Amid the escalating tensions between the United States and China, state governments in the U.S. are citing national security risks as they push for public pension funds to divest from Chinese companies.
In a report by “Nikkei Asia” on Thursday, Florida Governor Ron DeSantis signed a law this month requiring the state investment commission to cease investing $250 billion in entities owned by the Chinese government, Chinese Communist Party, or Chinese military with over 50% ownership. Following the signing of the bill, he stated that the law also mandates the withdrawal of all current direct holdings in Chinese companies to “ensure that foreign adversaries like China have no stronghold in our state.”
Reportedly, approximately $277 million from Florida’s major pension funds is invested in state-owned Chinese entities, accounting for 0.16% of the total fund. The largest investment is $54 million in China Construction Bank, followed by two investments totaling $46 million in Guizhou Maotai Distillery Co., Ltd.
The law in Florida mirrors a similar law passed in Indiana in May last year, which prohibits public employee retirement funds from being invested in entities blacklisted by the federal government or controlled by the Chinese government or Communist Party.
State legislatures in Illinois, Kansas, Missouri, and New Jersey are currently reviewing legislation mandating the forced divestment of state pension funds from China.
Chris Garten, a Senator from Indiana and a co-sponsor of the bill, stated that Indiana’s $50 billion state pension fund withdrew $526 million from China-related investments last year. The State Pension Fund Oversight Committee mentioned that there are still $711 million in investments related to China that are not subject to the divestment requirements.
Garten told “Nikkei Asia,” “Americans are clashing with the Communist Party of China every day, and I cannot accept the fact that over $1 billion from the hard work of Hoosiers was invested in the Chinese Communist Party last year.”
Under the new law in Florida, the investment commission must formulate a divestment plan by September 1 and fully exit within two years of the plan’s implementation.
Meanwhile, the Indiana State Pension Fund Committee indicated that they largely completed divestment in September last year and are currently working to divest the remaining $40 million with a timeline that minimizes the impact on the fund.
Previously, in November last year, the U.S. federal government decided to exclude stocks listed in China and Hong Kong from its retirement investment portfolio and expressed skepticism toward investment relationships established between public fund committees holding American funds and China.
Future Union, a non-partisan organization focused on transparency in capital and corporate investment in democratic countries, Executive Director Andrew King stated, “The issue here is the risk and whether funds can be withdrawn from China.”
He added that public pension fund investments have supported technological innovation in China, which now competes with American companies.