The White House on Wednesday pressured a second federal retirement fund to pull out hundreds of millions of dollars from American workers’ retirement funds from Chinese companies that have been linked to Beijing’s military and to human rights abuses.
National Security Adviser Robert C. O’Brien and Larry Kudlow, director of the National Economic Council, outlined their concerns regarding the investing of pension funds by the U.S. Railroad Retirement Board (RRB) to certain suspect Chinese companies.
The three-member board is an independent federal agency in charge of retirement benefits for railroad workers that is separate from the Social Security system.
“The investment of the retirement savings of hardworking Americans in Chinese companies is neither prudent from a risk perspective nor responsible from a long-term strategic perspective, especially given China’s culpable actions with respect to the pandemic,” said White House National Security Council spokesman John Ullyot.
As part of a boarder portfolio, the board’s National Railroad Retirement Investment Trust currently has holdings in Chinese companies involved in building missiles, military aircraft and telecommunications goods used in repression of minorities in China, Mr. O’Brien and Mr. Kudlow stated in a letter.
The amount of Chinese investments under scrutiny in the trust could not be learned. The Railroad Retirement Board reported it had $28.3 billion in assets under management two years ago, and had a beneficiary base of around half a million recipients in 2019.
The letter is the second time the White House has sought to curb the use of federal pension funds to China, part of a broader Trump administration campaign to highlight what it says is Beijing’s quest for an unfair economic and military advantage.
In May, the Thrift Savings Plan, which oversees more than $593 billion in savings for most federal workers retirement plans decided against investing in an index fund that includes questionable Chinese companies, including some that are under U.S. economic sanctions. The decision against the Chinese investment followed similar pressure from the White House.
The letter to the RRB asked board Chairman Erhard R. Chorle to reconsider allowing current retirement funds to continue to be invested in certain Chinese companies.
According to the letter, the Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) have found that China’s government has prevented the oversight board from seeing internal audits of Chinese companies.”This has prevented the PCAOB from conducting inspections of those firms’ audits of Chinese companies in violation of U.S. law,” the letter said. Chinese law “prevents the PCAOB from directly conducting its oversight function inside Chinese territory.”
While pension overseers traditionally have focused on the best and safest returns from investments in the U.S. and international market, the White House officials said such investments in Chinese companies expose American retirees to unacceptable financial risks.
The Chinese firms that received trust funds include Hikvision, a company linked to surveillance gear and other equipment used by Chinese security agencies against Uighurs in western China. More than 1 million Uighurs have been imprisoned in concentration camps as part of what rights groups say is Beijing’s mass repression of the Muslim ethnic groups.
Another company that received RRB retirement funds is the telecommunications company ZTE, which has been sanctioned by the Commerce Department for illicit dealings with Iran.
“In light of these economic, national security, and humanitarian concerns, we ask that you and your board carefully consider whether the NRRI Trust is currently acting as an appropriate fiduciary for those hardworking Americans and retirees the RRB serves,” Mr. O’Brien and Mr. Kudlow stated.
They also questioned whether it is appropriate for the trust to invest American retiree money “to fund China’s military industrial complex and human rights violations.”
Railroad Board spokesman Michael P. Freeman said the board is looking into the issues raised by the White House officials’ letter and plans to respond directly to Mr. O’Brien and Mr. Kudlow.
The investment trust is managed separately from from the RRB and is an independent, non-federal entity with its own board, he said.
“Our agency’s board will discuss the issues raised with the NRRIT as appropriate,” Mr. Freeman said in an email.