NCPA - National Center for Policy Analysis

Are State Pension Funds Ignoring U.S. Security Interests?

September 7, 1999

Some national security analysts are concerned that the massive California Public Employees Retirement System (Calpers) and the pension systems of at least two other states are investing in stocks of companies believed to have ties to the Chinese military or the mainland's intelligence networks.

The revelations have prompted two legislators on Capitol Hill, Reps. Spencer Bachus (R-Ala.) and Dennis Kucinich (D-Ohio) to sponsor a bill which would create a national security office in the Securities and Exchange Commission. They also wrote letters to all 50 state treasurers and attorneys general suggesting they review state portfolios to assure investments are consistent with "the vital national-security interests of our country."

  • Investor's Business Daily has identified four companies, Cosco Pacific Ltd., Citic Pacific Ltd., Citic Ka Wah Bank and China Resources Enterprise as "red chips" -- as extensions of mainland China's state-owned enterprises.
  • Although Calpers admits that it does not conduct any national-security review of its purchases, officials there blasted IBD's assertions as "inflammatory and inaccurate" and "McCarthyism at its worst."
  • A House task force earlier concluded that "Cosco is actually an arm of the Chinese military establishment" and noted that customs officials had caught one of its ships smuggling 2,000 automatic weapons into California.
  • The Teacher Retirement System of Texas also holds investments in Cosco, Citic Pacific and China Resources -- while Tennessee's state pension fund holds shares of China Resources, which Tennessee Sen. Fred Thompson (R) has called an agent of espionage.

The letters to the states have only elicited three responses so far.

Source: John Berlau, "A New Type of 'Calpers Effect,'" Investor's Business Daily, September 7, 1999.


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