By John Ubaldi, “Ubaldi Reports”

The coronavirus pandemic which has collapsed the global economy and caused over 30 million Americans to seek unemployment benefits and the recent jobs report by the U.S. Commerce Department showed that 20.5 million individuals lost their jobs in April bringing the nation’s unemployment rate to 14.7%.

This has never been seen since the economic turmoil of the Great Depression of the 1930’s, but what is even more troubling is that the California Public Employees’ Retirement System (CalPERS), the nation’s largest public retirement system is invested heavily in China.

This is the very nation where the pandemic originated and the very country who failed to warn the world, and allowed hundreds of thousands of infected individual’s to travel abroad including to the United States where it took the lives of over 78,000 Americans.

In “California Globe,” Edward Ring authored an article titled, “CalPERS is Heavily Invested in Chinese Companies,” by stating, “California’s public employees should know that their retirement funds have invested in companies controlled by the Chinese military, which manufacture parts for the DF-41 missile, along with a range of aircraft, unmanned aircraft systems, and airborne weapons.”

Many of the companies that CalPERS invest in deal directly with the manufacturing military equipment and surveillance equipment, from which these same companies are involved directly or indirectly with human rights abuses, suppressing labor rights, and the destruction of the environment across the globe.

Much of the problem with CalPERS is the pension managers are seeking that elusive 7-8% return on their investments that as they turn forego investing in Sudan or Iran, but continue to invest in China.

In 2018, CalPERS revealed that the pension funded numerous investments in China and Russia and continued in 2019, just not as much as the previous year with one such company being China Mobile Ltd.

China Mobile Ltd, operates as an investment holding company, which provides telecommunications and other related services in Mainland China. It offers communications services in all 31 provinces, autonomous regions and directly-administered municipalities throughout Mainland China and in Hong Kong Special Administrative Region.

China Mobile has partnered with Chinese telecoms equipment maker Huawei Technologies Co who has allegedly been linked to the theft of technology from the U.S., and the Trump administration has officially banned any company from using federal funds to buy any equipment from Huawei.

Roger Robinson, President and CEO of RWR Advisory Group, a Washington-based risk consultancy, is an expert on U.S. investments in China.  When reached for comment, he posed the following question, “Why would CalPERS hold in their investment portfolio Chinese and Russian companies either actively or passively via index providers, that have been sanctioned by the U.S.?”

Robinson who had served as chairman of the congressional U.S./China Economic and Security Review Commission, continued to focus on his remarks by highlighting the risks associated of investing pension funds in China, “Doesn’t being sanctioned represent an asymmetric material risk to the share values and corporate reputations of these companies, and if so, are California’s public employees being properly protected as investors?”

This practice of investing of pension funds in China has not gone unnoticed especially in lite of China’s duplicitous nature in its handling of the coronavirus, that U.S. Senator Marco Rubio (R, Florida) stated in a press release in June of 2019, “requested information from MSCI, Inc. (MSCI) regarding the company’s controversial decision to add Chinese companies in its equity indexes. MSCI indexes are listed on U.S. stock exchanges and available to retail investors. The MSCI Emerging Market Index includes 24 countries with emerging economies, including China. Specifically, Rubio requested information regarding whether MSCI examined the potential for funding Chinese companies involved in the Chinese government, Communist Party’s military, espionage, and human rights violations.”

CalPERS issued a statement on its investment policies, “We began investing in international stocks in the 1980s. Our pension fund has $200B invested in stocks around the world, including in China. We invest in nearly 50 countries, including the United States. Our global investment portfolio is necessary for the pension fund to meet its 7 percent investment return target to pay retirement benefits for our members for the long term.”

These may be constructive arguments that CalPERS makes, but should pension managers invest in authoritarian countries?

Bloomberg Businessweek in Sept 2018 issued a strong report that highlighted the abuses of China Communications Construction Co, which as of 6/30/2018, CalPERS owned shares in, the article mentions the fraudulent bidding practices, corruption, environmental violations, mistreatment of workers, national security concerns, and even a role in building Chinese military bases on reefs in disputed areas of the South China Sea. Bloomberg writes, “There’s no shortage of companies, including American ones that have been accused of bribery and environmental damage when operating abroad. Yet the number and scope of allegations involving CCCC set it apart.”

The Ring mentioned another Chinese company from which CalPERS holds shares in, is China Aerospace International Holding, a subsidiary of China Aerospace Science and Technology Corp., which is operated by the People’s Liberation Army, and China Unicom, a company which, according to the Washington Post, helped build and operate North Korea’s internet network.

The Jamestown Foundation reported this same Chinese company is a serial supplier of weapons to Iran, North Korea, Pakistan and Syria. Yet, to the mystification of all, in June 2008, the State Department dropped sanctions against the CGWIC.

Investing in foreign countries, especially China is legal, but this fly’s in the face of CalPERS own divestment principles, which can be found on page 15 of their Total Fund Investment Policy that places a premium on human rights.  China definitely doesn’t fit this criteria!

The various troubling human rights violations by the Chinese government in Xinjiang, Tibet, Inner Mongolia, Hong Kong, and within Central China, should concern CalPERS but CalPERS believes that engagement with the companies we own is the most fruitful way to enact change. In limited cases, divestment decisions have been mandated by legislative action and by the Board in accordance with our policies.”

