fund industry.

The asset manager told CNBC on Wednesday that its China mutual fund subsidiary set up its first fund in the country after raising 6.68 billion Chinese yuan ($1.03 billion) from more than 111,000 investors.

“The United States and China have a large and complex economic relationship,” a BlackRock spokesperson said in response to Soros’ comments.

“Total trade in goods and services between the two countries exceeded $600 billion in 2020. Through our investment activity, US-based asset managers and other financial institutions contribute to the economic interconnectedness of the world’s two largest economies.”

BlackRock’s Investment Institute recommended in mid-August that investors boost their exposure to China by as much as three times in some cases. Earlier in the year, CEO Larry Fink in a letter to shareholders described China’s market as a “significant opportunity to help meet the long-term goals of investors in China and internationally.”

A sign for BlackRock Inc hangs above their building in New York.

Lucas Jackson | Reuters

“The overwhelming majority of the assets BlackRock manages are for retirement. BlackRock’s clients around the world — including many US clients — seek a broad range of investments, including in China, to achieve their retirement and other financial objectives,” the spokesperson said.

BlackRock added that it believes it can help China to address its growing retirement crisis by providing retirement system expertise, products and services.

“We believe that globally integrated financial markets provide people, companies, and governments in all countries with better and more efficient access to capital that supports economic growth around the world.”

‘Situation now is totally different’

Soros said Tuesday that BlackRock’s investments in China showed the firm appeared to “misunderstand” Chinese President Xi Jinping.

Beijing has cracked down on multiple companies this year, prompting a sharp sell-off in Chinese stocks. Soros warned that while new rules were designed to target tech companies, they should also be regarded as a sign that Xi will do whatever it takes to stay in power.

“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,” Soros said. “Today, the US and China are engaged in a life-and-death conflict between two systems of governance: repressive and democratic.”

Writing for the Financial Times in a separate op-ed published on Aug. 30., Soros said investors in Xi’s China face a “rude awakening,” before adding that Xi’s crackdown on private enterprise showed he “does not understand the market economy.”

BlackRock reported on July 14 that its assets under management climbed to a record $9.49 trillion in the second quarter, up from $7.32 trillion a year earlier.

Shares of BlackRock are up over 28% year to date.