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Outside the Box: Federal employees should not invest their retirement savings in Chinese companies

More than 6 million federal employees—including members of America’s armed forces—save for retirement through the U.S. government’s Thrift Savings Plan (TSP). In 2019, these employees were astonished to learn that the agency overseeing their pension savings—the Federal Retirement Thrift Investment Board (FRTIB)—was planning to invest billions of dollars of retirement funds in an array of Chinese firms.

After staunch bipartisan opposition from Congress, the FRTIB reversed its decision. Now, however, the FRTIB is once again considering a similar investment in companies controlled by the Chinese Communist Party (CCP).

Congress and the Biden administration should immediately scuttle this reckless plan.

Invest in 5,000 mutual funds

The TSP currently holds more than $735 billion in investments. Under the guise of boosting profitability, the FRTIB is now proposing to open a new “mutual fund window.” Doing so would allow TSP participants to invest up to 25% of their savings in roughly 5,000 mutual funds. 

Wall Street would certainly like to see this happen—since it would profit handsomely from commissions on the hundreds of billions of dollars invested in new mutual funds. But federal employees should be appalled, since they could unwittingly transfer hard-earned retirement savings to companies controlled by the CCP.

Incredibly, many of these companies have already been sanctioned by the United States due to national security concerns or human-rights abuses.

Both the Trump and Biden administrations took action earlier to block a similar plan by the FRTIB. President Donald Trump personally intervened when the FRTIB was first considering new China investments. And more recently, President Joe Biden issued an executive order expanding on the Trump administration’s efforts. As a result, Americans are now prohibited from owning securities issued by Chinese companies that pose a threat to U.S. national security, or that engage in human-rights abuses. 

Impossible to monitor

The FRTIB’s new proposal is equally troubling. The new rule on mutual funds envisioned by the board would apply to roughly 5,000 mutual funds. Realistically, it would be impossible to vet the 5,000 presumably “approved” mutual funds on offer—to ensure that none contain corporations owned or controlled by the Chinese Communist Party.

Additionally, such mutual funds could also permit TSP investment to flow to Hong Kong-based companies that are now virtually indistinguishable from other Chinese corporations owned and controlled by Beijing.

The danger of funneling U.S. funds into Chinese companies has actually grown in recent years. In 2018, the Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) warned investors that U.S. regulators face challenges when attempting to conduct oversight of companies whose operations are based in China and Hong Kong. Since that time, China has consistently withheld access to the documents that the PCAOB needs to carry out its oversight. 

The FRTIB’s proposal is especially egregious when one considers that Beijing is actively supporting Russia’s war in Ukraine. In fact, Beijing’s “no limits” alliance with Moscow includes China buying Russian oil and promoting disinformation on Ukraine war.

National security

In pursuit of short-term gain, Wall Street has consistently ignored the long-term risks of transferring capital to China. And now the FRTIB is failing to consider the national-security implications of transferring potentially hundreds of billions of dollars in TSP funds to investment products that contain opaque Chinese firms potentially engaged in human-rights abuses and a range of military-related activities.

Some in Washington are already raising the alarm. Republican Sens. Marco Rubio of Florida, Tommy Tuberville of Alabama, and Tom Cotton of Arkansas recently sent a letter to four of Biden’s FRTIB nominees, requesting that they commit to withholding TSP funds from Chinese firms that undermine U.S. national security. Rubio and Tuberville have also placed a hold on the nominations. 

In 2005, I deployed to the Middle East in defense of our nation along with my fellow Marines. Now, I find it unconscionable that the FRTIB would consider sending my retirement savings—along with the men and women I served with—to China. 

Federal employees who have spent their careers serving our nation should not inadvertently fund investments in companies that threaten U.S. economic and national security. Congress and the administration should immediately step in—and ensure that the FRTIB publicly commits to not investing a single dollar from the TSP in Chinese companies.

Aaron Ringel, a former assistant secretary of state for global public affairs, is vice president for international policy and advocacy at the Coalition for a Prosperous America, a lobbying group for farmers, ranchers, manufacturers, and labor organizations that make and grow things in the United States.

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