In an op-ed for The Washington Post, U.S. Representative Mike Gallagher has questions (“Americans are unwittingly financing the CCP. It has to stop,” August 29, 2023):
Do you want your pension paying for China’s aircraft carriers?
Should your university’s endowment be underwriting the Chinese Communist Party’s genocide against the Uyghur people?
Would you like your retirement savings to be powering the CCP’s techno-totalitarian surveillance state?
These aren’t hypothetical questions. Millions of Americans have become financial backers of the CCP without knowing it. Their savings are funding companies that build weapons for China’s People’s Liberation Army as well as companies involved in the ongoing genocide in Xinjiang.
The answers of most Americans would be No, No, and No. So how can this be happening?
Well, most Americans are busy doing other stuff, not managing pension funds or mutual funds. Also, the U.S. government has been falling down on the job.
To tackle the problem, Gallagher suggests, first, tougher notification requirements. He argues that Congress “must establish much broader transparency measures across technologies critical to national security.”
Certain kinds of investments should simply be outlawed, such as “investments that support China’s military modernization, the CCP’s forced labor and genocide, or Beijing’s techno-totalitarian surveillance state…. [T]he U.S. government already blacklists many of these companies and prohibits them from purchasing American technology. Why do we allow Wall Street to shovel money to them?”
Also, “we must address all capital outflows to China, public and private,” which means expunging problematic investments in China from Americans’ retirement savings and pension funds and delisting culpable Chinese companies.
Finally, “we need to focus on sectors” and establish rules that won’t allow ETFs and mutual funds to help build fighter jets for the PLA in any way, shape, form.
We can’t play whack-a-mole imposing sanctions on individual companies that will inevitably change names and create subsidiaries to avoid restrictions. Nor will narrowly defining subcategories of technologies, as the Biden administration has done, suffice. Just look at the top PLA fighter-jet builder, Aviation Industry Corporation of China (AVIC). U.S. investors can’t hold AVIC securities, but AVIC subsidiaries are found in ETFs and mutual funds held by millions of Americans’ retirement accounts. Rather than creating an onerous, case-by-case review mechanism, we should give investors clear guidance over where they can and can’t invest, with an adequate but short glidepath to adjust.
Obviously, it’s an ugly mess, and it won’t be easy to fix. Congressman Gallagher is saying let’s get started.
