JEFFERSON CITY, Mo. — In the upcoming Missouri treasurer’s race, one issue has taken center stage: China. As state treasurer, Vivek Malek has been a vocal advocate for divesting Missouri’s main retirement system from Chinese companies, making Missouri one of the first states to do so. Now, as Malek seeks reelection in the August 6 Republican primary, he is touting this divestment as a major achievement, while his challengers also denounce financial ties to China.
This race highlights a growing trend of opposition to China, which has been labeled as a top threat to the U.S. by many candidates seeking election this year. Indiana and Florida have also restricted their public pension funds from investing in certain Chinese companies, while similar legislation has been proposed in Illinois and Oklahoma.
China currently holds the title of the world’s second-largest economy, behind only the U.S. Between 2018 and 2022, U.S. public pension and university endowments have invested approximately $146 billion in China, according to an analysis by Future Union, a nonprofit pro-democracy group led by venture capitalist Andrew King. The report also states that more than four-fifths of U.S. states have at least one public pension fund investing in China and Hong Kong.
King believes that there should be more shame associated with these investments, as he asserts that China has used intellectual property from U.S. companies to create similar products at lower prices, directly competing with the U.S. technology and innovation ecosystem. He argues that these investments are not only detrimental to the U.S. economy, but also pose a national security risk.
However, some investment officials and economists have raised concerns that the emerging patchwork of state divestment policies could weaken investment returns for retirees. Ben Powell, an economics professor and executive director of the Free Market Institute at Texas Tech University, believes that most of these policies are unwise and would ultimately make U.S. citizens poorer.
The National Association of State Retirement Administrators also opposes state-mandated divestments, stating that such orders should only come from the federal government and be based on specific companies that pose a threat to U.S. security or humanitarian interests.
The U.S. Treasury Department recently proposed a rule prohibiting American investors from funding artificial intelligence systems in China that could have military uses, such as weapons targeting. In addition, President Joe Biden has blocked a Chinese-backed cryptocurrency mining firm from owning land near a Wyoming nuclear missile base, citing national security concerns.
This is not the first time that states have blacklisted certain investments. In the past, numerous states, cities, and universities have divested from South Africa due to apartheid, before the U.S. Congress eventually took action. Some states have also divested from tobacco companies due to health concerns.
More recently, some states have announced divestment from Russia due to its war against Ukraine. However, this has proven to be a difficult task for some public pension fund administrators.
The push to halt investments in Chinese companies comes as a growing number of states have also targeted Chinese ownership of U.S. land. Currently, two dozen states have laws restricting foreign ownership of agricultural land, according to the National Agricultural Law Center at the University of Arkansas. Some laws apply more broadly, such as one facing a legal challenge in Florida that bars Chinese citizens from buying property within 16 kilometers of military installations and critical infrastructure.
Clark Packard, a research fellow for trade policy studies at the libertarian Cato Institute, believes that state pension divestment policies are part of a broader trend towards increased confrontation between China and the U.S. However, he also acknowledges that this makes it more challenging for the federal government to manage the overall relationship if there is a scattershot policy at the state level.
Indiana became the first state to enact a law requiring the state’s public pension system to gradually divest from certain Chinese companies last year. As of March 31, 2023, the system had approximately $1.2 billion invested in Chinese entities, with $486 million subject to the divestment requirement. A year later, its investment exposure in China had fallen to $314 million, with just $700,000 still subject to divestment, according to the Indiana Public Retirement System.
Missouri State Treasurer Malek attempted to get fellow trustees of the Missouri State Employees’ Retirement System to divest from Chinese companies last November. After facing defeat, he tried again in December and
