The Daily Signal

EXPOSED: How Wall Street Funnels US Money to CCP

May 11, 2025

Chris Iacovella, CEO of the American Securities Association, sheds light on alarming Wall Street practices that allow companies controlled by the Chinese Communist Party to access U.S. capital markets. He reveals how American investments unknowingly fund activities related to human rights abuses and military developments in China. Iacovella discusses the Variable Interest Entity and Passive Index loopholes, emphasizing the urgent need for legislation to address these issues and safeguard American values against unfair economic competition.

07:50

Episode guests

Chris Iacovella

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Episode notes

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Quick takeaways

Wall Street's exploitation of loopholes allows Chinese companies to access U.S. capital markets, raising significant national security concerns.

Legislation is being proposed to identify and sanction Chinese firms linked to military activities and human rights violations, highlighting growing awareness.

Deep dives

Loopholes in Chinese Market Access

Wall Street exploits specific loopholes to allow Chinese companies to enter U.S. markets despite legal restrictions prohibiting foreign ownership in China. The concept of Variable Interest Entities (VIE) enables American investors to purchase shares of companies like Alibaba, but what they actually own are contractual rights associated with a Cayman Islands entity rather than the Chinese company itself. This system undermines shareholder rights and limits legal recourse for investors if issues arise. Furthermore, the passive index loophole permits Chinese firms not listed on U.S. exchanges to be included in index funds, creating an unfair competitive advantage over American small businesses that comply with regulations.

Intro

2min

Loopholes Allowing Chinese Companies in U.S. Markets

2min

Navigating Wall Street's Influence and Concerns Over China

3min

In this eye-opening episode of The Daily Signal podcast, Rob Bluey interviews Chris Iacovella, CEO of the American Securities Association. Iacovella recently testified before Congress about a disturbing financial reality many Americans are unaware of.

Iacovella explains how Wall Street exploits multiple loopholes that allow companies controlled by the Chinese Communist Party (CCP) to access American capital markets, despite laws prohibiting foreign ownership of Chinese companies.

Key points discussed:

How American investments are unknowingly funding CCP activities, including the internment of Uyghurs, PLA weapons systems, cyber attacks against the U.S., and what the State Department has classified as genocide
The "Variable Interest Entity" loophole: Americans who think they're buying shares in Chinese companies like Alibaba are actually only purchasing rights to a contract with a Cayman Islands company that contracts with the mainland Chinese company
The "Passive Index" loophole: Asset managers include mainland Chinese companies in index funds sold to U.S. investors, allowing these companies to access American capital without complying with U.S. laws and regulations
Bipartisan legislation from Rep. Andy Barr and Sen. John Cornyn aimed at identifying Chinese companies with ties to the military or specific technology infrastructure
Why China's economic competition is fundamentally unfair: "When you have slave labor, no environmental laws, no OSHA laws, and no labor laws, of course it's going to be cheaper"

Iacovella also explains the mission of the American Securities Association as a non-Wall Street trade association representing approximately 100 member firms across the country. Its mission is to "promote investor trust and confidence and to facilitate the flow of capital to small businesses across America."

Listen now to understand how your investments might be inadvertently supporting a foreign adversary and what you can do about it.

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