November 7, 2023
The Future Fund is exposed to dozens of Chinese companies linked to the military, human rights abuses or unsavoury regimes in Russia, Iran and North Korea, sparking demands from the opposition that the Albanese government consider copying the Biden administration’s restrictions on outbound investment into Chinese firms.
Amid Prime Minister Anthony Albanese’s visit to China to stabilise relations with Beijing, answers to questions on notice provided to the Senate show the sovereign wealth fund has investments via index funds to 119 Chinese companies.
Of these, 50 companies raise concerns, according to an audit by opposition home affairs spokesman James Paterson, based on open-source material. Twenty-two companies have ties to the Chinese government and military, and 14 to Xinjiang province, home of the Uighur ethnic minority.
The Future Fund, which manages about $200 billion on behalf of the federal government, defended its shareholdings. It said they were widely held by investors and that it followed ethical guidelines and did not invest in companies subject to Australian government sanctions.
Chinese corporate titans are among the companies the fund is exposed to, including Baosteel, a Shanghai-listed steelmaker that has been accused in the past of being the beneficiary of US trade secrets stolen by military hackers. A Baosteel subsidiary has provided steel for Chinese weapons, including rockets.
Another firm with military ties is Shanghai Fudan Microelectronics Group, which has received funding from the People’s Liberation Army to reverse engineer microchips and semiconductors, one of the key technological battlegrounds of the 21st century.
Brewer Tsingtao and electric carmaker BYD are both identified by the audit for reported ties to Xinjiang province, where the United Nations has raised concerns about human rights abuses of the Uighur people, including forced labour.
The Future Fund also has exposure to three of China’s big four banks – the Bank of China, China Construction Bank and the Industrial and Commercial Bank. Ukrainian researchers claim the big four quadrupled their exposure to Russian banks after Western sanctions were imposed on Russia’s financial sector after last year’s invasion.
The details of the opposition’s audit come amid heightened scrutiny in the US of American investment in Chinese companies.
In August, President Joe Biden issued an executive order effectively banning outbound US investment into China in sensitive technologies such as semiconductors, quantum computing and artificial intelligence, and it is pushing allies to follow.
Senator Paterson urged the Albanese government to advise Australian investors about potentially risky Chinese investments and consider joining the Biden administration’s crackdown.
“It is unacceptable that taxpayers’ dollars and Australians’ retirement savings may be inadvertently financing military technology advancements of a potential adversary or could be unknowingly complicit in serious human rights abuses,” he told The Australian Financial Review.
“But if even the Future Fund, with its robust oversight and risk management mechanisms, can have such wide exposure to these risks, it is virtually certain that super funds and other investment vehicles are also vulnerable.”
In its response to the questions on notice, the Future Fund said its exposure to China peaked in 2019 “but has reduced since 2022 reflecting the board’s view of the balance of investment risk and return in that market”. It began investing in China in 2007 as part of its emerging markets program.
The fund did not detail the value of its Chinese stake, but a spokesman told the Financial Review the investments were index-tracking and were widely held by other investors.
“We fully comply with Australian government sanctions and these investments are not subject to Australian government sanctions,” the spokesman said.
“In line with our environmental, social and governance framework, we work closely with our external managers to ensure they apply appropriate due diligence on ESG matters.”
