Mike Gallagher (R-Wis.) is calling for a reformation of Wall Street’s investment strategy towards China. The initiative seeks to influence the investment decisions of major asset management firms, including BlackRock Inc. and Vanguard in the Asian nation.

"We just don't have the granular knowledge or the ability to enforce that. So even though it's a blunter instrument, I think a sector-specific prohibition that applies to both passive and active instruments, public and private investments, makes the most sense,” he added.

Currently, Wall Street is prohibited from directly investing in Chinese firms alleged to have connections to the country’s military.

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Despite Wall Street’s hesitation to get embroiled in the contentious debate over U.S. investment in China, Gallagher remains undeterred. His committee is expected to unveil its legislative recommendations before the end of the year.

Why It Matters: Gallagher’s initiative comes at a time when the U.S.-China relationship continues to be strained over several issues, including trade, cybersecurity, and human rights. The investment strategy overhaul would further complicate the relationship and could potentially lead to retaliatory measures from Beijing.

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