State Department Drops BOMBSHELL LIST Of Shell Companies Owned By The CCP

Office of the Spokesperson

“Under Xi Jin­ping, the CCP has pri­or­i­tized some­thing called ‘mil­i­tary-civ­il fusion.’ … Under Chi­nese law, Chi­nese com­pa­nies and researchers must – under penal­ty of law – share tech­nol­o­gy with the Chi­nese mil­i­tary. The goal is to ensure that the People’s Lib­er­a­tion Army has mil­i­tary dom­i­nance. And the PLA’s core mis­sion is to sus­tain the Chi­nese Com­mu­nist Party’s grip on power.”

– Sec­re­tary of State Michael R. Pom­peo, Jan­u­ary 11, 2020

The Chi­nese Com­mu­nist Party’s threat to Amer­i­can nation­al secu­ri­ty extends into our finan­cial mar­kets and impacts Amer­i­can investors. 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 mon­ey flow­ing into these index funds – often pas­sive­ly, by U.S. retail investors – sup­ports Chi­nese com­pa­nies involved in both civil­ian and mil­i­tary pro­duc­tion. Some of these com­pa­nies pro­duce tech­nolo­gies for the sur­veil­lance of civil­ians and repres­sion of human rights, as is the case of Uyghurs and oth­er Mus­lim minor­i­ty groups in Xin­jiang, Chi­na, as well as in oth­er repres­sive regimes, such as Iran and Venezuela.

As of June 2020, at least 22 of the 31 par­ent-lev­el PRC mil­i­tary com­pa­nies had affil­i­ates’ secu­ri­ties includ­ed on a major secu­ri­ties index, includ­ing at least 68 dis­tinct affil­i­ate-lev­el secu­ri­ties issuers; at least 13 PRC firms on the Enti­ty List had affil­i­ates or par­ent com­pa­nies includ­ed in the MSCI or FTSE stock indices; and the MSCI emerg­ing mar­ket index includ­ed 230 A‑shares Chi­nese stocks incor­po­rat­ed on the main­land, quot­ed in ren­min­bi, and list­ed on Chi­nese Com­mu­nist Par­ty-con­trolled Shang­hai and Shen­zhen exchanges.

PRC Mil­i­tary Com­pa­nies on MSCI and FTSE

“Some of the Chi­nese com­pa­nies (on MSCI Index) present sig­nif­i­cant nation­al secu­ri­ty and human­i­tar­i­an con­cerns for the Unit­ed States which increas­es the risk that they could be sub­ject to sanc­tions, pub­lic protests, trade restric­tions, boy­cotts, and oth­er puni­tive mea­sures that jeop­ar­dize their busi­ness and prof­itabil­i­ty. For exam­ple, mil­i­tary con­trac­tors that pro­vide mil­i­tary air­craft and telecom­mu­ni­ca­tions sup­port to the People’s Lib­er­a­tion Army. The list also includes com­pa­nies that man­u­fac­ture sur­veil­lance equip­ment that Chi­na uses to oppress reli­gious minori­ties as well as one com­pa­ny indict­ed for engag­ing in eco­nom­ic activ­i­ty with Iran and North Korea in vio­la­tion of U.S. sanc­tions law.”

– Robert C. O’Brien, Nation­al Secu­ri­ty Advi­sor, and Lawrence Kud­low, Direc­tor, Nation­al Eco­nom­ic Coun­cil, May 11, 2020


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