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president trump : no chinese stock for federal pension funds

(wed, 13 may 2020). president trump blames china for the coronavirus pandemic. his latest actions suggest a new phase of the trade war is about to begin. the president axed a plan to invest federal pension funds in chinese stocks. beijing is sure to bristle at the snub. could another trade war be next? president donald trump and the u.s. labor department are diverting billions of dollars away from the chinese stock market. on monday, the white house ordered a board charged with managing federal pension funds to end plans to invest in chinese stocks. the move could have massive geopolitical repercussions.

federal retirement thrift investment board oversees the thrift savings plan. it’s a pension fund for federal workers, including the u.s. military. tsp manages over $550 billion in assets for federal employees’ retirement plans.

in november, the thrift investment board confirmed plans to change its international equities fund to an index that includes chinese stocks. this week, labor secretary eugene scalia warned the changes would place, "billions of dollars in retirement savings in risky companies that pose a threat to u.s. national security".

now the u.s. is changing course and keeping chinese stocks out of its pension funds. the chinese government will undoubtedly perceive this as a symbolic slight, and as a substantive attack on its economic growth by donald trump. part of the concern stems from worries over a lack of transparency and regulatory scrutiny for chinese stocks. but also at issue is the chinese government’s role in the spread of coronavirus. $2.44 billion would have been invested in chinese stocks before the changes.

 

china could retaliate for pension snub
beijing is certainly unhappy with the news. donald trump has already ramped up the war of words against china in recent days. trump went so far as to suggest china let coronavirus spread to the u.s. as revenge for the recent trade war.

he also said there’s no question that the chinese government misled the global community about coronavirus. and he’s threatened to resume the tariff war in retaliation for coronavirus. that sent the u.s. stock market for a dive on fears of a renewed trade war with china. benchmarks rallied into the new year pricing in a hard-fought u.s.-china détente on trade.

but trump’s recent move is politically shrewd. he looks tough on china without going back on the trade agreement. if that provokes china to raise tariffs in retaliation, trump can also blame them for ending the short-lived truce. meanwhile, he could strike back by raising u.s. tariffs in response. let’s hope it doesn’t go that far.

 


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