Federal Retirement Fund Poised to Allow Investment in Xinjiang Genocide-Linked Firms, Lawmakers Warn

The independent government agency that oversees a retirement fund for over 6 million federal-government employees and service members is poised to allow investments in Chinese firms linked to the Chinese Communist Party’s genocide of Uyghurs, Congressional Republicans warned.

They also accused that agency of willfully moving to violate existing U.S. sanctions — ignoring concerns about national security and human rights — out of a desire for cost efficiency.

That fund, the Thrift Savings Plan, is expected in June to allow investors to choose investment funds that contain at least six Chinese firms with documented business ties to the Xinjiang region’s paramilitary and shadow government arm. That Chinese Communist Party–controlled entity is a key part of Beijing’s efforts to destroy and replace ethnic minorities in the region, and in 2020 was blacklisted by the U.S. government.

The warning came from Representative Jim Banks in a letter sent today to Treasury secretary Janet Yellen and Labor secretary Martin Walsh. Banks is the chairman of the Republican Study Committee, the largest group of Republicans in the House of Representatives. Representatives Rob Wittman, Michael Waltz, Claudia Tenney, and Greg Steube — all of whom are leading GOP voices on China policy — also signed the letter, which National Review exclusively obtained.

Their concerns stem from the fact that the Federal Retirement Thrift Investment Board, the independent agency which administers the TSP, is set to allow its investors to invest in private-sector mutual funds, which comprise a range of different companies. According to a bulletin posted on May 10 to the Federal Register, that mutual-fund-investment window will open on June 1.

The lawmakers said that FRTIB has not provided transparency on the mutual funds it will open to federal investment, which makes it difficult to know precisely which Chinese firms may benefit from the move. The lawmakers, however, listed a few that are likely to be included.

“Based on a review of the current mutual fund market, funds in the window are likely to include: companies that are currently sanctioned by the United States for using Uyghur forced labor, e.g. KTK Group Co.; and entities that maintain close business ties with the Xinjiang Production and Construction Corps (XPCC), which is sanctioned under the Global Magnitsky Act for its role in the gross violation of Uyghurs’ human rights,” they wrote.

The Trump administration put the XPCC on the Global Magnitsky list in July 2020 for its significant role in the Xinjiang atrocities. The organization is a de facto governing structure within Xinjiang, providing schooling and social services to residents on land which it controls. It also operates prison camps and cotton harvesting operations—which are documented to use significant degrees of forced labor.

The lawmakers pointed to six companies which use XPCC forced labor-produced cotton. FFRTIB is poised to violate the Global Magnitsky designation, they warned.

In addition, they demanded that FRTIB scrap its plans to open the mutual fund window and that the Treasury Department investigate the companies for their ties to the XPCC and to sanction them accordingly. They also asked Yellen to impose “secondary sanctions” which penalize firms that do business with the XPCC.

FRTIB’s board knew about this problem with this proposed mutual-fund window yet decided to ignore it, according to the lawmakers.

“When concerns about the TSP’s exposure to Chinese firms were raised in the FRTIB’s May 26, 2021 board meeting, FRTIB staff indicated that they considered it cost prohibitive to try to screen the 5000 mutual funds in the window and therefore would not be taking any steps to ensure the integrity of the funds or provide guidance to TSP investors on this matter.”

This is hardly the first controversy surrounding FRTIB’s inclinations toward allowing millions of U.S. investors to fund Chinese firms. In 2020, the agency abandoned a similar plan to add Chinese stocks and bonds to its holdings after bipartisan Congressional outrage. Then-President Trump also intervened to oppose the move, according to Chaos Under Heaven, a book by Washington Post columnist Josh Rogin about Trump-era China-policy decisions.

Banks blamed the Biden administration for failing to speak out against the forthcoming move.

“Under the new administration the TSP Board is again planning to invest Americans’ savings in blacklisted Chinese firms by exploiting a loophole,” he told National Review. “I hope that the Democrat lawmakers who opposed the board’s cynical and shortsighted decision in 2020 speak out and pressure Joe Biden to follow President Trump’s example.”

This fund’s anticipated investment, on behalf of American public servants and armed services members, in Chinese firms linked to genocide is only going to make an already-sorry situation worse. Previous efforts, during the Trump era, to force the TSP to divest from its current Chinese holdings, were rebuffed by the fund’s board.

More sweeping changes need to come from Congress. The American Securities Association, a trade group that has warned about U.S. financial institutions’ ties to China, called this month for Congress to pass a provision, as part of a broader China-focused legislative package, to remove Chinese companies from the fund.

Editor’s Note: This piece has been updated to reflect that the Thrift Savings Plan is a retirement investment plan and not a pension fund, as previously stated.