With the recent downturn in its stock market, China is trying to present itself as a business-friendly destination and entice foreign entities to revive its struggling economy, as evidenced by how President Xi Jinping paid particular attention to business executives in Palo Alto during the APEC summit. Investors in the United States have taken notice. These institutional investors are a unique economic lever, largely untapped but immensely powerful. But the choice before them is not as simple as diversifying their portfolios. The choice is whether to invest in America’s future or China’s.
Unlike many major industrialized nations with sovereign wealth funds, the U.S. relies on a combination of private-public equivalents–its largest pensions, university endowments, and philanthropic foundations. Collectively, these entities wield a comparable influence to sovereign government-linked funds seen in other nations. When American investors expand their financial ties with China, these connections undermine our national interests by bolstering a competitor’s innovation economy and the advancement of the most cutting-edge technologies.
The all-volunteer team with which I work at Future Union–comprising venture capitalists, former White House officials, executives, and national security experts—works on identifying the capital flows that enable the advancement of China’s cutting-edge technology, which is pacing, or surpassing, the U.S. and our allies in many strategic sectors.
The staggering numbers revealed in our forthcoming report, The Rubicon Report: Conflict Capital, unveil a surprising adversary: Ourselves. The largest U.S. public pensions and university endowments, which are funded by state and local employees including our teachers, have invested upward of $1.6 trillion in alternative assets, making them some of the largest U.S. investors in private equity and venture capital. The alarming reality is that a significant portion of this capital is invested in companies that directly compete with U.S. startups, ultimately aiding China's innovation ecosystem.
Public pensions have been a significant contributor, pouring a whopping $68 billion into China in the past five years alone. Even as tensions with Beijing intensify, these investments continue, with 39% of the largest pensions allocating funds to China since 2022. Notably, the New York State Common Retirement Fund has allocated over $2 billion to Chinese investors in the last five years alone. A spokesperson for the NYSCRF has disputed exact total sum invested but confirmed that they represented nearly 3% of its more than $250 billion in assets in statements to CNBC.
The problem extends beyond pensions to the endowments of educational institutions and influential foundations, even though none of their investments are in breach of sanctions. The University of Michigan has invested $1.6 billion across 83 China-related funds, more than double the number of investments by other schools. Numerous schools have invested more than a billion dollars each in China-related funds, including the University of Texas ($1.6 billion and 29 investments) and University of California/California Regents ($1.5 billion and 22 investments). The universities have not responded to our findings.
Now is the time to break from the status quo of chasing profits and inadvertently bolstering America’s rivals. The U.S. private sector holds the greatest power–and the greatest responsibility–to defend democracy through free-market democratic capitalism. With China in dire need of American capital, institutional investors hold the power to play a pivotal role.
Andrew King is the executive director of Future Union, and an early-stage venture investor at Bastille Ventures, investing in technology safeguarding and furthering geopolitical democracy.
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