EYESHENZHEN  /   Opinion

When Soros hits BlackRock

Writer: Lin Min  |  Editor: Jane Chen  |  From: Shenzhen Daily  |  Updated: 2021-09-13

While politics and investment are two vastly different domains, political bias can stand in the way of investment.

The China mutual fund subsidiary of BlackRock, a New York-based international investment management company, set up its first fund in China last week after raising 6.68 billion yuan (US$1.03 billion) from more than 111,000 Chinese investors.

BlackRock, the world's largest money manager with US$9.5 trillion under management, is the first foreign asset manager to operate a wholly owned business in China, which has a US$3.6 trillion mutual fund industry.

A U.S. money manager's successful foray into a market largely untapped by American financial institutions should be a cause for celebration in Wall Street. However, billionaire investor George Soros attacked BlackRock's investments in China in an acrimonious opinion piece. Writing for The Wall Street Journal on Tuesday, Soros labeled BlackRock's initiative in China as a "tragic mistake" that would "damage the national security interests of the U.S. and other democracies." The commentary, 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.

In response to Soros' criticism, BlackRock defended its China initiative, saying "The United States and China have a large and complex economic relationship."

"Total trade in goods and services between the two countries exceeded US$600 billion in 2020. Through our investment activity, U.S.-based asset managers and other financial institutions contribute to the economic interconnectedness of the world's two largest economies," a BlackRock spokesperson said.

It is not the first time that Soros has made critical remarks on China. Soros, who pocketed US$1 billion by shorting the British pound in 1992, may have harbored a grudge against China after losing bets against the Hong Kong dollar and the yuan.

Soros, who earned himself the nickname "financial crocodile" for attacking currencies he perceived as having weaknesses worth exploiting, reportedly lost US$2 billion shorting both the Hong Kong dollar and Hang Seng Index futures in 1998, after successfully attacking the Thai baht in 1997. Years later, he reportedly made several attempts to profit from exploiting the "weakness" of the yuan, only to suffer great losses.

As a diehard liberal ideologue, Soros is infamous for his shady funding of political groups in other countries. By funding liberal NGOs and other groups, his involvement in Ukraine has been well known, and his name is linked to the "color revolution" and regime changes in some countries. While Soros remains a successful financier despite the failed bets on China, his ideological stubbornness means he fails to view China objectively and fairly, and hence is oblivious to investment opportunities in China.

For international investors, China, the world's second-largest economy, is a market that should not be ignored. More and more international investors and money managers are allocating resources to China. BlackRock's Investment Institute recommended in mid-August that investors boost their exposure to China by as much as three times in some cases. In a letter to shareholders earlier this year, BlackRock CEO Larry Fink described China's market as a "significant opportunity to help meet the long-term goals of investors in China and internationally."

Ray Dalio, founder of Bridgewater Associates, the world's biggest hedge fund, has also repeatedly called for investing in China, saying its opportunities can't be ignored. He described the swings in Chinese markets as little more than "wiggles" in late July.

In January 2020 Dalio said that China will emerge as the world's financial center. In an opinion piece, entitled "Don't be blind to China's rise in a changing world," published in the Financial Times on Oct. 23, 2020, Dalio said: "The world order is changing, yet many are missing this because of a persistent anti-China bias."

"China's fundamentals are strong, its assets relatively attractively priced, and the world is underweight [in] Chinese stocks and bonds. These currently account for 3 percent or less of foreign portfolio holdings; a neutral weighting would be closer to 15 percent," he observed.

Soros and other staunch ideologues in the West have been wrongly predicting the collapse of China repeatedly. They should heed Dalio's caveat: "Prejudice and bias always blind people to opportunity."

(The author is a deputy editor-in-chief of Shenzhen Daily.)