The New York Times :
The rivalry between the United States and China has spread to a fight over financial ties between the countries, pitting Washington security hawks against Wall Street investors.
Members of Congress and the Trump administration are warning that Chinese companies are raising money from American investors and stock exchanges for purposes that run counter to US interests. To help curb the flow of dollars into China, they have turned their sights on an unlikely target: their own retirement fund.
The Thrift Savings Plan is the retirement savings vehicle for federal government employees, including lawmakers, White House officials and members of the military. Beginning next year, the fund is scheduled to switch to a different mix of investments that would increase its exposure to China and other emerging markets. Lawmakers and some in the Trump administration are trying to stop that move, saying the change would pump federal workers’ savings into companies that could undermine national security or have been sanctioned by the United States.
Last week, a bipartisan group of senators sent a letter to the plan’s governing board urging it to reverse its decision. On Monday, Sen. Marco Rubio, said he would introduce bipartisan legislation to block the decision.
The push to forestall more investment in China is part of a broader effort by some officials in Washington to separate ties between the world’s two largest economies. It is also another indication that President Donald Trump’s conflict with China will persist, even if the United States signs a limited trade deal with Beijing later this year.
Some China critics are pressing Trump to go beyond the tariffs he has already imposed and erect larger barriers between the two countries, including restrictions on the flow of technology and investment.
In recent months, officials have been making more frequent calls to re-examine China’s presence in the stock portfolios of American investors. Administration officials, including members of the National Security Council, have begun pressing the Securities and Exchange Commission to increase scrutiny of Chinese firms, which have long skirted the auditing and disclosure requirements of American stock exchanges, putting investors at risk. Chinese law restricts the company documentation that auditors can transfer out of the country, limiting their visibility to US regulators.
Policymakers are considering more stringent proposals. In June, a bipartisan group of senators introduced legislation that would delist foreign firms that do not comply with US financial regulators for a period of three years.
Another area of concern is the decision by companies that compile major stock indexes to include more firms that are listed on Chinese exchanges. While investors can’t put money directly into an index, they can invest in a fund that mirrors an index’s particular basket of securities.
As global stock markets have steadily trended upward in recent years, more investors have turned to passive investing, in which a fund simply mirrors a major index, rather than active investing, in which fund managers try to pick certain stocks to outperform the market.