This also has translated into a troubling article published in Epoch Times in July 2019 exposing alleged ties between the Chinese government and the Chief Investment Officer at CalPERS, Yu Ben Meng.  The premise of the article is Meng’s time spent as the deputy CIO at China’s State Administration of Foreign Exchange (SAFE), and his status as the Chief Investment Officer of California Public Employees’ Retirement System (CalPERS) in January 2019.

Currently CalPERS handles over $360 billion in assets, making it the nation’s largest pension fund.

China controls how SAFE handles and manages it’s over $3 trillion in foreign reserves.  According to Investopedia, “Its mandate includes the study and implementation of policy measures for the gradual advancement of the convertibility of the renminbi (CNY), China’s official currency.”  There would be no organization more important to Beijing’s global ambition, and SFAE would be intractably part of this.  Meng’s role as Deputy CIO would have place him in contact and would have him dealing with the most senior members of the Chinese government.

CalPERS reacted extremely negatively to the question, “Is it plausible to assume that when the Chinese hired Mr. Meng to occupy a high ranking position with SAFE from 2015-2018, that the Chinese government relied on his loyalty to the Chinese regime,”

CalPERS responded, “Your suggestion is patently absurd, and frankly, offensive. Ben Meng is a United States citizen born in China. He is globally respected investor, serves as a member of the CFA Institute’s Future of Finance Advisory Council, and is an associate editor for the Journal of Investment Management. Mr. Meng has a Ph.D. from University of California, Davis. In addition, he not only has master’s degree in financial engineering from University of California, Berkeley, but has also taught at the Haas School of Business where he was the recipient of the Cheit Award for Excellence in Teaching. Mr. Meng was hired by CalPERS after a rigorous recruitment for the CIO position and was found to be the most qualified and best-positioned candidate to lead the investment office and to help ensure the security and sustainability of the CalPERS fund.”

Meng’s own comments have to be ascertained in the context from which the United States faces with its relationship with China and the threat that it has posed in the past and one it currently poses today.

Here is a quote from Meng in the People’s Daily (using Google translator), and his reaction in 2017 to working again in his native China, after moving to the U.S. at age 25, “In a person’s life, if there is an opportunity to work for the motherland, this responsibility and honor is unmatched by anything.”

What does Meng mean by his comment of “motherland,” when China is America’s greatest geo-strategic threat by U.S. intelligence?

Epoch Times investigative reporter who has extensive experience covering China when he was asked to respond to Yu Ben Meng possible conflict of interest, “He was part of the Thousand Talent Plan which is operated by the Chinese regime, but we don’t have proof that he has ties to the Chinese Communist Party other than what is available to the public.”

The South China Morning Post reported in June 2018, “China’s ‘Thousand Talents’ program to tap into its citizens educated or employed in the US is a key part of multi-pronged efforts to transfer, replicate and eventually overtake US military and commercial technology, according to US intelligence officials.”

Ring asked numerous times of CalPERS but responded to multiple follow up requests to disclose whether or not Yu Ben Meng has ever received a security clearance from the Chinese regime, or was ever a member of the Chinese communist party. In a follow-up email, their statement read “We have no additional comments, other than what we’ve said: Ben is a U.S. citizen and an investor respected globally for his skill and integrity.”

Yu discussed the complexities and risks of investing in China, “There are so many uncertainties when you go to China to invest. Most investors have not thought through the circumstances in China. It is a country without any transparency. A country that puts the communist party above the law. If there is ever serious instability going on in China against the ruling communist party they will use whatever means available to control the investments and financial markets. If anything like that happens it is a big risk to all the investments from the US in China.”

Even the Atlantic offers a sobering assessment of China’s espionage against the U.S., but also counters to be careful of overreacting, “China is both a rival and a top trade partner. The economic and research relationship between the two countries benefits them both. At the same time, Chinese immigrants and visitors to America risk being unfairly targeted if U.S. officials fail to find the right balance.”

This challenge of highlighting the huge concern of investing public pensions in China also comes from U.S. Senator Jeanne Shaheen (D, New Hampshire), who is forging a bipartisan consensus by putting pressure on the Federal Retirement Thrift Investment Board which manages pension assets for federal employees, to “reverse a decision that is set to channel billions of US dollars into funding Chinese companies that they say support Beijing’s military, espionage and domestic security efforts.”

Ring made a good point ,with CalPERS unwilling to make Mr. Meng available for an interview, questions remain that are worth asking of him and his deputies in the CalPERS investment office: When are you going invest tens of billions in equity positions in California’s infrastructure projects? When are you going to accept lower rates of return, so you don’t have to chase emerging markets that include China, which is arguably the biggest security threat the United States has ever faced? And when are California’s public sector unions, to whom you answer, going to establish investment rules that benefit an American “belt and road” initiative, instead of furthering the strategic objectives of a murderous regime halfway around the world?

The U.S. should now know that China is not ever going to be a western style Democracy, it is and ever will be an authoritarian state bent on supplanting the United States as the preeminent global power, if we fail to realize this then Vladimir Lenin’s statement will ring true, “The capitalists will sell us the very rope from which we will hang them by.”