US China interdependency

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Retirement board reverses on Chinese-linked index fund

In response to a White House directive, the Federal Retirement Thrift Investment Board said it would defer a planned decision to shift its international funds to an index that contained firms with links to the Chinese government.

“Due to a meaningfully different economic environment related in large part to the impact of the global COVID-19 pandemic, as well as the nomination of three new FRTIB Board Members, pending further study, the FRTIB Board is delaying the implementation of the I Fund Benchmark change to the MSCI ACWI ex-U.S. Investible Market index from the MSCI EAFE index,” the FRTIB said in a statement to reporters on May 13.

The announcement came after two White House officials wrote to the Secretary of Labor on May 11 asking him to immediately stop the FRTIB from investing in the MSCI All Country World Ex-US Investable Market Index.

National Economic Council Director Larry Kudlow and National Security Advisor Robert O’Brien opposed the shift, citing economic and national security concerns that the index contained firms that supported China’s military and surveillance operations.

They also noted that the ongoing COVID-19 virus had originated in the Wuhan province.

The FRTIB oversees the Thrift Savings Plan, which manages over $500 billion in federal employees' and armed service members’ retirement funds.

In November, the FRTIB reaffirmed a 2017 decision to invest its I-Fund in the new market index, drawing condemnation from both Democratic and Republican senators.

On May 6, President Donald Trump nominated three people to the board to replace current FRTIB Chairman Michael Kennedy and two other members whom former President Barack Obama had appointed to serve on the board.

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