U.S. Sen. Jeanne Shaheen, D-NH, has joined Sen. Marco Rubio, R-Fla., in calling on administrators of the federal government’s main retirement savings fund to reverse a decision that they say would shift billions in investments into Chinese companies supporting that nation’s military and espionage efforts.
“I’m glad to work across the aisle with Sen. Rubio and fight to ensure that the retirement savings of New Hampshire federal workers and members of our armed forces don’t go toward investments in companies that could help the Chinese government spy on Americans, commit human rights abuses and work against our country’s interests,” said Sen. Shaheen in a statement.
Shaheen and Rubio, both senior members of the Senate Foreign Relations Committee, sent a letter Monday to Federal Retirement Thrift Investment Board Chairman Michael Kennedy criticizing the board’s November 2017 decision to shift its International Stock Fund investment option to mirror an index that includes some controversial Chinese companies.
“This change, which is expected to be implemented next year, will expose nearly $50 billion in retirement assets of federal government employees, including members of the U.S. Armed Forces, to severe and undisclosed material risks” associated with those companies, the two senators wrote.
“It is well known that the Chinese Government uses state-owned and state-directed enterprises to control production, compete in global markets, and serve the Chinese Communist Party’s military, political, and economic goals,” wrote Shaheen and Rubio. “Many of these Chinese companies may soon receive investments directly from the paychecks of members of the U.S. Armed Services and other federal government employees because of your decision.”
The two sent copies of their letter to a number of top Trump administration officials, including Secretary of State Mike Pompeo, Treasury Secretary Steven Mnuchin, and Secretary of Defense Mark Esper.
“We’ve received it and we’re reviewing it,” said Kim Weaver, a spokesman for the agency, adding that they will respond in a “timely manner.”
The letter, which was reported Monday by the Financial Times, illustrates the increasing support in the U.S. for keeping up pressure on China over its trade and human rights policies. President Donald Trump has made China the central focus of his trade policy.
The board is an independent agency that administers a retirement savings plan similar to a 401(k) for federal civilian employees and military personnel. It decided last year to shift part of its portfolio to mirror the MSCI All Country World Index ex USA Investable Market Index.
In their letter, the senators said the decision could allow investment in companies that include AviChina Industry and Technology Ltd., the listing companies for the Aviation Industry Corporation of China and its subsidiaries that develop aircraft and weapons systems for China’s military. The index or its subindexes also have invested in China Mobile Ltd., a Chinese state-owned entity that the Federal Communications Commission voted in May to block from entering the U.S. market due to national security considerations.
The two raised other issues, including the risk of fraud by companies listed on Chinese exchanges, which aren’t subject to the same disclosure standards as U.S. firms.
The two senators are asking Kennedy to answer a series of questions by Sept. 6, including a request for detail about how the board reached its decision to make the change.
The questions include:
What criteria were used to identify and evaluate the suitability of a new index for the I Fund, and to what extent was due diligence related to security, human rights, and financial transparency performed by the board? What criteria did the board use when deciding that federal employees and military personnel should be investing in Chinese military modernization?
Were the members of the board aware at the time of the motion to adopt the new index for the I Fund that constituent firms of this index were previously subject to U.S. Government sanctions?
What disclosures is the board planning to issue to TSP participants warning them of the material risks associated with investment in Chinese firms, including those sanctioned by the U.S. government? How was the board planning to inform federal employees that the I Fund may invest in companies involved in the build-up of the People’s Liberation Army’s conventional and nuclear-related military capabilities as well as firms responsible for the Chinese Government’s Orwellian surveillance and egregious human rights abuses against Uighur Muslims and other religious and ethnic minorities in Xinjiang?
“Many Chinese companies included in MSCI indexes are not just involved in China’s military, espionage, and human rights abuses, they are also state-owned or state-directed enterprises used as tools by the Communist Party to undermine American companies and workers,” added Rubio.