On May 11, the U.S. National Security Adviser Robert O’Brien and National Economic Council Chair Larry Kudlow wrote to U.S. Labor Secretary Eugene Scalia stating that the White House does not want the Thrift Savings Plan (TSP), a federal employee retirement fund, to have money invested in the stock of Chinese companies.
Secretary Scalia wrote to Michael Kennedy, the chairman of the Federal Retirement Thrift Investment Board, sharing the Kudlow/O’Brien letter noting the two have “grave concerns with the planned investment on grounds of both investment risk and national security.” (#1, Stock Times)
TSP manages near 600 billion dollars of retirement money for several million federal employees including Congressmen, White House staff, and military staff. It plans to invest about 4.5 billion dollars in the Morgan Stanley Capital International All Country World Ex-U.S. Investable Market Index (MSCI ACWI ex-USA IMI). That index covers 22 developed and 26 emerging markets and consists of large, mid, and small-cap stocks from more than 6,000 companies, including Chinese securities.
The MSCI index fund controversy is that it includes “many firms that are involved in the Chinese Government’s military, espionage and human rights abuses,” which Senator Marco Rubio and other U.S. law makers have repeatedly pointed out. For example, AviChina Industry & Technology Ltd. is the listing company for the Aviation Industry Corporation of China (AVIC) that develops manned aircraft, unmanned aerial vehicles, missiles, and other weapons systems for the People’s Liberation Army. AVIC and its subsidiaries have been the subjects of repeated sanctions for proliferation activities related to Iran, North Korea, and Syria. Hangzhou Hikvision Digital Technology (Hikvision), a state-run technology firm, provides tens of thousands of surveillance cameras throughout the Xinjiang Uighur Autonomous Region. The cameras support the Chinese Communist regime in detaining over one million Uighur Muslims and other ethnic and religious minorities. (#2, Senator Marco Rubio’s website)
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