If you have a 401(k) or IRA, some of your money may be helping to fund Chinese companies the U.S. says threaten national security and are accused of human rights abuses. Congressional investigations and hearings over the past two years reveal that billions of dollars have flowed from American retirement accounts into firms linked to the Chinese Communist Party, military development, and forced labor in Xinjiang.
In April 2024, the House Select Committee on the Chinese Communist Party released findings showing that Wall Street firms, through index providers and asset managers, had channeled roughly $6.5 billion into 63 Chinese companies appearing on U.S. government blacklists. The report identified holdings in firms linked to China's military-industrial complex, companies capable of producing nuclear warheads, and others tied to forced labor in Xinjiang.
The advocacy group Coalition for a Prosperous America (CPA) reported that BlackRock's offshore funds alone held about $130 million in 14 Chinese military-industrial complex companies, and that four of those companies appeared on the Uyghur Forced Labor Prevention Act Entity List. Separately, the House Select Committee found that MSCI indexes had funneled roughly $3.7 billion into these firms.
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Public Pensions Deep in China
A separate report from a bipartisan nonprofit in 2023 found that 72 of the largest U.S. public pension funds invested a combined $68 billion in China between 2020 and 2023. Funds like the New York State Common Retirement Fund, CalPERS, and CalSTRS were among those with substantial exposure.
Republican attorneys general from 17 states have accused major Wall Street firms, including BlackRock, Goldman Sachs and JPMorgan, of downplaying the risks of investing in China, particularly the possibility of a Chinese invasion of Taiwan, when managing state pension funds.
Banks Defy Warnings Over CATL's Military Links
The issue flared again in 2025 with the Hong Kong IPO of Contemporary Amperex Technology Co. Ltd. (CATL), the world's largest producer of electric vehicle batteries.
In April 2025, the House Select Committee urged JPMorgan and Bank of America to withdraw from the deal, citing national security and reputational concerns. CATL appears on a U.S. Defense Department list of companies with alleged ties to the Chinese military, added in January 2025. However, the warning didn't change their plans. Both banks stayed on as underwriters.
The IPO, which raised around $5.2 billion in May, was conducted under Regulation S, meaning most U.S.-based investors were excluded from buying shares directly. However, U.S. institutions with offshore accounts could still participate. Shares jumped more than 16% on debut, making it the largest listing of the year.
By July 2025, Congress had issued subpoenas to JPMorgan CEO Jamie Dimon and Bank of America CEO Brian Moynihan for internal communications related to the offering. Lawmakers want to know why two of the largest U.S. banks helped a company with alleged military links access global capital markets despite explicit warnings.
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Rules are Changing, but Slowly
The U.S. Treasury's final outbound-investment rule, issued on Oct. 28, 2024 under Executive Order 14105, took effect Jan. 2, 2025. It established civil and criminal penalties for investing in Chinese companies involved in advanced military-related technologies such as semiconductors, artificial intelligence, and quantum computing. Additional export controls and entity listings have followed, aimed at cutting off sensitive technology to blacklisted Chinese firms.
Those steps have prompted some Wall Street firms to scale back their China exposure, and a few, including Sequoia Capital, have separated their China operations entirely. But many legacy investments remain, and numerous index funds still hold Chinese companies the U.S. government has flagged. That means American investors, even those who never knowingly choose to invest in China, may still have indirect exposure through their 401(k)s or IRAs.
A Bigger Question for Investors
The CATL IPO and earlier congressional findings raise a larger question: should American capital, especially retirement savings, be helping to fund companies that the U.S. government says threaten national security or are implicated in human rights abuses?
Proponents of continued investment argue that capital markets should remain open and diversified, and that excluding China could limit returns for U.S. investors. Critics counter that the risks far outweigh the benefits, especially when the money in question belongs to millions of Americans who may not even know where it's going.
For now, the flow of money has slowed but it hasn't stopped. Wall Street firms continue to manage funds with significant China exposure, public pensions remain invested and major banks are still willing to help Chinese companies tap global capital markets.
Keeping Investment Dollars in the U.S.
While billions of U.S. retirement dollars have been quietly flowing overseas, there are still ways to put capital to work right here at home. One area attracting growing interest from institutional investors is the $34 trillion locked in American home equity.
The U.S. Home Equity Fund from Homeshares gives accredited investors a way to participate in this market by providing homeowners with access to the equity in their primary residence without adding debt. In return, the fund shares in the home's future appreciation. That means potential double-digit annual returns for investors, while helping Americans tap into their own wealth to renovate, pay down debt or simply gain financial breathing room.
It's an approach that keeps capital in the U.S., supports American households and targets growth in one of the most valuable, and historically resilient, asset classes in the country.
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