OPINION:
As the Senate considers a defense bill, Sens. Marco Rubio, Florida Republican, and Jeanne Shaheen, New Hampshire Democrat, are pushing for an important bipartisan amendment. They want to protect federal employees from unwittingly investing in America’s greatest geopolitical adversary, China.
The Rubio-Shaheen amendment — based on their Taxpayers and Savers Protection Act — would prohibit the federal retirement Thrift Savings Plan, or TSP, from investing in Chinese companies that the U.S. government has identified as national security risks involved in the use of forced labor or aiding the modernization of China’s military.
The TSP is the federal retirement and savings plan for government employees and members of the U.S. armed forces. According to data collected by the Coalition for a Prosperous America, the TSP has been funding China’s military-industrial complex and its forced labor industry.
In June 2022, the TSP introduced a mutual fund window, a new option allowing TSP participants to invest up to 25% of their account in a choice of 5,000 mutual funds managed by providers such as Vanguard, Fidelity, T. Rowe Price and others.
CPA has found that the MFW includes companies affiliated with or controlled by the Chinese Communist Party. That means TSP participants — largely without their knowledge or consent — can invest directly in Chinese entities.
And last August, the No TSP for the CCP Coalition found that the 10 largest international and emerging market funds offered by the MFW weighted an average of 22% toward Chinese securities.
The coalition analyzed five funds that “represented a diverse cross-section of major mutual fund providers.” It found that they contained companies on the U.S. Entity List, with links to China’s surveillance state, military-industrial complex, and its use of Uyghur forced labor.
As part of its repression campaign in Xinjiang, Beijing has detained over 1 million Uyghurs and other ethnic minorities in “reeducation” camps, often releasing them into forced labor. This vast transfer system places up to 2.5 million ethnic minorities at risk of forced labor, and implicates large swaths of global supply chains, including 20% of the world’s supply of cotton, alongside tomatoes and polysilicon.
According to a new report by Radio Free Asia, forced labor in China also includes students under “secret agreements” with their high schools, forcing children to work 14 hours a day and endure verbal and physical abuse.
The CCP’s use of forced labor, mass internment, reeducation and cultural oppression makes China an unacceptable investment for average investors, let alone employees of the federal government.
The TSP’s inclusion of Chinese entities in its funds is not new. Despite commitments made in 2020, the Federal Retirement Thrift Investment Board, which is in charge of the TSP, has refused to remove 33 Hong Kong-listed Chinese companies from its index.
Since participation in the MFW is optional, concerns about the funds’ contents are the responsibility of the individual investor. But the board has indicated that it does not have the resources to analyze whether mutual funds contain Chinese companies. If the board doesn’t have the resources to analyze these funds, the average TSP participant likely doesn’t either.
The board insists that a tailored index excluding Chinese securities would be costly. But there’s a simple solution: Require fiduciaries that wish to be a part of the MFW to screen for Chinese securities within the funds.
There are numerous low-cost programs that fiduciaries could use to sort companies by country weight. And requiring asset managers to screen out Chinese companies would be at no cost to the board or TSP participants.
The TSP could simply switch indexes for its I-Fund, choosing from a variety of highly profitable international or emerging markets funds.
Even if screening Chinese companies out of the MFW were costly, time-consuming or inconvenient, these arguments would be feeble excuses to do nothing about Chinese entities encroaching on the TSP.
If the retirement savings of federal employees and members of America’s armed forces are being invested in companies that exploit human labor and fund a surveillance state hostile to the American people, then it is the duty of lawmakers, the Federal Retirement Thrift Investment Board, and the asset managers involved in the MFW and I-Fund to fix it.
• Andrew Bremberg is president of the Victims of Communism Memorial Foundation. Michael Stumo is the CEO of the Coalition for a Prosperous America.
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