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As state treasurer, Vivek Malek pushed Missouri\u2019s main retirement system to pull its investments from Chinese companies, making Missouri among the first nationally to do so. Now Malek is touting the Chinese divestment as he seeks reelection in an Aug. 6 Republican primary against challengers who also are denouncing financial connections to China.<\/p>\n
The Missouri treasurer\u2019s race highlights a new facet of opposition to China, which has been cast as\u00a0a top threat to the U.S.<\/a>\u00a0by many candidates seeking election this year. Indiana and Florida also have restricted their public pension funds from investing in certain Chinese companies. Similar legislation targeting public investments in foreign adversaries was vetoed in Arizona and proposed in Illinois and Oklahoma.<\/p>\n China ranks as the world\u2019s second-largest economy behind the U.S.<\/p>\n Between 2018 and 2022, U.S. public pension and university endowments invested about $146 billion in China, according to an\u00a0analysis by Future Union<\/a>, a nonprofit pro-democracy group led by venture capitalist Andrew King. The report said more than four-fifths of U.S. states have at least one public pension fund investing in China and Hong Kong,<\/p>\n \u201cFrankly, there should be shame\u2014more shame than there is\u2014for continuing to have those investments at this point in time,\u201d said King, who asserts that China has used intellectual property from U.S. companies to make similar products that undercut market prices.<\/p>\n \u201dYou\u2019re talking a considerable amount of money that frankly is competing against the U.S. technology and innovation ecosystem,\u201d King said.<\/p>\n But some investment officials and economists have raised concerns that the emerging patchwork of state divestment policies could weaken investment returns for retirees.<\/p>\n \u201cMost of these policies are unwise and would make U.S. citizens poorer,\u201d said Ben Powell, an economics professor who is executive director of the Free Market Institute at Texas Tech University.<\/p>\n The National Association of State Retirement Administrators opposes state-mandated divestments, saying such orders should come only from the federal government against specific companies based on U.S. security or humanitarian interests.<\/p>\n The U.S. Treasury Department recently\u00a0proposed a rule<\/a>\u00a0prohibiting American investors from funding artificial intelligence systems in China that could have military uses, such as weapons targeting. In May,\u00a0President Joe Biden blocked<\/a>\u00a0a Chinese-backed cryptocurrency mining firm from owning land near a Wyoming nuclear missile base, calling it a \u201cnational security risk.\u201d<\/p>\n Yet this isn\u2019t the first time that states have blacklisted particular investments. Numerous states, cities and universities divested from South Africa because of apartheid before the U.S. Congress eventually took action. Some states also have divested from tobacco companies because of health concerns.<\/p>\n Most recently, some states announced a divestment from Russia because of its war against Ukraine.\u00a0But that has been difficult<\/a>\u00a0to carry out for some public pension fund administrators.<\/p>\n The quest to halt investments in Chinese companies comes as a growing number of states also have targeted Chinese ownership of U.S. land. Two dozen states now 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\u00a0facing a legal challenge in Florida<\/a>\u00a0that bars Chinese citizens from buying property within 10 miles (16 kilometers) of military installations and critical infrastructure.<\/p>\n State pension divestment policies are \u201cpart of a broader march toward more confrontation between China and the United States,\u201d said Clark Packard, a research fellow for trade policy studies at the libertarian Cato Institute. But \u201cit makes it more challenging for the federal government to manage the overall relationship if we\u2019ve got to deal with a scattershot policy at the state level.\u201d<\/p>\n Indiana last year became the first to enact a law requiring the state\u2019s public pension system to gradually divest from certain Chinese companies. As of March 31, 2023, the system had about $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, the Indiana Public Retirement System said.<\/p>\n Missouri State Treasurer Malek tried last November to get fellow trustees of the Missouri State Employees\u2019 Retirement System to divest from Chinese companies. After defeat, he tried again in December and won approval for a plan requiring divestment over a 12-month period. Officials at the retirement system did not respond to repeated questions from The Associated Press about the status of that divestment.<\/p>\n In recent weeks, Malek has highlighted the Chinese divestment in campaign ads, asserting that fentanyl from China \u201cis drugging our kids\u201d and vowing: \u201cAs long as I\u2019m treasurer, they won\u2019t get money from us. Not one penny.\u201d<\/p>\n Two of Malek\u2019s main challengers in the Republican primary\u2014state Rep. Cody Smith and state Sen. Andrew Koenig\u2014also support divestment from China.<\/p>\n Koenig said China is becoming less stable and \u201ca more risky place to have money invested.\u201d<\/p>\n \u201cIn China, the line between public and private is much more blurry than it is in America,\u201d Smith said. \u201cSo I don\u2019t think we can fully know that if we are investing in Chinese companies that we are not also aiding an enemy of the United States.\u201d<\/p>\n A law signed earlier this year by Florida Gov. Ron DeSantis requires a state board overseeing the retirement system to develop a plan by Sept. 1 to divest from companies owned by China. The oversight board had announced in March 2022 that it would stop making new Chinese investments. As of May, it still had about $277 million invested in Chinese-owned entities, including banks, energy firms and alcohol companies, according to\u00a0an analysis by Florida legislative staff<\/a>.<\/p>\n Florida law already prohibits investment in certain companies tied to Cuba, Iran, Sudan, Venezuela, or those engaged in an economic boycott against Israel.<\/p>\n In April, Arizona Gov. Katie Hobbs vetoed a bill that would have required divestment from companies in countries determined by the federal government to be foreign adversaries. That list includes China, Cuba, Iran, North Korea, Russia and Venezuela.<\/p>\n Hobbs said in a letter to lawmakers that the measure \u201cwould be detrimental to the economic growth Arizona is experiencing as well as the State\u2019s investment portfolio.\u201d<\/p>\n<\/div>\nRecommended Newsletter: <\/strong>CEO Daily provides key context for the news leaders need to know from across the world of business. Every weekday morning, more than 125,000 readers trust CEO Daily for insights about\u2013and from inside\u2013the C-suite. Subscribe Now<\/a>.<\/div>\n