U.S. Retirement Fund Would Face China Investment Ban Under Bill
U.S. Retirement Fund Would Face China Investment Ban Under Bill
(Bloomberg) --
Chinese stocks would be off limits to a U.S. government retirement fund under a bipartisan Senate bill to be introduced Wednesday, aimed at concerns that the investments would undermine national security and contribute to China’s economic and corporate growth.
The bill would block the Federal Retirement Thrift Investment Board from allowing its funds to invest in securities listed on mainland Chinese exchanges. Its introduction follows a move by the board to shift one of its funds to an index that includes Chinese companies by next year, although that decision could be delayed.
That index includes companies that are under U.S. sanctions and export bans, according to Republican Marco Rubio of Florida and Democrat Jeanne Shaheen of New Hampshire, the lead Senate sponsors of the bill.
They say that investing the retirement assets of federal workers in these kinds of companies could be a security risk and goes against U.S. interests.
“America’s investors should never be a source of wealth funding Beijing’s rise at the expense of our nation’s future prosperity,“ Rubio said in a statement. He added that the board, which oversees the Thrift Savings Plan for some public sector workers, “should not force U.S. service members and federal employees to unwittingly undermine the American national security interests that they work hard every day to protect.”
The proposal comes at a delicate moment for U.S.-China relations, as lawmakers urge solidarity with protesters in Hong Kong at the same time as the Trump administration is trying to finalize a trade deal between the world’s top two economies.
Although the bill has bipartisan support, there’s no guarantee that it will be considered by the Senate and put on the floor for a vote.
There is some urgency for the measure after the federal retirement fund board decided in 2017 to increase U.S. government workers’ investment exposure to Chinese stocks by mid-2020. Rubio and Shaheen have pressed the board to reverse that decision, repeating that plea in a letter sent before the board’s meeting last week.
In a statement for the bill’s introduction Shaheen said: “If the Federal Retirement Thrift Investment Board is going to drag its feet on reversing the decision that would allow this dangerous policy to go into effect, then Congress must act.”
Lawmakers say their concern was that switching the benchmark for the board’s $50 billion TSP I Fund to mirror an index with Chinese assets would undermine U.S. economic and national security.
The board met on Oct. 28 and conferred with its investment consultant regarding the recommendation to move the fund to a different index, according to Kim Weaver, the board’s spokeswoman. A decision on whether to advance the plan was delayed for at least two weeks. The board is expected to address the issue again at a Nov. 13 meeting.
The Senate proposal would prohibit TSP funds from being invested in companies on Chinese exchanges unless certain conditions are met and would preclude the savings plan from investing in products or stocks in countries where the Public Company Accounting Oversight Board is restricted from accessing financial accounting information.
The Chinese government has long refused to allow the PCAOB to examine audits of firms whose shares trade on the New York Stock Exchange, Nasdaq and other U.S. platforms. Alibaba Group Holding Ltd. and Baidu Inc. are among Chinese companies that have raised billions of dollars in the U.S. while avoiding PCAOB scrutiny, something the two countries have fought over for more than a decade.
Co-sponsors of the measure include Senators Kirsten Gillibrand, a Democrat, and Republicans Mitt Romney, Josh Hawley, Rick Scott and Mike Braun. Representative Mark Meadows, a North Carolina Republican, is introducing a companion bill in the House of Representatives.
To contact the reporters on this story: Daniel Flatley in Washington at dflatley1@bloomberg.net;Jenny Leonard in Washington at jleonard67@bloomberg.net
To contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, Anna Edgerton, Elizabeth Wasserman
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