The China Loophole

Federal employees can invest in Chinese companies sanctioned by the U.S. through their government retirement plan. How could that happen?

- VALERIE BAUMAN and DIDI KIRSTEN TATLOW

MILLIONS OF FEDERAL EMPLOYEES CAN invest in Chinese companies sanctioned by the U.S. government via its flagship retirement plan-even though these companies have been branded a danger to national security or are accused of profiting from forced labor or other human rights abuses, a Newsweek investigation reveals.

Since June 2022, the federal government's employee retirement savings plan-the largest in the world with $720 billion in assets-has offered its 6.8 million members the option to invest some of their savings via a platform that gives them access to an additional 5,000 mutual funds beyond the plan's core funds. Some of the funds available through the portal have holdings in Chinese companies that are on at least nine U.S. government sanctions or watch lists, according to an exclusive analysis for Newsweek by Washington D.C.-based consulting firm Kilo Alpha Strategies, using data from the Coalition for a Prosperous America, a nonprofit that describes itself as a bipartisan coalition of farmers, ranchers, manufacturers and labor organizations that make and grow things in the U.S.

Among those companies are a leading developer of engines for fighter planes and turbines for naval ships, solar panel firms targeted for allegedly using forced labor by Uyghurs and others living in China's western Xinjiang region, as well as makers of surveillance systems seen as a threat to the U.S.