BlackRock China ETFs Lose Cash As U.S. House Probes Misuse

BlackRock China ETFs Lose Cash As U.S. House Probes Misuse

About $2b has left a handful of funds since investigation into whether or not company profited from Chinese military operations.

Finance Reporter
Reviewed by: Sean Allocca
Edited by: Ron Day

A set of China-focused funds from BlackRock Inc. saw significant outflows in August as the U.S. House of Representatives investigates the asset management giant for possibly profiting off Chinese military operations.  

On Aug. 1, the U.S. House Select Committee accused BlackRock of profiting from investments in ETFs that backed the Chinese military. The iShares Core MSCI Emerging Markets ETF (IEMG), the iShares MSCI Emerging Markets ETF (EEM), the iShares MSCI China ETF (MCHI), the iShares MSCI China A ETF (CNYA), were all named directly by the House Select Committee on the Chinese Communist Party. The BlackRock China A Opportunities Fund (CHILX) was also mentioned.

“Our review has shown that, as a direct result of decision made by (BlackRock/MSCI), these Americans are now unwittingly funding PRC (People’s Republic of China) companies that develop and build weapons for the People’s Liberation Army,” Chairman Mike Gallagher (R.-Wis.) and Rija Krishnamoorthi (D-Ill.) wrote in the committee’s letter addressed to BlackRock CEO Larry Fink. BlackRock denied any wrongdoing in a statement to the Financial Times

China Funds See Outflows 

Four of the funds have seen significant outflows since the house committee announced its accusations, as first reported by the Financial Times. The iShares MSCI Emerging Markets ETF saw a massive $1.9 billion in outflows during August, according to data.  

The iShares MSCI China A ETF saw outflows of $14.2 million during August, and the BlackRock China A Opportunities Fund bled $17 million.  

Yet the movements may be due to poor fund performance. The iShares MSCI China ETF is down more than 11% since Aug. 1, while the iShares MSCI China A ETF lost nearly 4% and the China A Opportunities Fund dropped roughly 9%.  

Investors are taking money out of China funds and pouring them into Indian funds, previously reported

“I am sure some investors sold shares as a result of the U.S. House Select Committee letters,” Morningstar analyst Bryan Armour said in an interview with “The bigger issue is that there are significant cracks appearing in China’s economy.”  

Drops in the funds are also linked to larger macroeconomic conditions. While China has long been a popular pick for investors who look to emerging markets, its economy has slowed and many investors have exited the region. Reuters reports that some economists believe China will struggle to meet its 2023 economic growth target of about 5% without increased government spending. 

Contact Lucy Brewster at [email protected].  

Lucy Brewster is a finance reporter at covering asset managers, emerging technologies, and regulation. She hosts webinars and appears on Exchange Traded Fridays,’s flagship podcast. She previously was a finance fellow at Fortune Magazine where she covered markets, investment strategy, and venture capital. She has also been a freelancer writer at the publication Mergers & Acquisitions and a research fellow at the Historic Hudson Valley. 

She graduated from Vassar College in 2022 with a degree in History and was an editor of The Miscellany News, the college's award winning student run newspaper. 

Lucy lives in Brooklyn, NY, and in her free time she loves to run and find new recipes to cook.