Despite Divestment Talk, US Public Pensions Continue to Invest Billions in China
In recent years, there has been growing talk of divesting from China among US public pension funds. However, a recent report by Future Union, a non-partisan trade group, reveals that these efforts might be in jeopardy as public pension funds continue to invest billions of dollars in the Chinese market. The report states that American public pensions have invested approximately $68 billion in China over the last three years, with 72 pension funds across 42 states having investments in China or Hong Kong.
California and New York are the chief contributors to these investments. The New York State Common Retirement Fund leads the way with an investment of $8.392 billion, followed by the California Public Employees Retirement System (CaIPERS) and the California State Teachers Retirements System (CALSTRS) with investments of $7.8 billion and $5.559 billion respectively. Other states such as Washington, Pennsylvania, and Maryland have also made significant investments in China.
These investments come at a time when many state and local public pension funds are facing unfunded liabilities amounting to billions of dollars. A recent study by Truth in Accounting found that pension debt at the local level in the US totals nearly $176 billion, with post-employed benefits exceeding $135 billion. With such significant financial burdens, officials may be willing to explore every avenue to address their funding gaps, including investing in China.
It’s not just public pension funds that have diversified into China; universities and non-profit organizations have also committed funds to the Chinese market. The University of Michigan, the University of Texas, and the University of California are among the institutions that have invested billions of dollars in China. Notable foundations such as the MacArthur Foundation, the Carnegie Foundation, and the Andrew W. Mellon Foundation have also made sizable investments in Chinese-related private funds.
The US government has made efforts to restrict investment in China, particularly in sensitive sectors such as technology. The current administration issued an executive order prohibiting investment in specific Chinese sectors related to artificial intelligence, semiconductors, and quantum computing. However, critics argue that these efforts do not go far enough. They suggest that the US should consider stricter scrutiny of foreign investments, targeted sanctions, and incentives for divesting from critical sectors within China.
The House Select Committee has published a report stating that China’s economic model is incompatible with the World Trade Organization (WTO). The report recommends an end to US private equity investments in China and accelerated divestments. US officials are working to press institutions like the WTO for reforms to address China’s economic aggression.
As the WTO prepares for its upcoming ministerial meeting, there is hope that reforms and discussions will address the challenges posed by China’s state-led economic system. US Trade Representative Katherine Tai has highlighted the importance of reform campaigns within the WTO and the need for honest and difficult conversations to ensure the organization’s effectiveness.
In conclusion, despite the talk of divestment from China, US public pensions continue to invest billions of dollars in the Chinese market. While efforts have been made to restrict investment in sensitive sectors, critics argue that more needs to be done. The issue of investing in China is complex, with financial pressures and the need for reform within institutions like the WTO playing a significant role. As discussions continue, it remains to be seen how these investments will evolve and whether divestment efforts will gain momentum.
