China is waging economic warfare in its bid to replace the United States as the world’s dominant superpower.
Beijing uses the dollars Americans send them to buy, build, and steal the military and high-tech hardware it needs to achieve its goal to take over the world.
And the money comes from IPOs on Wall Street as well as aisle six in Walmart.
Even more outrageous than the merchant bankers listing dodgy Chinese and Hong Kong-based companies on U.S. stock exchanges is the federal government’s plan to invest its pension funds in those Communist party-controlled companies.
In case you hadn’t heard, Washington has a notion to send (even more) American taxpayer dollars to the Chinese Communist Party.
The Federal Retirement Thrift Investment Board oversees the Thrift Savings Plan, the retirement fund for federal workers and members of the armed services. In November 2017, the board decided the Thrift Savings Plan’s international stock fund should invest in an index fund known as the Morgan Stanley Capital International—All Country World Index (MSCI ACWI.)
Among the China-headquartered companies whose shares are included in that index are ZTE Corporation, Hikvision, and the Aviation Industry Corporation of China (AVIC).
These companies have been sanctioned by the U.S. government and are involved in human rights abuses and activities threatening America’s national security interests.
ZTE is a cyber-espionage arm of the People’s Liberation Army disguised as a telecom company. Hikvision makes the surveillance equipment used in western China, where over 1 million people have been imprisoned in concentration camps for the “crime” of being Muslim.
Hikvision’s parent company, China Electronics Technology Group Corporation, was added to the Commerce Department’s “entity list” in August 2018 for “acting contrary to the national security or foreign policy interests of the United States.”
The 2019 National Defense Authorization Act flatly prohibits the U.S. federal government from procuring equipment from ZTE and Hikvision.
AVIC is China’s top defense contractor, owned by the Chinese government. It develops manned aircraft, unmanned aerial vehicles, missiles, and other weapons for the People’s Liberation Army Air Force, People’s Liberation Army Naval Air Force, and People’s Liberation Army Rocket Force. AVIC built its stealth fighter based on plans for the American F-35 jet stolen by Chinese hackers and has been sanctioned for selling weapons to Iran, North Korea, and Syria.
So on the one hand, officials at the highest levels of the Pentagon, Treasury, Commerce, intelligence agencies, and the White House have identified these companies as a threat to our national security. On the other, the deep state bureaucracy wants to take money from the paychecks of federal employees and uniformed servicemen and give it to our enemy.
Speaking at the Committee on the Present Danger: China, U.S. Representative Jim Banks (R-Ind.) drily noted, “It seems ironic that federal employees’ funds would be used to support our adversaries” since “many of these employees spend their entire career[s] countering adversarial actions by countries like China.”
Banks is sponsoring legislation, HR 2903, that would stop the giveaway.
And Banks is not alone. Senators Marco Rubio (R-Fla.) and Jeanne Shaheen (D-N.H.) are asking Michael Kennedy, chairman of the Federal Retirement Thrift Investment Board, to reverse his boneheaded decision.
In their letter to Kennedy, Rubio and Shaheen point out that apart from the national security risks, American investors easily could be defrauded.
“The dangers of fraud and deceit are well-documented for companies listed on Chinese exchanges, which are not transparent or subject to the disclosure requirements that American companies must abide by. For example, in April 2019, Kangmei Pharmaceutical Co., a Chinese company that has been included in this MSCI index or its sub-indexes, admitted to falsely overstating the value of its cash holdings by $4.4 billion. Moreover, Ruihua, China’s second-largest domestic accounting firm and the client of multiple Chinese firms in the MSCI indexes, was implicated in a scandal over the quality of its audits,” the senators wrote.
This points to another, larger problem.
The U.S.-China Economic and Security Review Commission has identified 156 Chinese companies, including 11 state-owned-enterprises, with a combined market capitalization of $1.2 trillion listed on America’s three largest stock exchanges. If you think U.S. rules and regulatory oversight applied to all companies listed on U.S. exchanges, think again.
Beijing treats its companies’ accounting information as state secrets and blocks American regulators from auditing their books. Chinese companies listed on American stock exchanges are as opaque as they come.
The Securities Exchange Commission could issue a regulation making all companies subject to the same standards. (Why they haven’t done so is a mystery.)
Congress is ready to act if the SEC won’t. A bipartisan group of lawmakers, including Senators Rubio, Bob Menendez (D-N.J.), Tom Cotton (R-Ark.) and Kirsten Gillibrand (D-N.Y.), along with Representatives Mike Conaway (R-Texas), Tim Ryan (D-Ohio), and Mike Gallagher (R-Wis.) have introduced legislation to delist foreign companies that do not comply with U.S. accounting and oversight regulations. That would force the Chinese government to let U.S. regulators view full audit reports of publicly traded companies headquartered in Hong Kong and mainland China that are listed on U.S. stock exchanges.
Common sense says Chinese companies that want to be listed on U.S. exchanges should comply with U.S. laws and regulations for financial transparency and accountability.
They don’t, and that shows the deep dysfunction of the Wall Street-Washington cartel.
Wall Street financiers, whose highest principle is “love for sale,” make a fortune listing Chinese companies on U.S. exchanges. They justify their treason by leaning on a foreign policy establishment that believes, “You never have to say you’re sorry” or never admit to wrongdoing about anything.
They still refuse to admit their 40-year-old assumption that building up China would curb its rulers’ authoritarian brutality was disastrously wrong.
Vladimir Lenin said capitalists would sell him the rope he’d use to hang them with. Now, Wall Street and Washington want to send Beijing the money they’ll use to buy that rope.
We can’t let that happen.