Military and civilian personnel must not have their money enabling CCP threat

April 18, 2022

WASHINGTON, D.C.— Committee on the Present Danger: China (CPDC) Chairman Brian Kennedytoday wrote to the acting Chairman of Federal Retirement Thrift Investment Board (FRTIB), David Jones, in response to recent congressional and media revelations that, at its direction, the U.S. government’s Thrift Savings Plan (TSP) is poised once again to start investing TSP participants’ retirement funds in companies owned or controlled by the Chinese Communist Party (CCP). To do so, FRTIB will have to ignore directives by both President Trump and Biden and strong opposition on Capitol Hill, as well as the financial interests — to say nothing of the patriotism — of both uniformed and other federal employees, past and present.

Mr. Kennedy’s letter served notice with the following warning:

“It has come to the attention of the Committee on the Present Danger: China that the Federal Retirement Thrift Investment Board is proposing to open a ‘Mutual Fund Window’ in June. By so doing, it would make available to Thrift Savings Plan (TSP) participants the opportunity to invest up to 25% of their savings in one or more of some 5,000 mutual funds.

“The Committee is deeply concerned that the upshot of such an arrangement could be to induce past and present federal employees unwittingly to hold the equities of enterprises owned or otherwise controlled by the Chinese Communist Party (CCP), a number of which have been sanctioned by the United States for egregious national security and/or human rights abuses.”

Mr. Kennedy reminded the FRTIB members that President Trump personally intervened two years ago to prevent an earlier gambit by the Board to a similar end. Subsequently, President Biden issued an Executive Order updating and strengthening one issued by his predecessor in November 2020. As a result, U.S. persons and entities are effectively prohibited from owning securities issued by Chinese corporations that pose a threat to our national security, are engaged in surveillance or otherwise abetting CCP human rights abuses.

Today’s CPDC letter also highlights concerns publicly expressed to four Biden nominees to FRTIB within the past fortnight by three U.S. Senators — Marco Rubio, Tommy Tuberville and Tom Cotton:

“We are deeply concerned by the Federal Retirement Thrift Investment Board’s history of voting to invest federal employees’ retirement savings into China-based companies, including firms involved in the Chinese government’s military, espionage, human rights abuses, and aggressive industrial policy designed to undermine U.S. industry. The FRTIB’s previous actions have demonstrated a willingness to invest American retirement savings into Chinese companies working to undermine U.S. interests and national security, as well as exposing federal employees’ retirement savings to considerable risk. This cannot be allowed in the future.”

The Committee on the Present Danger: Chinastrongly agrees with the Senators and called on the Federal Retirement Thrift Investment Board “to postpone its implementation of a Mutual Fund Window until such time that these material risk, national security and human rights concerns are fully addressed.”

To that end, CPDC endorsed three important questions posed by Sens. Rubio, Tuberville and Cotton, which the Committee contends should be answered by serving Board members, as well as nominees to the Board awaiting confirmation:

• Do you commit to ensuring that the TSP’s I Fund does not mirror the MSCI All Country World ex-U.S. Investable Market Index?
• Do you commit to ensuring that no sums in the Thrift Savings Fund are invested in any security that is listed on an exchange in a jurisdiction in which the PCAOB is prevented from conducting a complete inspection or investigation of a registered public accounting firm under section 104 of the Sarbanes-Oxley Act of 2002 because of a position taken by an authority in that jurisdiction, as determined by the PCAOB?
• Do you commit to voting to ensure that no federal employee retirement funds go to any Chinese firms that undermine U.S. national security?

In addition, the Committee on the Present Danger: China believes that the following questions must be addressed as well by both serving and prospective FRTIB members before any further action is taken to open a Thrift Savings Plan Mutual Fund Window:

• Will corporations owned or controlled by the Chinese Communist Party be in any of the 5,000 presumably “approved” mutual funds offered by the Mutual Fund Window?
• Will such mutual funds permit TSP investment funds to flow to Hong-Kong-based companies — which are now indistinguishable from other Chinese corporations owned or controlled by the Chinese Communist Party?
• If so, would the presence of such equity offerings in the TSP Mutual Fund Window not be tantamount to a U.S. government endorsement (via FRTIB) of investing in companies effectively controlled by the Chinese Communist Party — something that was precluded by President Trump’s action two years ago?
• In the event CCP-owned or -controlled corporations are included in the portfolios of mutual funds offered by the Mutual Fund Window, would their presence and accompanying risk profiles (including officially sanctioned behavior etc.) be provided to TSP participants prior to being made available for selection?
• Will FRTIB be responsible for assuring that detailed due diligence has been performed on the financial viability and material risks associated with any and all CCP-controlled companies in which it may be, in effect, encouraging TSP participants to invest through the offer of risky, tainted mutual funds?
• Will FRTIB publish data on the Chinese and Russian corporate equity and debt holdings of each of these 5,000 mutual funds and which of these companies have been — or are currently — sanctioned by the United States?

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