Concerns about serious risks of Chinese state capitalism called into question by Trump administration
Canada’s public pension plan has invested millions of dollars in Chinese companies blacklisted in the United States over security concerns.
In 2010 and 2011, the Canada Pension Plan Investment Board invested $4.5m and $5.6m in China Finance International Investment Management Co, two Chinese arms of companies sanctioned by the US government.
As early as 2009, the Office of the Director of National Intelligence had flagged four of the companies and identified them as Chinese intelligence collection tools.
These include China Finance Holdings, China Heart Health Investments, China Securities Investment Co, and China Finance Investment Management Co (International) Ltd.
According to the US Treasury, CSIMM is a subsidiary of the People’s Bank of China.
The accounting for the investments, and the appeal of China’s political economy to the board, was revealed in documents published by the Better Democracy (BDP) group, a Canadian watchdog group.
The initial investments were part of a separate $4.5bn (Canadian) Canadian pension fund commitment to offshore investments.
In 2011, the Canadian minister of finance issued a media release announcing an additional $6.9bn (Canadian) commitment for International Finance and Investment Management Co.
The media release stated that the board wanted to give the money to “investors who invest in promising and growing projects at lower risk”.
Paul Donoughue, a University of Toronto professor emeritus in business and economics who heads BDP, told the Guardian that any asset purchase by the Canadian Pension Plan, or any other jurisdiction’s pension fund, is best left to the executives and trustees.
The fact that people at the investment board had no idea of the questionable security holdings and made the investments is symptomatic of a broader problem in Canadian finances, Donoughue said.
“You should have great responsibility and not be allowed to dabble in sovereign wealth funds where you might know nothing.”
The potentially risky nature of investments abroad provides another example of the “human rights deficit” in Canadian politics, said Keith Neuman, professor of economics at the University of British Columbia.
“This is really important because of our Canadian values around human rights and ethical investment,” he said.
The Canada Pension Plan Investment Board did not respond to request for comment by the Guardian.
According to its website, the investment board was founded in 1991.
Canada’s Ministry of Finance has had a unique relationship with the CPPIB over the years. In 2011 the board was designated as a Treasury adviser. In 2013, the investment board received a three-year exemption from the Investment Canada Act.
In 2015, the board was named a member of the Commission for Public Investment and Investment Companies.
BDP, a citizen group that campaigns against financial corruption, has called on the federal government to bring in legislation similar to US legislation known as the International Emergency Economic Powers Act.
Donald Trump’s announcement that he was implementing tariffs on steel and aluminium, could lead to more serious sanctions against countries such as China.
The US Treasury Department has said it has begun an “informal review of potential actions and investment violations” that may have occurred “under the China Sanctions”.
Neuman said the US is now in the difficult position of combating, to prevent the collapse of the Chinese stock market, rather than being held directly responsible for ensuring that its policies do not lead to ruinous intervention.
“There is a really big and troubling gap where politics and governance rules over economics,” Neuman said.
• This article was amended on 19 April 2020. The previous version said that “CSIMM is a subsidiary of the People’s Bank of China”. The Treasury Department said CSIMM is a subsidiary of the People’s Bank of China; this has been corrected to say that CSIMM is a subsidiary of China Finance Investment Management Co (International) Ltd.