The board overseeing Missouri’s state employee pension plan voted down a proposal by state Treasurer Vivek Malek to sell off any investments in Chinese stocks and other securities.
On a voice vote last week, the 11-member board of the Missouri State Employees Retirement System rejected Malek’s call to punish the Asian economic powerhouse for COVID-19, spy balloons and the fentanyl crisis by pulling its pension investments.
China has become a bad investment in recent years as its economy suffers from deflation, low population growth and an overbuilt housing market, Malek said in a Friday interview with The Independent. He also said China’s threatening posture towards Taiwan, and friendship with Russia, make investments there a bad choice.
“Given the economic decisions, and the economic projections, it is very clear that we should not be investing in China,” Malek said.
Doing business with China has become a political sore spot in the past few years. It was one of the first issues raised in the 2022 Republican Senate primary in Missouri and this year, the Missouri House passed a bill to limit the sale of farmland to investors from China and a handful of other countries. The bill died in the state Senate.
And the U.S. Senate in July voted to prohibit China, Iran, North Korea and Russia from purchasing U.S. farmland.
MOSERS provides pensions to most of the state government workforce. It is supported by contributions from the state treasury, employee payroll deductions and investment income. In recent years, returns on the system’s portfolio, valued at $8.8 billion in June 2022, have not kept pace with growing liabilities.
In 2001, Missouri contributed 12.3% of the state’s covered payroll to MOSERS. The state contribution rate for fiscal 2022 was 23.51% and the trustees have asked that it be set at 28.75% for the coming fiscal year.
Investments in China represent about $200 million of MOSERS’s investment portfolio, Malek said.
Many of the issues between the U.S. and China were topics for a meeting this week in San Francisco between President Joe Biden and Chinese President Xi Jinping. Xi agreed to help curb fentanyl production, the Associated Press reported, with Biden pressing Xi to refrain from sending military support to Russia and promise not to invade Taiwan.
“Those are issues of national interest for the United States and we should be looking at national interests” in state investments, Malek said.
Malek took office as treasurer in January by Gov. Mike Parson and is seeking election to a full term in 2024. Two lawmakers, House Budget Committee Chairman Cody Smith, R-Carthage, and state Sen. Andrew Koenig, R-Manchester, are also campaigning for the GOP nomination.
Malek has a seat on the 11-member MOSERS board because of his office, as does Commissioner of Administration Ken Zellers. The others are legislators, members of the pension system elected by other members, and appointees of the governor.
Two legislators reached for comment on Thursday’s vote were split. Senate Minority Leader John Rizzo, an Independence Democrat, voted against divestment, while Rep. Don Mayhew, a Crocker Republican, voted for it.
The MOSERS board should wait for guidance from the General Assembly on investments in China, Rizzo said.
“It was clearly being done for political purposes,” Rizzo said. “If this decision is going to be made, it should be done by the legislature.”
Mayhew said he supported Malek’s proposal and thinks it will be revisited at a future meeting.
“We were provided data that would tend to indicate that, at best, investing in China is a break even proposition, but recent history kind of indicates it’s probably a bad choice,” Mayhew said.
Soon after Russia invaded Ukraine, the MOSERS board voted to dump investments tied to Russia and bar investment managers from making future purchases of Russian securities.
Chinese investments have similar issues, Malek said.
“The truth of the matter is that investing in Russia was not safe for us,” he said. “And so it’s not for China.”
This story was originally published by the Missouri Independent, part of the States Newsroom.
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