Chinese investment puts US government retirement funds at risk

As the trade standoff with China continues and the protests in Hong Kong escalate, the Chinese Communist Party’s aggressive tactics are becoming clearer.

For example, since 2013, China has been building and militarizing artificial islands and land features in the South China Sea. The Chinese Communist Party also has been building a massive surveillance state and concentration camps in the western Xinjiang region — where it imprisons and oppresses millions of Uyghur Muslims and other ethnic and religious minorities. The Chinese Communist Party recently deployed troops along the border and into Hong Kong in the midst of the ongoing protests and has issued an official defense white paper saying that it made “no promise to renounce the use of force” against any effort to recognize Taiwan as independent.

The scope and scale of the challenge that the United States now faces with the communist-ruled nation is massive. Frankly, the Chinese Communist Party is deploying an all-of-society strategy — both in China and across the globe — to further its own interests and expand its power. Much of this is done in violation of U.S. and international laws and at the expense of the human rights and freedoms of China’s people.

Now, despite all these dangers, a federal agency is seeking to put billions of dollars in federal retirement funds at risk by opening them up to Chinese influence and investment.

The Federal Retirement Thrift Investment Board (FRTIB) decided in 2017 to shift almost $50 billion of U.S. government pensions to mirror the MSCI All Country World Index Ex-U.S. (MSCI ACWI Ex-U.S.), to which China has access.

Previously, this $50 billion worth of assets mirrored an index that excluded China — the MSCI Europe, Australasia, Far East Index. The FRTIB (which oversees the Thrift Savings Plan that includes about $578 billion worth of assets and has more than 5 million participants) intends to make this shift in 2020. 

Many companies listed on the MSCI ACWI are known bad actors that actively pose serious risks to U.S. national security, violate human rights and engage in inadequate financial disclosure. Sens. Marco Rubio (R-Fla.) and Jeanne Shaheen (D-N.H.) recently submitted a letter to the chairman of the FRTIB urging an immediate reversal of the board’s wrong-headed decision.

Rubio and Shaheen wrote that the decision would result in China-based companies receiving U.S. investment even though many of these companies “are involved in the Chinese government’s military, espionage, human rights abuses, and ‘Made in China 2025’ industrial policy.”

The MSCI ACWI, for example, includes AviChina Industry & Technology Limited — a company that develops and produces aircraft and missiles for the People’s Liberation Army Air Force, PLA Naval Air Force and PLA Rocket Force.

It also includes China Unicom (Hong Kong) Ltd. and China Mobile Ltd. — two companies that provide telecommunications capabilities for China’s islands in the heavily disputed South China Sea and one of which (China Mobile) recently was barred from the U.S. market by the Federal Communications Commission because of national security concerns.

State-run Hangzhou Hikvision Digital Technology also is included in the MSCI ACWI and has played a key role in building the surveillance state in Xinjiang — tens of thousands of its surveillance cameras are installed throughout the region, including on the walls of the Uyghur concentration camps.

These are only a few examples of the egregious abuses committed by some of the companies that MSCI saw fit to include in its All Country World index, apparently without performing any national security-minded diligence. There is no justification for using the retirement funds of U.S. federal government employees and our U.S. Armed Forces members to advance the very security and human rights violations that our country is working to stop.

Rubio and Shaheen are right: “It is our responsibility to these public servants to ensure that their savings do not undermine the American interests for which they serve.”

Not only should we reject this action by the Thrift Savings Plan Board, but the American people also must hold private-sector investment managers accountable. As Roger Robinson, president and chief executive of RWR Advisory Group, observed: “This controversy should send an unmistakable message to Wall Street and other fund managers and index providers that henceforth the material risks associated with Chinese corporate national security and human rights abusers must be taken into proper account.”

Simply put, this FRTIB decision would provide the Chinese Communist Party with capital investment to further its nefarious aims — many of which are harmful to the United States, China’s neighbors and basic human rights. It also would put at risk the retirement funds of our civil servants and brave men and women in uniform.

This decision must be reversed immediately.

Newt Gingrich is host of the Newt’s World podcast. A Republican, he was speaker of the U.S. House of Representatives from 1995 to 1999. His upcoming book is “Trump vs China.” Follow him on Twitter @NewtGingrich.