Red State’s Latest Move Away From ‘High-Risk Chinese Investments

West Virginia will no longer be investing money in Chinese-based companies through its higher education savings investment program, according to Republican State Treasurer Riley Moore.

Moore announced Wednesday that the state would be designating dollars from the investment program, known as SMART529, into a fund that wouldn’t back Chinese-based companies. The previous fund included investments in Chinese companies through an emerging markets fund.

“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,” Moore said. “I’m grateful to the Board members for carefully considering this recommendation to reduce exposure to these more risky Chinese investment options.”

Under the former investment plan, Chinese companies could be qualified for some of the $40 million SMART529 dollars that were invested in emerging markets. Moore said the decision to shift investments away from China came after a “lengthy period of study” showed that keeping investment in China was risky. He began looking at the move in late 2021.

“This decision is in the best long-term financial interests of those individuals who choose to invest in a SMART529 Select Plan and the children whose educational future benefits from these funds,” he said.

Moore had investment consultant company NEPC create a research report for him on potential risks from partnering with Chinese companies.

“China’s domestic policies can create periods of heightened volatility and it is possible that ongoing tensions could increase and negatively impact Chinese stocks,” NEPC told the West Virginia board that oversees the state’s college funding programs.

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State Armor, a group dedicated to fighting national security threats on the state level, praised the decision.

“Excluding Chinese investments will reduce American funding of our greatest adversary, and protect participants from China’s volatile economy,” said Michael Lucci, the group’s CEO. “More states should look to West Virginia’s example and examine their own investment portfolios.”

“State leaders must take immediate action to protect their education systems, which includes divesting from adversaries, reviewing and canceling gifts and contracts from adversaries, and generally cutting adversary government influence on American campuses,” Lucci added.