The Trump administration is taking steps to block investments from federal retirement funds into Chinese equities, The Hill has confirmed.
National security adviser Robert O’Brien and National Economic Council Chairman Larry Kudlow in a Monday letter to Labor Secretary Eugene Scalia reportedly called for the Thrift Savings Plan, a federal employee retirement fund, to pull funds invested in Chinese equities.
The letter warned that the investments “would expose the retirement funds to significant and unnecessary economic risk, and it would channel federal employees’ money to companies that present significant national security and humanitarian concerns because they operate in violation of U.S. sanction law and assist the Chinese Government’s efforts to build its military and oppress religious minorities.”
“Further, the Federal Retirement Thrift Investment Board … is set to implement these plans during a time of mounting uncertainty concerning China’s relations with the rest of the world, including the possibility that future sanctions will result from the culpable actions of the Chinese Government with respect to the global spread of the COVID-19 pandemic,” the letter continued.
The administration officials also said the investments in the Chinese equities were “risky and unjustified.”
In a separate Monday letter, Scalia called for Michael Kennedy, the chairman of the Federal Retirement Thrift Investment Board, to shift the investments, adding that Scalia shared the letter from Kudlow and O’Brien and said the officials have “grave concerns with the planned investment on grounds of both investment risk and national security.”
Scalia’s letter also warns that because the federal government “matches” Thrift Savings Plan contributions, the investments “would result in the federal government funding activities that are diametrically opposed to U.S. military interests.” It says that moving the assets is “at the direction of President Trump” and calls for a response by Wednesday.
Fox Business first reported the developments.
“Investments in Chinese companies pose a significant and unnecessary economic risk to participants in America’s federal retirement system as China shields its own companies from the need to comply with U.S. securities laws, leaving participants without important protections and leaving these companies vulnerable to financial mismanagement and scandal,” a senior administration official told The Hill.
Trump has frequently blamed China for the coronavirus outbreak, claiming that Chinese officials could have acted sooner to stop the spread of the virus.
Last week, U.S. and Chinese trade officials discussed “phase one” of a deal signed in January, promising to uphold the plan and create a “favorable atmosphere” for trade between the two countries.
–This report was updated on May 13 at 3:11 p.m.