George Soros Calls BlackRock’s China Investment ‘Tragic Mistake’

]

(Bloomberg) – George Soros criticized BlackRock Inc.’s China push as a risk to clients’ money and U.S. security interests, in the billionaire financier and philanthropist’s latest broadside against investment in the world’s second-largest economy.

“Pouring billions of dollars into China now is a tragic mistake,” Soros wrote in an op-ed in the Wall Street Journal. “It is likely to lose money for BlackRock’s clients and, more important, will damage the national security interests of the U.S. and other democracies.”

BlackRock is leading a global foray into China’s asset management industry. The world’s largest money manager last month began offering investment products to Chinese individuals, two months after winning approval to become the nation’s first wholly foreign-owned mutual fund firm.

The commentary was one several that Soros has written in recent weeks to warn against closer economic ties to Xi Jinping’s China amid a wave of market-roiling crackdowns. Soros denounced Xi in another Journal op-ed last month as “the most dangerous enemy of open societies in the world” and subsequently argued in the Financial Times that Congress should pass legislation limiting asset managers’ investments to “companies where actual governance structures are both transparent and aligned with stakeholders.”

In the latest piece, Soros said BlackRock appeared to misunderstand Xi, whose administration he said regarded all Chinese companies as “instruments of the one-party state.”

The divergent views from two of the world’s most influential money managers underscore the increasingly fraught environment confronting financial firms in Asia’s largest economy. While Xi has made it easier for foreign investors to participate in domestic markets, his government is also tightening its grip on the private sector and clashing with the U.S. on everything from cybersecurity to human rights abuses in Xinjiang.

Soros said the curbs that began with the sudden cancellation of Ant Group Co.’s initial public offering last year have since “reached a crescendo.” He cited the actions against ride-hailing company Didi Global Inc. days after its New York listing, and the crackdown on “U.S.-financed” Chinese tutoring companies. Soros also said BlackRock managers must be aware of an “enormous crisis brewing in China’s real estate market.”

Story continues

Although Soros remains an influential backer of U.S. President Joe Biden’s Democratic Party, he no longer manages outside money and is a minority voice for now on Wall Street. BlackRock, Goldman Sachs Group Inc. and most of their major peers in money management and banking have decided the opportunities in China outweigh the risks.

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

More stories like this are available on bloomberg.com

Subscribe now to stay ahead with the most trusted business news source.

China sends 19 aircraft into Taiwan’s air defence zone

]

China’s military sent 19 aircraft into Taiwan’s “air defence identification zone” on Sunday, including several nuclear-capable bombers, on the eve of Taipei’s annual war games exercises.

The sortie by China’s People’s Liberation Army air force was one of the largest in weeks, and included 10 J-16 and four Su-30 fighters, as well as four H-6 bombers, which can carry nuclear weapons, and an anti-submarine aircraft.

The planes flew a short distance from the coast of China towards the southern tip of Taiwan, north of the disputed Pratas Island, and into Taiwan’s air defence identification zone (Adiz). The area is not Taiwan’s territorial airspace but the sorties provoke Taiwan’s air force to scramble jets in response, and on Sunday missile monitoring systems were also deployed.

PLA flights towards Taiwan have increased in the last 18 months, with periods of near-daily flights involving a usually small number of planes. The largest recorded was 28 planes sent in June. Planes have also been sent past Taiwan and up the island’s east coast.

While activity has been increasing generally, large incursions by the PLA usually appear to be in response to particular events, for instance US arms sales to Taiwan, or military activity in or near the Taiwan Strait.

It was not clear what prompted Sunday’s action, but Taiwan’s annual large scale live-fire exercises are set to begin next weekend, with rehearsal drills held on Monday. In recent weeks, military vessels from the US and the UK have also sailed through the region, with a US warship and a US Coast Guard cutter going through the Taiwan Strait.

The Taiwan strait and nearby South China and East China Seas are geopolitically sensitive and the site of increasing Chinese expansionist activities. Beijing considers Taiwan to be a province of China under what it calls the “one China principle”, and has not ruled out the use of force to “reunite” it. It considers the Tsai Ing-wen-led Taiwanese government to be separatist. Tsai’s administration maintains that Taiwan is already an independent state.

