California Congressional Candidate Proposes Legislative Ban on Public Retirement Funds of Investments in China

Alison Hayden. Courtesy of Alison Hayden

Alison Hayden, who is currently running for Congress in California, is taking initiatives to protect public retirees from losing money in their retirement accounts due to high-risk investments in China.

“Americans retired, 65 and older collecting retirements, close to 50 percent of them are on federal or state retirement systems,” said Hayden during an interview with the Epoch Times. Hayden is on the ballot in the coming November election for California’s 14th Congressional District.

“If those pension funds are not reliable and secured, we are looking at a catastrophic problem,” Hayden asserted.

In a legislative initiative, Hayden has stated four reasons that the U.S. public retirement funds should not be invested in China-based stocks, bonds, or mutual funds:

1. The Chinese regime does not allow any free flow of information and independent media. The Chinese authorities actively criminalize anyone who reports on negative political and economic news from China.
2. The judicial system in China is not independent, and often rules against foreign corporations and investors with legitimate claims against Chinese entities.
3. In the past, China-based companies, such as Lukin Coffee (NASDAQ: LK) and Kingold (NASDAQ: KGJI), were caught with serious frauds that had hurt U.S. investors.
4. Workers in China are not allowed to form independent labor unions.

Lukin Coffee is a Chinese coffee company and coffeehouse chain headquartered in Xiamen City, China. In April 2020, the company reported to have inflated its 2019 sales revenue by close to $310 million, which resulted in the crash of its stock price. The company was later delisted from NASDAQ in June 2020. Lukin filed for chapter 15 bankruptcy in February 2021.

Kingold Jewelry was a NASDAQ-listed Chinese company. The company was reported in 2020 using 83 tons of gold bars as loan collateral to secure a $2.8 billion loan. Those gold bars turned out to be gilded copper bars.

A sign for BlackRock Inc. hangs above their building in New York on July 16, 2018. Lucas Jackson/Reuters

Hayden’s proposed legislative initiative also suggests that the U.S. public pension systems disclose their exposure to securities linked to China, Russia, and Belarus, and that the U.S. Congress establish a special oversight committee to assess the risks of the investment environment in China.

“We must protect the hard-earned savings of American retirees and we must protect the local governments and school districts from being forced to cut services to meet pension obligations,” Hayden emphasized in her legislative initiative.

“Truth is not something China is known for,” said Hayden, who criticized the Chinese regime for preventing Chinese companies listed in the U.S. financial market from being audited under the same accounting standards for US companies. In the past, the Chinese Communist Party (CCP) leadership has been using national security as excuses to block the request from the US Securities and Exchange Commission (SEC) for original accounting information.

In December 2020, U.S. Congress passed the “Holding Foreign Companies Accountable Act,” which requires the SEC to identify foreign companies that the commission was unable to inspect completely. According to the Public Company Accounting Oversight Board (PCAOB), currently, China and Hong Kong are listed as the only foreign jurisdictions where the PCAOB lacks “necessary access to conduct oversight.” The PCAOB is a nonprofit corporation established by Congress and overseen by the SEC.

Chinese companies “don’t have the requirements that American companies and any other foreign companies are subject to,” Hayden pointed out, adding there has been a longtime joke about how Chinese corporations conduct their businesses: every company has four sets of accounting books—"one for the taxman, one for the boss, one for the boss’s wife, and one for the foreign investors.”

Hyden was born in California but grew up in Taiwan because her father served in the U.S. Airforce. She has a BA in political economy from UC Berkeley and an MS in management from the London School of Economics. She is running as a Republican candidate in her district.

Hyden believes that with the direction changes of the U.S. government’s China policy, the public retirement funds will choose India, Taiwan, South Korea, or other countries considered U.S. allies for their foreign investment markets.

Traders work on the floor of the New York Stock Exchange in early 2011. In the beginning of June, short seller Muddy Waters Research released a report that dramatically reduced the value of Sino-Forest stock. This was just the first of several Chinese companies being assessed by Muddy Waters. Mario Tama/Getty Images

“When we do not have a fair judiciary, whether or not the company you invest in has a dispute with the (Chinese) government or with another Chinese nationally owned company, you cannot trust the court to give you a fair judgment,” said George Yang, who supports Hayden’s legislative effort. George is one of the candidates who ran for California Superintendent of Public Instruction in this year’s primary election.

During a phone interview with The Epoch Times, Yang mentioned Sony’s experience as an example to discuss the problems of the Chinese judiciary system, and the risks Western companies face doing business in China.

Sony’s China branch was fined 1 million yuan ($150,000) by Beijing’s market regulator in Oct. 2020, because the Japanese company tried to release a new product on a day considered offensive to the Chinese authorities.

On June 30, 2020, Sony announced that it would release a new product on July 7, the anniversary of Japanese aggression against China in 1931, which marked the beginning of the 14-yearlong Sino-Japanese war that ended in 1945. Beijing’s authorities considered Sony’s behavior undermined Chinese national dignity and interests. Sony’s China branch reported a total sales revenue of 9 trillion yen ($70 billion) in 2020.

Yang said if there was an independent judiciary in China, Sony would fight in court, but in China “there is no clear definition about what the law is and where is line is drawn,” Yang commented.

Yang also used the collapse of China’s tutoring industry to explain why doing business in China bears huge risks. Beijing’s education authority made a sudden policy change in July 2021, banning all private for-profit tutoring businesses in core school subjects. Gao Techedu Inc. (NYSE: GOTU), one of the Chinese education tycoon companies listed on the New York Stock Exchange, saw its stock price plunge by almost two-thirds after the crackdown.

“Your whole industry is dead because of one (government) decision. You don’t know when the decision is coming down, you have no time to prepare for it, and you have no way to argue against it,” Yang said.

Yang is also concerned about the growing tension over the Taiwan Strait. The Chinese regime recently claimed sovereignty over Taiwan Strait, and President Joe Biden has repeatedly stated that U.S. troops will defend Taiwan in the event of a Chinese invasion.

“When a war happens between China and Taiwan, all those investments will be locked up,” Yang said, adding that “all pension funds will stop investing in China until there is clarity in these areas.”

Yang is a Chinese immigrant who came to the United States in 1992 when he was 15.