Trump Halts US Officials' Fund Investment in Chinese Stocks

US-China COVID-19 Conflict Spills into Capital Markets
"President Trump's Directive"
China Sanctions Also Suggested
Trade Deal Renegotiation Debate Continues Amid US Expansion of China Regulations

[Image source=AP Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The White House is drawing attention as it moves to block federal retirement pensions from investing in Chinese stocks. If this measure materializes, it is highly likely that the conflict between the two countries caused by the novel coronavirus infection (COVID-19) will spread to the capital markets.

On the 12th (local time), according to Fox Business and Bloomberg News, Robert O'Brien, White House National Security Advisor, and Larry Kudlow, Chairman of the White House National Economic Council (NEC), stated in a letter sent to Labor Secretary Eugene Scalia the day before that the White House does not want the Thrift Saving Plan (TSP) to invest in Chinese stocks.

Major foreign media explained that the issue is that TSP's own "International Stock Investment Fund" invests in stock indices that include Chinese companies.

According to CNBC, the Federal Retirement Thrift Investment Board (FRTIB), which manages the fund, was scheduled to start investing in the MSCI ACWI ex USA IMI index by the end of this year. According to Morgan Stanley Capital International, which designed the index, this index includes stocks of companies from developed markets and emerging markets including China.

In the letter, the White House pointed out that investing in Chinese stocks would expose retirement pensions to significant and unnecessary economic risks, stating that it would be "providing federal workers' money to companies (in China) that pose serious national security and humanitarian concerns."

The White House also pointed out that Chinese companies are operating in violation of U.S. sanctions and supporting the Chinese government, which is strengthening its military power and suppressing religious minorities.

The White House further emphasized, "The FRTIB is attempting to implement this (investment) plan at a time when uncertainties are increasing regarding the relationship between the rest of the world and China, including the possibility that future sanctions may arise from the Chinese government's negligence related to COVID-19."

This underscores the point that since sanctions may be imposed related to China's responsibility for COVID-19, U.S. investment funds should not be invested in these companies' stocks.

The TSP is widely subscribed to by the White House, federal employees, congressional staff, and the U.S. military. As of the end of March, it is a public institutional investor with assets under management totaling $557 billion. CNBC reported that about $41 billion of this is invested in international capital markets.

In this regard, Secretary Scalia, in a letter to Michael Kennedy, Chairman of the FRTIB, conveyed that Advisors O'Brien and Kudlow "have serious concerns about the planned investment based on investment risks and national security," and that the asset movement (suspension of investment in Chinese stocks) is "in accordance with President Trump's directive."

Cleat Willems, a partner at Akin Gump who served as a trade advisor in the Trump administration, expressed concern, saying, "While this issue includes various perspectives from a national security standpoint, investor protection is also an important matter." He argued, "U.S. authorities cannot access the accounting of Chinese companies listed on the U.S. stock market, which could put investors at risk."

This content was produced with the assistance of AI translation services.