Mutual fund giant Vanguard recently announced plans to launch a new fund called the Vanguard China Select Stock Fund.
The Vanguard press release says the fund "will have estimated expense ratios of 0.83% for Investor Shares and 0.73% for Admiral Shares," or eight or nine times Vanguard's average expense ratio, which the firm says is 0.09%. It doesn't seem like a great opportunity to me, paying eight or nine times the ordinary price for the chance to invest in a country with one-party communist rule, no rule of law or free press, and what the U.S. government says is an ongoing genocide.
Adviser Investments, which keeps a close eye on Vanguard, wrote that "the new fund represents a significant departure from the broad-based indexes the Malvern, Pennsylvania, giant is known for: It will be the firm's first single-country fund, and it will be actively managed."
I initially suspected Vanguard might be doing this to try to curry favor with the Chinese government and win its permission to pursue Chinese investors as clients. Yet in Spring 2021, Vanguard reportedly abandoned its push for a mutual fund license to operate in China, and even "returned about $21 billion in managed assets to government clients in China."
You can already buy, through Vanguard, the "Vanguard ESG International Stock ETF." That ETF uses an environmental, social, and governance screen that excludes stocks in "alcohol, tobacco, weapons, fossil fuels, gambling, and nuclear power," and excludes "companies that do not meet certain diversity criteria." It has 10% invested in China, including in companies such as China Merchants Bank and China Construction Bank, whose most recent investor presentation boasts that it "explored collaboration with government departments." So if you are a company that makes weapons to allow free countries to defend themselves from China, you get screened out, but if you are a bank controlled by or part-owned by the Chinese government, you are okay for investment by this ESG ETF.
Anyway, I'm not here advocating that the U.S. outlaw investing in China the way it restricts investing in, say, Iran, or Cuba. Investing in plenty of American companies—say, Apple or Tesla or GM or Goldman Sachs—means owning a share of the considerable business they do in China. But I am not rushing to invest in the Vanguard China Select Stock Fund, at least until the U.S. government declares the genocide is no longer "ongoing."
Meanwhile, George W. Bush's Treasury Secretary, former Goldman Sachs CEO Henry Paulson, is featured on the website of the U.S.-China Green Fund, identified as "fund promoter Mr. Paulson."