Despite ongoing human rights abuses, American finance company MSCI Inc. recently removed its forced labor red flag on a Volkswagen factory in China, a move now being questioned by U.S. Rep. John Moolenaar (R-MI) and a bipartisan, bicameral contingent of lawmakers.
In a May 30 letter sent to MSCI Chairman and CEO Henry Fernandez, the lawmakers noted particular concerns about MSCI’s decision to lift its “red flag” rating for Volkswagen’s jointly owned facility with Beijing’s state-owned SAIC Motor, which is located in the Xinjiang Uyghur Autonomous Region (XUAR) in the People’s Republic of China.
“As you are aware, the Chinese Communist Party (CCP) is currently committing genocide against Uyghurs and other predominantly Muslim ethnic groups in the XUAR,” wrote Rep. Moolenaar and his colleagues. “The CCP has subjected these populations to detention, forced sterilization, forced abortion, brainwashing, and several forms of forced labor.
“As a result, the XUAR operates what experts assess to be the world’s largest contemporary system of state-imposed forced labor, with more than two million people at risk,” according to the letter, which was also signed by U.S. Rep. Raja Krishnamoorthi (D-IL) and U.S. Sens. Marco Rubio (R-FL) and Chris Coons (D-DE).
Due to these activities in the XUAR, MSCI originally added its red flag rating on Volkswagen in 2022, they wrote. In response, Volkswagen commissioned Lӧning GmbH to conduct an audit on its facilities in the XUAR.
However, the audit apparently found no indications or exposure to forced labor, though the audit relied heavily on a Chinese law firm for on-the-ground inspections, according to the letter, and MSCI decided in December 2023 to lift the red flag rating on Volkswagen.
“Experts have noted that a reliable audit is unable to be conducted in the XUAR, given that Uyghurs and other ethnic groups cannot speak freely, and that conventional audit approaches are unable to assess the presence of state-imposed forced labor,” wrote Rep. Moolenaar and his colleagues, noting that Volkswagen has continued to partner with certain companies in China that appear to use forced labor since the red flag was lifted.
The lawmakers requested that Fernandez answer several questions by June 21 about MSCI’s decision in this situation.