West Virginia will stop investing in companies based in China through its higher education savings investment plan, the state’s chief financial officer said.
According to Mr. Moore, the decision was made following a “lengthy period of study” which found that shifting away from Chinese investments aligns with the best interests of families participating in the plan, who hope to ease the burden of college expenses for their children in the future.
“We have a fiduciary duty to act in the best financial interests of SMART529 plan participants, and we believe excluding Chinese emerging market investments from our Select Plan portfolio will help maximize returns while reducing exposure to the potential regulatory and geopolitical risks that come with investing in companies based in China,” Mr. Moore said.
“I’m grateful to the Board members for carefully considering this recommendation to reduce exposure to these more risky Chinese investment options.”
Mr. Moore said he began looking at the possibility of moving SMART529 funds away from Chinese investments in late 2021. Around the same time, Dimensional Fund Advisors, a Texas-based investment firm managing the plan’s $667 million assets, had also created a new equity portfolio fund that does not include investments in China-based companies.
According to an analysis by Dimensional, the China-excluding fund not only outperformed the traditional emerging markets fund since its inception, but also outperformed the traditional fund in a simulation dating back to 1994.
In addition, investment consultant company NEPC also warned the West Virginia officials of “significant investment risks” associated with geopolitical tensions between Beijing and Washington along with the Chinese regime’s own tendency to “quickly shift domestic policies.”
Past Efforts to Protect West Virginia
This isn’t the first time West Virginia reconsidered business dealings with China.In March 2023, Gov. Jim Justice signed a law that bans the purchase of West Virginia’s farmland and property by citizens of any country on the U.S. Department of State’s “Country of Particular Concern” list during tax sales.
Specifically, the law requires potential property bidders to register with the state auditor’s office in advance. The auditor’s office is mandated to disqualify any citizen or entity under the control of citizens from the countries listed, which includes China, North Korea, Russia, and Saudi Arabia.
West Virginia is also among a growing number of states that took steps to pull assets from large financial institutions that prioritize climate goals over business goals. In 2021, Mr. Moore led a coalition of 16 state treasurers, auditors and comptrollers in pushing back against banks that boycott the coal, oil, and gas industries.
The coalition, according to Mr. Moore, represents more than $600 billion in public assets under management. Its members have pledged to take “collective action” in response to the “ongoing and growing economic boycott” of traditional energy production industries by U.S. banks.
“Woke capitalists and globalist actors have been using the guise of climate change to press for anti-American reforms that reduce our country’s competitiveness against hostile nations like Russia and China,” he said at that time. “As a result, in less than a year our country has gone from energy independence to having a president who is begging OPEC and Russia to pump more oil.”
