This bill would prohibit index funds from investing in Chinese companies, with the goal of limiting American investment flows to China. The legislation defines a Chinese company broadly to include entities incorporated in China, those with majority assets or employees there, those controlled by the Chinese government, and companies whose value depends substantially on Chinese companies. Index funds that violate this rule would face civil penalties of up to $250,000 or twice the value of the prohibited transaction, whichever is greater. The bill provides a 180-day grace period from enactment for index funds to divest from existing Chinese company investments before penalties apply. The Securities and Exchange Commission would be responsible for writing the rules needed to enforce this prohibition.
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