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The majority of Americans agree that China poses the biggest external threat to the United States. Therefore, it would be incredibly alarming for them to discover that their retirement savings are actually funding Chinese companies.
Instead of supporting the revival of American industry, retirees are unknowingly contributing to the growth of China’s People’s Liberation Army, which is controlled by the Communist Party.
It is unacceptable for American retirees to unknowingly subsidize the industries of our greatest adversary. That’s why I have introduced the Protecting Americans’ Retirement Savings Act (PARSA). PARSA prevents private pension plans regulated by the Employee Retirement Income Security Act (ERISA) from making new investments in companies controlled by or based in our foreign adversaries, such as China, Russia, Iran, and North Korea. Additionally, it requires investors to disclose and explain their existing stakes in these nations and sanctioned entities.
China’s national flag is seen in front of cranes on a construction site at a commercial district in Beijing, China, Jan. 26, 2016.
(Reuters/Kim Kyung-Hoon)
A few years ago, I, along with other like-minded policymakers, expressed strong concerns about proposals to invest in Chinese assets through the Thrift Savings Plan (TSP), which is the pension plan for service members and federal workers.
In May 2020, the Trump administration prevented the TSP’s I Fund from investing in Russian and Chinese firms through an index. When Russia invaded Ukraine less than two years later, their stock market took a huge hit. The Trump administration’s decisive action protected federal retirees from significant financial losses. However, today, the Chinese holdings in ERISA plans pose a similar, unaddressed risk to private sector retirees.
Investing in a Chinese company comes with unique financial risks compared to investing in an American company. Due to the crackdown led by Chairman Xi Jinping, Chinese public accounting firms can no longer guarantee independence from the communist government. Just recently, Beijing even pressured staff at Enrst & Young China to wear communist party badges. The lack of auditor independence makes investments in China inherently riskier, as the financial health of Chinese firms cannot be confidently assessed.
ERISA plans are not managed by retirees themselves, but by designated fiduciaries, often investment managers. Fiduciaries are responsible for ensuring that investments comply with U.S. securities laws, including transparency standards. It is extremely difficult to verify if firms in hostile states, especially China, are adhering to U.S. laws. By sending American pension savings to China, investors are subjecting retirees to unnecessary risk.
A Chinese warship sails during a military drill near the Taiwan-controlled Matsu Islands that are close to the Chinese coast, on April 8, 2023.
(Reuters/Thomas Peter)
As a member of the Armed Services Committee and the China Select Committee, my primary concern is the significant national security threat posed by these investments. Potential U.S. investors need to recognize that Chinese companies are still under the control of the Communist Party, and their financial information can be accessed by the party at any time.
Most importantly, investing in China means investing in the Communist Party and its expansionist ambitions. These companies directly contribute to the Uyghur genocide and the growing military capabilities of the People’s Liberation Army, which threatens the United States.
ERISA plans are the main retirement savings plans for private-sector employees, covering millions of Americans. Safeguarding these plans is crucial, which is why ERISA was established in the first place. Since President Trump’s executive order regarding the TSP, several states, including my home state of Indiana, have divested pension funds from China. Private sector retirees deserve the same level of protection as federal and state employees.
It is not enough to rely on the Biden administration to take action against China. Congress must pass the PARSA Act to protect Americans’ retirement savings and deny our greatest adversary the capital it needs.
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