American investors are bankrolling China’s plan to drive the U.S. military from the Indo-Pacific region and risking their own retirement funds in the process, according to one of President Trump’s top advisers.
“Why are we sending American capital to a country and supporting a defense industry that’s popping out a couple destroyers and frigates a month and threatening to have total overmatch against us in the Pacific?” White House national security adviser Robert O’Brien said Wednesday at an event in Washington. “I don’t see why we should be underwriting the Chinese defense industry.”
O’Brien singled out the California Public Employees’ Retirement System, the largest retirement fund in the country, for a special warning that its investment decisions could harm both retirees in particular and U.S. national security in general.
“Some of the CalPERS investment policies are incredibly concerning,” he said. “If someone told me I had to invest my 401(k) in Chinese state-owned enterprises or partially state-owned enterprises, where they don’t follow the generally accepted accounting principles and they don’t have to report to independent regulatory bodies, I’d be pretty worried about that.”
CalPERS officials have rebuffed federal government complaints about their investments in Chinese stocks, which amount to roughly $72 million of the system’s $379 billion portfolio. “Our global investment portfolio is necessary for the pension fund to meet its 7% investment return target to pay retirement benefits for our members for the long term,” the fund emphasized in a statement last month.
Their investments drew congressional scrutiny after Secretary of State Mike Pompeo warned an assembly of state governors that Chinese communist agents could use offers “to invest big money in your state, perhaps in your pension” as a way to gain influence in the United States.
“The Chinese Government has been methodical in the way it’s analyzed our system, our very open system, one that we’re deeply proud of,” Pompeo said. “It’s assessed our vulnerabilities, and it’s decided to exploit our freedoms to gain advantage over us at the federal level, the state level, and the local level.”
O’Brien added that a lack of transparency around the finances of Chinese state-owned companies raises the risk of financial losses due to corruption.
“It’s something we’re taking a look at, and it’s concerning,” he said of the investments. “I’d rather underwrite the U.S. defense industry with our retirees’ money, and I’d feel safer with that money in U.S. companies’ hands.”
