Morgan Stanley is currently under intense scrutiny from the Republican head of the US House China committee, Representative John Moolenaar, concerning its role as an underwriter for the $3.7 billion Hong Kong initial public offering (IPO) of Zijin Gold International Co. The transaction, which occurred in September, was notably the world’s largest such offering since May, co-led by Morgan Stanley and Citic Securities Co.

In a letter dated November 13 to Morgan Stanley Chief Executive Officer Ted Pick, Moolenaar specifically requested detailed information, including documents and communications, related to the IPO. The central issue revolves around whether the transaction may have inadvertently assisted Zijin Gold’s parent company, Zijin Mining Group. Zijin Mining Group is currently on a US government blacklist due to allegations of violating restrictions on using forced labor within China's Xinjiang region.

Moolenaar raised critical questions regarding the deal's structure, inquiring whether it was designed to consolidate Zijin Mining’s overseas gold assets under a distinct entity while simultaneously allowing Zijin Mining to retain its controlling shareholder status. He expressed significant concerns about the adequacy of Morgan Stanley's due diligence practices, given the company's inclusion on a U.S. government entity list, its association with human rights abuses, and its profound connections to the Chinese Communist Party.

Despite the controversy, Zijin Gold’s Hong Kong shares performed exceptionally well, climbing 68% on their first day of trading and doubling in value since their debut. This IPO marks Hong Kong's second-largest listing of the year, surpassed only by Contemporary Amperex Technology Co. Ltd.’s $5.3 billion mega deal.

The request for information from Morgan Stanley is part of a wider review initiated by the House Select Committee on China. This committee, led by Moolenaar, is investigating the involvement of Wall Street banks in IPOs of Chinese companies that have documented ties to China’s military or a history of labor abuses. Moolenaar starkly stated that Morgan Stanley’s underwriting of Zijin Gold’s IPO exemplifies the very type of commercial activity the US government aims to prevent. This action by the committee follows previous subpoenas issued in July to JPMorgan Chase & Co. and Bank of America Corp. regarding their involvement in CATL’s Hong Kong listing.