Banning pension investment in China hurts US retirees

By Wang Jiamei Source:Global Times Published: 2019/11/27 20:53:40

Banning pension funds in China hurts US retirees

An individual investor follows the stock market at a bourse in Nanjing, East China's Jiangsu Province, on Monday. The Shanghai Composite Index rose 5.6 percent, while trading volumes on the Shanghai and Shenzhen bourses surpassed 1 trillion yuan ($150 billion) on Monday. Photo: VCG
By seeking a legislative ban on investment in China, hardliners in Washington are actually blocking the Federal Thrift Retirement Investment Board (FTRIB) from pursuing investment decisions in its best interests, which will only see a backlash from financial markets.

After the federal pension fund indicated last week that it intends to press on with plans to shift billions of dollars to an index fund that includes some Chinese A shares, a group of politicians in Washington are still pushing a bipartisan bill that would force the federal retirement fund to change its mind.

The move clearly conflicts with the guidelines of the FTRIB, which is designed to offer federal employees a retirement plan similar to private employers' 401(k) plans with assets of nearly $600 billion under the Thrift Savings Plan (TSP). 

It is neither appropriate nor reasonable to deprive the federal retirement fund of an investment choice that is available to its peers. 

The implications of the discriminatory legislation can't be underestimated. The move seems like nothing but an attempt to sever Wall Street's ties to the Chinese market. This approach of politicizing rational financial investment decisions is clearly against the laws of economic and financial development, and it will only harm the interests of TSP participants in the end.

For any farsighted investors, the value of China's A shares has become so clear these days given, the relatively low valuations on the Chinese mainland stock markets, especially as US stocks keep rising to record highs. 

As such, a growing preference for the Chinese capital market could be totally justified based on recent studies and investment research papers from around the world.

Moreover, the continued opening-up of China's financial sector is the opportunity global investors can't and shouldn't miss when it comes to sharing the country's development dividends. For instance, foreign ownership limits for futures, mutual funds and securities firms will all be removed next year to welcome global investors including the TSP and other American retirement funds to better tap the Chinese market.

It would be regrettable in the end if the TSP changes its decision under political pressure in Washington. After all, a growing number of foreign institutions are interested in and bullish on investment opportunities in China's equities markets. 

According to media reports, a number of pension funds from Australia, Sweden and Canada have had portfolios in A shares through the Qualified Foreign Institutional Investors program. It is believed that with the expansion of investment channels, A shares will become more and more attractive to foreign institutional investors.

The author is a reporter with the Global Times.

Newspaper headline: Banning pension funds in China hurts US retirees


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