Trump Weighs China Stock Ban for $50 Billion of Federal Savings

(Bloomberg) -- President Donald Trump is exploring blocking a government retirement fund from investing in Chinese equities considered a national security risk, a person familiar with the internal deliberations said.

The Thrift Savings Plan -- the federal government’s retirement savings fund -- is scheduled to transfer roughly $50 billion of its international fund to mirror an MSCI All Country World Index, which captures emerging markets, including China.

The Federal Retirement Thrift Investment Board overseeing the fund made a decision in 2017 that the money should be moved by mid-2020. Opponents of the transfer in recent weeks have engaged in a last-minute effort to stop it.

The action would possibly come in the form of an executive order, the person said. A senior administration official said no decision has been made at this time.

”Microsoft, Boeing, and Lockheed, among other major companies in the U.S., use the same index the TSP is implementing,” said Kim Weaver, a spokeswoman for the TSP. “The TSP is simply moving to parity with other American 401(k)s. The FRTIB has long held the view that the Office of Foreign Asset Control is the appropriate arm of the federal government to determine legal foreign investments for all Americans.”

The offshore yuan was among the biggest decliners in emerging markets Friday, weakening by the most in a month after the publishing of the report.

Senator Marco Rubio, a Florida Republican, applauded reports of the move in a statement Thursday.

“It’s outrageous that five unelected bureaucrats appointed by the previous administration have ignored bipartisan calls from Congress to reverse this short-sighted decision, and I applaud President Trump for directing his administration to take swift action preventing this from going forward,” he said.

Rubio and others have pushed for action and introduced legislation to force the fund to reverse its decision.

Stocks fell, with the S&P 500 declining 2.1%, the most since April 21, by 10:23 a.m. in New York.

Michael McCaul, the lead Republican on the House Committee on Foreign Affairs, welcomed Trump’s move.

“Pleased that the president is examining plans to stop federal pension-fund dollars from going to Chinese companies,” he said on Twitter, adding that the current situation “only serves to enrich” the Chinese Communist Party at “the expense of U.S. national security.”

©2020 Bloomberg L.P.

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