California often serves as a cautionary tale for other states with its misguided policy choices informing other governors of what not to do. Most recently, California is under scrutiny for directing billions of dollars in its state retirement pension funds into companies connected to Chinese military expansion.
Last fall, California pensions held $3.1 billion worth of shares in 172 different Chinese companies. Their holdings include Chinese military contractors such as China Shipbuilding Industry Corp. and companies currently sanctioned by the Commerce Department for building surveillance and internment camps in Xinjiang, such as Hikvision.
“It’s outrageous that taxpayers in my home state of California are unwittingly funding the Chinese Communist Party activities aimed directly at the heart of America,” said Rick Manning, president of Americans for Limited Government.
Manning has taken a leadership role in a national coalition that is shining light on this security risk and calling on governors to divest their state pension funds of all Chinese companies. The coalition includes retired military leaders who warn that that pension fund abuses are not limited to California. U.S. mutual funds and pension funds, including private, state and local government pensions, have invested about $251 billion in Chinese and Hong Kong equities and bonds.
“Chinese military buildup represents a clear and present danger to our national security,” added Manning. “We must put an immediate stop to funding this build up with the hard-earned money of American taxpayers.”
Earlier this year, a diverse set of groups and individuals succeeded in getting the federal government to immediately halt all steps associated with investing Thrift Savings Plan assets in Chinese companies. The federal Thrift Savings Plan is a retirement savings and investment plan for federal employees and members of the uniformed services.
According to Sec. of Labor Eugene Scalia whose agency determines what are suitable investments for private pension funds and 401(k)s, said in a May 11 letter to the Federal Retirement Thrift Investment Board announcing the change, “The millions of federal employees, retirees, and service-members participating in the [TSP] Plan should not be placed in the untenable position of choosing between forgoing any investment in international equities, or placing billions of dollars in retirement savings in risky companies that pose a threat to U.S. national security.”
The obvious question that Manning posed to Secretary Scalia in a recent letter is, “if these assets are too risky for inclusion in the federal TSP, why would they be allowed to be included in private 401(k) investments where the same argument directly applies?” Manning continued, “The answer is that they are not, and under [federal law] it’s the Labor Department’s job to protect private sector retirement-specific investments or pensions from choices that are unsuitably risky.”
Adding to the dangerous national security implications of the California state pension investments, is the fact that it’s most recent chief investment officer, Ben Meng, a U.S. citizen who grew up in China, once was connected to a Chinese Communist Party recruitment effort called the Thousand Talents Program. The FBI has said Beijing uses this program for nontraditional espionage. The Senate Permanent Select Committee on Investigations revealed in a recent report several instances of the program being used for criminal abuses of U.S. institutions of all kinds. Meng was forced to resign earlier this month after allegations of ethics violations related to the pension fund investments.
“Every governor should look to this California train wreck and divest their state pension funds of all Chinese companies,” urged Manning, concluding, “Not only do these investments pose a national security threat, many Chinese companies are up to their necks in producing goods using child- and slave-labor. By allowing investments into these companies, states are effectively making individual 401(k) owners or pensioners parties to and profiteers from the exploitation of the victims of such cruel abuse.”
Catherine Mortensen is the Vice President of Communications at Americans for Limited Government.
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