South Dakota Gov. Kristi Noem has written to leaders of the U.S. Congress asking for legislation that supports state and local governments in cutting investment ties with China.In a letter sent to Congress on Dec.
21, Noem cites national security concerns as well as increasing Chinese investment in American assets. Noem asked for support to divest in Chinese companies and to prevent investment in Chinese assets.In her letter, Noem also said that Congress has previously taken action to support state and local governments from divesting in countries that 'are a threat to the United States or committing human rights atrocities.' Noem cited divestment actions against Iran in 2010 and Sudan in 2007.Noem also sent a letter to the investment management company Vanguard asking it to remove China from its 'emerging markets' fund. Some of South Dakota's state investments are managed through the company.In her letter to Vanguard CEO Mortimer Buckley, Noem requested that Vanguard create a version of the fund that does not include China.According to Vanguard's website, the fund currently includes companies located in emerging markets around the world.
Some of the markets it highlights are Brazil, Taiwan, South Africa and China. Noem's letter to Buckley indicated that Chinese companies make up around one-third of the emerging market fund.'I recognize that China falls under the definition of ‘emerging markets' that Vanguard uses,' Noem wrote in her letter. 'However, with the world's second largest GDP of approximately $18 trillion dollars, I take issue with the fact that China is an ‘emerging market.''Vanguard has not responded to a request for a comment on Noem's letter or the composition of its fund.According to a press release sent out by Ian Fury, chief of communications for the Governor's Office, the South Dakota Investment Council has already cut investment ties with three Chinese companies.
Additionally, none of the council's internally managed funds are invested in Chinese companies.However, 1.3% of the council's portfolio is invested in China through the emerging markets index, and 0.7% is invested in Chinese real estate through external funds.