Last year, Pennsylvania divested its government holdings of certain firms in Russia and Belarus, as well as the two countries’ governments.
This year, some legislators want to follow a similar divestment path for China.
Though no draft language is yet available, Sen. Doug Mastriano, R-Chambersburg, has circulated a legislative memo to divest the state of its connections to the Chinese Communist Party.
"For far too long, Pennsylvania has invested hundreds of millions in government funds to a regime that continues to trample on human rights,” Mastriano wrote, referencing persecution of the Uyghurs and other Muslims in China, as well as the erosion of self-rule in Hong Kong, abuses in Tibet, and undermining of democracy in Taiwan.
China’s failure to prevent fentanyl from leaving its shores for America, too, drew his ire.
"It is far past time to separate our state funds from companies controlled by the CCP,” Mastriano said.
He proposes to require a gradual divestiture from the Pennsylvania Treasury, the State Employees Retirement System, and the Public School Employees Retirement System.
PSERS declined to comment. But Pennsylvania Treasurer Stacy Garrity was open to the change.
"I fully support divesting state assets from companies domiciled in China,” Garrity said. "Because of serious concerns related to geopolitical risk and human rights abuses, I directed my investment team to divest all of Treasury’s holdings in China in the first half of 2022. That process is complete. I believe it would be smart to do the same across all Commonwealth funds.”
In February 2022, Treasury quickly divested from Russian companies after the invasion of Ukraine (about $3 million). Also in 2022, Treasury divested almost all $394 million of its Chinese holdings — only $50,000 wasn’t divested by the end of the year, according to its annual investment report.
Though the bill wouldn’t require extra effort from the Treasury, things may be more complicated for the pension plans. Mastriano Spokesman Josh Herman estimated that SERS’ Defined Benefit fund has about $924 million connected to companies in China, Hong Kong, and Macau — about 2.6% of its $35 billion fund as of 2021.
Several other states divested from Russia last year, and others like Indiana have banned China-connected pension investments (with a five-year divestment deadline), though loopholes in the law may weaken the overall impact. Other states like Arkansas have required Chinese companies to divest of farmland within state borders.
Divestment efforts follow a long-term decline in Chinese money flowing to America. Chinese investment has "slowed to a trickle,” dropping from $46 billion in 2016 to less than $5 billion in 2022 — less than investment from Spain and Norway.
Attitudes have also changed.
U.S. Sen. Bob Casey was criticized in March for supporting a $31 million investment in a Chinese firm in 2006 when he served as Pennsylvania treasurer; in November, Casey introduced a bill to require private equity firms to reveal their investments in China and other "countries of concern.”
Casey’s Republican opponent in the 2024 Pennsylvania Senate election, David McCormick, led a hedge fund’s dramatic increase in Chinese investments from 2017-2021, but has campaigned on the need to divest from China.
