Lead Republican McCaul: Dollars Invested in the TSP Will Now Benefit our Foreign Adversary

By: Congressman Michael McCaul (R-TX), Lead Republican of the House Foreign Affairs Committee 

Government Executive

November 18, 2019 

Every month, federal employees contribute part of their hard-earned paycheck into a retirement account known as the Thrift Savings Plan to invest in their future. Starting next year, the TSP will use an index fund that includes shady Chinese companies with goals that are in stark contrast to American interests and values. As an alarming consequence, American retirement dollars will contribute to Chinese companies that build weapons that could be used against the United States and our allies. 

Despite opposition from Republicans and Democrats in the House and the Senate, the Federal Retirement Thrift Investment Board decided on Wednesday not to change its decision to use the MSCI All Country World ex.-U.S. Investable Market Index (IMI) for its International Fund. This decision is indefensible and serves only to benefit our strategic adversary China. 

The index includes Chinese companies that threaten America’s economic and national security. For instance, Tencent Holdings, an integral part of the Chinese Communist Party’s industrial policies and one of four national champions for artificial intelligence, accounts for a significant number of shares in the IMI. Tencent is also heavily involved in the development of the social credit system, a dystopian system China has implemented to score its citizens’ behavior.

China’s state-owned Aviation Industry Corporation (AVIC) will soon also be a recipient of U.S. savings dollars. Concerningly, AVIC is the sole supplier of military aircraft to the Chinese People’s Liberation Army and a key part of Beijing’s plan to replace Boeing in commercial aircraft. This creates a scenario in which the success of U.S. federal employees’ retirement portfolio is tied to a Chinese company that has stolen American fighter jet technology and aims to put our commercial aviation industry out of business.

AVIC is also an important developer of the People’s Liberation Army’s growing missile force, which is specifically intended to counter U.S. and allied military advantages, sink aircraft carriers, and threaten U.S. service members. In October, the CEO of a subsidiary of the IMI posted a picture of one of these missiles with the caption “Express delivery to Guam?” The FRTIB’s decision to invest in these companies will use U.S. service members’ savings to empower companies that build weapons to use against them.

Additionally, ZTE, a state-directed telecommunications company part of the CCP’s surveillance apparatus, is on the index. ZTE has stolen American intellectual property and pleaded guilty to illegally proliferating U.S. technology to Iran and North Korea. This crime resulted in the U.S. government fining the company $1 billion. As a result of the TSP board’s decision, American taxpayers will be helping ZTE pay off a fine for doing business with countries that are developing nuclear weapons aimed at America. 

Moreover, many of these companies are simply bad investments. Because accounting books in China can be considered state secrets by the Communist Party, U.S. auditors are unable to conduct a complete audit of companies in China. Even for Chinese companies listed on American exchanges—which should have a high degree of transparency—U.S. regulators are given incomplete access to financial reporting. This is unacceptable and not how prudent investments are made.

I have already begun to work with my colleagues in Congress to remedy the TSP board’s misguided decision and to expedite the replacement of the board members who voted “yes” to changing the I Fund’s index. I am co-sponsoring a bill by Rep. Mark Meadows, R-N.C., that would have the effect of blocking the TSP from investing in Chinese companies. The bill is identical to one in the Senate.

As federal government employees, we work each day to try to make our country stronger and safer. It is inconceivable that our retirement money counteracts our daily work and mission. The Federal Retirement Thrift Investment Board’s decision is deeply disappointing. It is bad for our country and the financial security of federal employees.   

The op-ed originally appeared in Government Executive, here.