There is growing speculation over the likelihood of Beijing, under the leadership of Xi Jinping, deciding to move on Taiwan. The potential circumstances and timing is vociferously debated, but there is general consensus that the risk is higher now than it has been for decades.

In a report to parliament last month, Taiwan’s defence ministry said China has the capability to “paralyse” the island’s defences, including through cyber-attacks, Reuters reported.

China “can combine with its internet army to launch wired and wireless attacks against the global internet, which would initially paralyse our air defences, command of the sea and counter-attack system abilities, presenting a huge threat to us”, the ministry’s report said.

As China has become more isolated on the world stage, modernised its military, and expanded its activities in border and disputed regions, tensions have grown between its government and Taiwan and its supporters. The US maintains a policy that does not guarantee or rule out coming to Taiwan’s defence in the event of an attack, but under president Donald Trump the US increased its arms sales to Taiwan, and the Biden administration has reaffirmed support.

Japan has also become increasingly vocal with its concerns over the China threat. Its deputy prime minister remarked in July that an attack on Taiwan could be considered an existential threat to Japan – which would trigger constitutional permissions for the country to engage militarily. Under a 2015 reinterpretation of its pacifist, post-second world war constitution, Japan says it can use force to come to the aid of an ally, with the justification that failing to do so could endanger Japan.

Taiwan warns ally Honduras against China’s promises

]

Taiwan warns ally Honduras against China’s promises

By Lu Yi-hsuan and Kayleigh Madjar / Staff reporter, with staff writer and Reuters, TEGUCIGALPA

Taiwan yesterday reminded its diplomatic ally Honduras of Beijing’s record of broken promises, after the Latin American nation’s main opposition party pledged to switch diplomatic recognition to Beijing.

The left-wing Liberty and Refoundation Party (LIBRE), led by ousted former Honduran president Manuel Zelaya, on Sunday said that if it wins November’s presidential election it would seek to establish diplomatic relations with China and “readjust” the country’s debt.

The party is for a second time fielding Zelaya’s wife, Xiomara Castro, who set out her plans at a news conference in Tegucigalpa.

Xiomara Castro, presidential candidate for the Liberty and Refoundation Party, speaks at a news conference in Tegucigalpa on Sunday. Photo: Reuters

“I will order an international audit on the internal and external debt, and the readjustment of it,” said Castro, 61, without elaborating on what steps that would entail.

Honduras currently has diplomatic relations with Taiwan, but if victorious, Castro said she would “immediately open diplomatic and commercial relations with mainland China.”

Honduras is among only 15 UN member countries that maintain formal relations with Taiwan.

“Honduras must understand that the Chinese government’s promises have always been all flash and no substance,” Ministry of Foreign Affairs spokeswoman Joanne Ou (歐江安) said, adding that Beijing would try any “ploys to sabotage Taiwan’s diplomatic relations with our allies.”

The government was aware of the agenda outlined by LIBRE candidate Castro and would pay close attention to any developments, she added.

Taiwan and Honduras have enjoyed diplomatic relations for 80 years, during which they have cooperated on many successful projects universally supported by the Honduran government and its people, Ou said.

Building on this deep friendship, Taiwan would continue to improve cooperation and consolidate ties between the two nations, she added.

At the end of last year, Honduras had public debt of more than US$13 billion, equivalent to 55 percent of GDP, Honduran Ministry of Finance data showed.

Of that, US$8.45 billion was foreign debt.

No reliable polling has yet been published for the election, in which several candidates are to face Tegucigalpa Mayor Nasry Asfura, who is backed by Honduran President Juan Orlando Hernandez.

Hernandez’s rule has been dogged by allegations of vote-rigging in 2017 and accusations raised in US courts, which he denies, of his links to drug traffickers.

However, he remains an influential figure and his National Party is still the strongest force in Honduran politics.

Additional reporting by AFP