Financial officers from 15 states are urging public pension fund fiduciaries to sever ties with China-based investments due to concerns over the Chinese Communist Party's (CCP) influence on certain firms. The officers, including state treasurers from Alabama, Arkansas, Alaska, and others, emphasized the fiduciaries' duty to safeguard investments for future beneficiaries.
The letter highlights the CCP's control over Chinese companies, citing issues such as compromised financial audits and interference in stock and bond markets. The officers also raised alarms about the legality of Variable Interest Entities (VIEs), offshore shell companies commonly used for U.S. investments in China, which could face sudden legal challenges from the CCP.
Geopolitical tensions, like the potential Taiwan invasion, further fuel concerns among investors. The officers noted a decline in foreign investment in China, prompting fiduciaries in states like Florida and Indiana to reconsider their China-based investments.
Referencing a report by the House Select Committee on U.S.-CCP Strategic Competition, the officers highlighted how asset managers channeled billions into blacklisted Chinese companies. While U.S. government blacklists exist, they do not always restrict investment in listed firms, creating risks for investors.
The officers urged pension boards to analyze these risks and divest from China-based investments in line with fiduciary duties. They cautioned against repeating past mistakes, citing losses incurred by states during Russia's invasion of Ukraine. The call for divestment aligns with growing concerns over CCP influence and the need to protect pension funds from potential risks.
