Pension funds, top schools have billions in Beijing

WASHINGTON – American public pension funds have invested more than $68 billion in China – the US’ No. 1 adversary – since 2020, alarming finance experts who are warning about the national security risks in a new report obtained by The Post.

The bipartisan nonprofit Future Union found that 56 of the largest 74 American pension plans had put money into the Chinese market over the past 36 months — a period during which relations between Beijing and Washington have only grown more strained.

“In the past 12 months, 24 investments alone have been made, which should be acknowledged as support for the technological advancement of China,” the report said.

“Our research indicates four of the largest US public pensions have invested in China in the last few months,” it added.

Investments

In all, the new report says, various US public pension funds have more than $73.28 billion wrapped up in Chinese stocks.

Among the largest funds investing in Chinese companies are the New York State Common Retirement Fund — more than $8.3 billion — and the New York State State Teachers’ Retirement System, which has $3.1 billion committed.

Other top public pension funds investing in China are the California Public Employees Retirement System ($7.86 billion); the California State Teachers System ($5.55 billion); the Washington State Investment Board ($5.02 billion); San Francisco Employees Retirement System ($3.3 billion); and the Pennsylvania Public School Employees Retirement System ($3.2 billion), according to the report.

Dozens of public American school systems and universities’ endowment funds have also invested more than $7.6 billion in Chinese companies. Topping that list are the University of Michigan ($1.56 billion); Texas’ public school fund ($1.97 billion) and the University of Texas System ($1.6 billion); as well as the University of California Board of Regents ($1.55 billion).

“The threat posed by China to America’s national security is clear yet the managers of our retirees’ pensions and university endowments continue to feign ignorance and rue accountability, undermining America’s national interests,” Future Union executive director Andrew King told The Post. “That must end now.”

Private university endowments are also guilty of the questionable investments, but the total amounts are unclear as they do not have the same reporting requirements as public institutions, King said. For example, the group found that Columbia University, Harvard University and the University of Chicago have invested unknown amounts in China.

Still, Future Union tracked down enough information to determine that Princeton has at least $155 million invested in Chinese funds, followed by Stanford (at least $80 million), Yale (at least $50 million); Massachusetts Institute of Technology (at least $22 million); Duke (at least $20 million); and Carnegie Mellon (at least $10 million).

“The report is effectively an indictment against existing pension and endowment leaders who, up to now, have taken the path of least resistance in preserving optionality instead of demonstrating true leadership and doing what’s right instead of what’s easy,” King said.

‘It’s just got to stop‘

Though the investment data is concerning, King said he was not claiming any illegal activity, adding that many of the institutions “probably don’t know” that their funds are being invested in the Chinese market.

“Not every fund is a villain, and this report highlights the pensions, endowments, and nonprofit funds that are leading on this issue,” King said. “Others should follow their lead and take meaningful action.”

King also said Future Union did not want to accuse money managers of “intentionally backing China over the US,” but explained that investing in Chinese stocks is tempting given that Beijing tightly controls its market and can artificially inflate returns.

“They’re making investments in startups that are competing against us and democratically aligned countries with a rigged system where the [CCP] members basically put the thumbs on the scale of who wins, and so obviously returns are better,” he said.

“The fact is [investors] run portfolios, they want diversification and frankly, if the returns are good in China, they’re going to invest in try it out,” he added.

Still, he said, the conduct has “just got to stop,” given the threats such investments pose to the US government and American innovation and industry.

In a statement last week, former Pentagon chief technology officer Christine Michienzi called China “the leading threat to US national and economic security” – and noted investing in its market only enhances that threat.

“Efforts that assist China in growing its economy help erode US capability and provides China with an advantage in any potential military engagement,” she said. “Identifying these investors is a critical step in deterring this type of assistance and preventing China from continuing its quest for dominance.”    

Aside from committing a political faux pas, King said US investors in China assume “a non-zero risk” that Beijing could freeze the funds given current geopolitical tensions.

“Because the whole system is rigged in China, there may be a day where they don’t let you get your money,” he said. “It’s not encompassed any of the models that make these asset management firms run.”

Future Union, which works to “magnify the impact of the private sector and capitalism in preparation for global conflicts,” plans to present its findings to Congress after House Speaker Mike Johnson (R-La.) removed a bipartisan proposal to curb Pentagon investments in Chinese technology from the 2024 National Defense Authorization bill, which passed last week.

“The removal of legislation that would have restricted capital to China through the NDAA effectively sidelined Congress well into next year and for the foreseeable future,” King lamented. “It also evinced an uncomfortable truth that America’s elected leaders need help.”

“What we’re hoping to do is catalyze get some of the representatives back on the Hill to come around on this issue,” he added.

Such an initiative may have a chance in the new year, as Chairman of the Select Committee on the Chinese Communist Party Rep. Mike Gallagher (R-Wis.) told The Post that “Congress must act so that public pension dollars do not fuel the CCP’s economic, ideological and military aggression.”

“Under no circumstances,” he added, “should the retirement accounts of American workers fund the Chinese Communist Party, support forced labor or build the weapons that could someday be used against us on a field of battle.”