Australian Wealth Fund Invests Taxpayer Money into Chinese Companies Linked to Human Rights Abuse

Senator James Paterson in the Senate on Feb. 06, 2023 in Canberra, Australia. Martin Ollman/Getty Images

Australia’s sovereign wealth fund is using billions of taxpayer dollars to fund at least 50 high-risk Chinese companies that pose serious human rights and national security threats.

Future Fund, which aims to “invest for the benefit of future generations of Australians,” was exposed for having stakes in 22 companies linked with the Chinese Communist Party (CCP) and 14 companies linked to the oppression of Uyghurs in Xinjiang.

The $243 billion (US$164 billion) fund also invested in 14 companies that had investments in countries that are being sanctioned, including Russia, Iran and North Korea. A further six companies were identified as raising ethical or governance-related concerns.

The finding was part of an audit launched by Shadow Home Affairs and Cyber Security Minister James Paterson on Aug. 14 following media reports that the centre-left Labor government was considering clamping down on investment in sensitive technology ventures in China, as the United States does.

Some of the high-risk firms include Aluminium Corp. of China and Baoshan Iron & Steel Co., both of which were major beneficiaries of trade secrets stolen from U.S. companies by Chinese military hackers in 2014.

Shandong Nanshan Aluminium Co. was also identified. The company was a major buyer of a Xinjiang industrial giant that was linked to the CCP’s labour transfer programs.

The Future Fund first entered into the Chinese market in December 2007 when it invested in listed equities in China through its emerging markets program.

Since then, more Australian taxpayer’s dollars have continued to be invested in high-risk Chinese ventures, with investment reaching its peak in 2019.

Wealth Fund ‘Dangerously Exposed’

Mr. Paterson called on the Albanese government to prevent taxpayer dollars and retirement savings from being poured into Chinese assets that threaten Australia’s national interest.

“No Australian would want their taxpayer dollars or retirement savings to be inadvertently funding national security threats to our country or supporting companies facilitating serious human rights abuses,” he said in a media statement on Nov. 7

“If our national sovereign wealth fund is so dangerously exposed, it is highly likely that other Australian investment funds—most notably in the superannuation sector—will also be at serious risk.”

He added that if the government was serious about standing for Australia’s national interest, it should consider cracking down on outbound investments based on national security grounds or, at the very least, provide investors with guidance on how to lessen political risks.

Mr. Paterson also told the Australian Broadcasting Corporation (ABC) that the firms identified in the audit spanned across different industries “from beverages to energy to finance, to healthcare, IT, manufacturing and materials.”

“Most of the companies are not household names that Australians would have heard of but they are hugely significant in China,” he noted.

High-Risk Companies Listed By Australian Allies

Several Chinese firms identified in the audit have also been flagged by Australia’s allies and prevented from acquiring U.S., Canadian, and European firms.

Some of these have been barred from investing in critical minerals in Canada, delisted from U.S. stock exchanges for failing to comply with auditing standards, fined for not complying with money laundering standards, penalised for failing to report dangerous faulty consumer products, and breaching U.S. sanctions.

This includes Zangge Mining Co., which was ordered by the Canadian government in 2022 to exit lithium mining, citing national security.

Responding to the audit, a Future Fund spokesperson said that the investments in question are index tracking.

“We fully comply with Australian government sanctions and these investments are not subject to Australian government sanctions,” the spokesperson said, according to the Australian Financial Review.

“In line with our ESG framework, we work closely with our external managers to ensure they apply appropriate due diligence on ESG matters.”

‘Foreseeable’ Situation

In March this year, outgoing chairman of Future Fund and former treasurer, Peter Costello, predicted that foreign investment could be barred from pouring money in China, similar to how they were barred from Russia following waves of sanctions.

“Is it foreseeable that something similar could happen in China? I think it’s foreseeable,” Costello said during a panel discussion at the AFR business summit in Sydney.

“And so we’ve gone through very, very carefully as many companies as we can to try and drop stocks. Have we found every company? No, because you don’t know of a lot of these Chinese companies.”

A report by the Australian Strategic Policy Institute on the human rights situation of Uyghurs in March 2020 revealed at least 82 well-known global brands were working in factories that are in the supply chains using Uyghur forced labour.

These brands spanned broad portfolios including in the technology, clothing and automotive sectors. Examples include Apple, BMW, Gap, Huawei, Nike, Samsung, Sony, and Volkswagen.

However, the federal Australian government in 2021 blocked the attempt by then-Independent Senator Rex Patrick to propose a motion that would have categorised Beijing’s treatment of the Uyghurs as genocide.