by Robert Romano
Citigroup Inc., JPMorgan Chase & Co. and Morgan Stanley are underwriting part of what could be a $40 billion initial public offering (IPO) for Ant Group Co. in Hong Kong and Shanghai, which China-controlled megacorporation Alibaba owns a 33 percent share of, raising concerns that the money will be ultimately funneled to the Chinese Communist Party (CCP) and military.
The move by prominent U.S. banks, particularly to underwrite the IPO in Hong Kong, also legitimizes China’s takeover of Hong Kong. With the national security law being imposed on Hong Kong, the Trump administration has declared China in violation of the 1984 Sino-British Declaration treaty, since autonomy for Hong Kong was not supposed to lapse until 2047 under the treaty. And President Donald Trump has waived trade privileges for Hong Kong.
The Trump administration is also withdrawing federal employee retirement investments from China — leading the world in divestment from Beijing.
All of which calls into question why Wall Street is now expanding its operations in favor of the CCP. Why are these investment banks supporting the crackdown of human rights in Hong Kong?
There is no question of Ant Group and Alibaba’s ties to the CCP. Alibaba co-founder and former executive chairman Jack Ma is a member of the Chinese Communist Party who hand-picked his successor Daniel Zhang and in Sept. 2019 China began officially assigning state officials to work at 100 companies including Alibaba as part of its Party Committees system to govern boardrooms.
The CCP is using Party Committees to expand “its authority and supervision over organizations, creating different nuances of corporate governance with Chinese characteristics,” Federica Russo reported at the Diplomat in Dec. 2019.
Russo explained, “A Party Committee is formed by a group of senior CCP members who are given a leadership position inside the halls of public and private companies operating in China. The legal pillars sustaining such a committee’s activity are marked in the 2012 Constitution of the Communist Party of China. In China’s state-owned enterprises (SOEs) the committee’s leading position refers to its competence in setting the right decision, keeping in mind the big picture, and supporting the meeting of shareholders and boards of directors to decide on major issues. Within private enterprises, however, it implements Party’s policies and operates through the Trade Union and the Communist Youth League Organization…”
The level of state control is complete, Russo reports, with the Party Committee “being responsible for the allocation of funds relative to important issues, cadres’ appointments or dismissals, and new projects… The members of the Party Committees could also become part of the board of directors or the executive team… The Party unit must oversee the system of appointment of the executives.”
Meaning, anyone investing in the initial public offering of Ant Group, which could be one of the largest in history, will be putting their money directly into the hands of the CCP.
The same can be said of the $381 billion that U.S. residents have invested in China and Hong Kong as of May 2020, according to the U.S. Treasury. A good chunk of the investment that includes manufacturing in China that is built on child and slave labor, according to the annual report on child and forced labor by the Department of Labor Bureau of International Labor Affairs. The report details any investment in companies producing textiles are made by child labor, artificial flowers, Christmas decorations, coal, footwear and garments and nails are made by forced labor, and bricks, cotton, electronics, fireworks and toys are made by child and forced labor.
In response, the Trump Administration and U.S. Customs & Border Protection is now moving to block the importation of some Chinese products produced with child and/or slave labor including tomatoes and cotton.
The Department of Defense has blasted a vast concentration camp system in China — what Beijing calls “re-education centers” — that could be housing up to 3 million Uighur Muslims in Xinjiang province alone. Assistant Secretary of Defense for Asian and Pacific Security Affairs Randall Schriver told a Pentagon briefing, “The [Chinese] are using the security forces for mass imprisonment of Chinese Muslims in concentration camps,” justifying the use of the term because “given what we understand to be the magnitude of the detention, at least a million but likely closer to three million citizens out of a population of about 10 million”.
And then there is the ongoing genocide for organs of political prisoners including Falun Gong, the Uighurs and others, according to the Independent Tribunal Into Forced Organ Harvesting from Prisoners of Conscience in China. The tribunal found, “Forced organ harvesting has been committed for years throughout China on a significant scale… of unmatched wickedness — on a death for death basis — with the killings by mass crimes committed in the last century.” The organ extractions allegedly occur while the victims are still alive in some cases.
What these Wall Street investment banks are doing, by underwriting these Chinese IPOs, with Beijing’s appalling human rights record, is beyond tacit consent — it is complicity. The money will support the CCP’s agenda top to bottom. It legitimizes the takeover of Hong Kong, endangers Taiwan and may even underwrite slavery and mass murder. History will one day look back on this moment and ask what they were thinking.
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Robert Romano is the Vice President of Public Policy at Americans for Limited Government.