Rep. Dusty Johnson introduces bill encouraging states to divest from Chinese companies

South Dakota’s lone United State’s House of Representatives member introduced legislation Thursday to allow states to divest state dollars from the People’s Republic of China.

Republican Rep. Dusty Johnson's legislation, called the PRC Accountability and Divestment Act of 2023, comes from his work on the Select Committee on the Chinese Communist Party. The committee, made up of Republican and Democratic members, has been examining the threat the Chinese government poses to the U.S. people and values.

The legislation, if passed, would allow state and local governments to divest assets, such as those found in retirement or pension funds, and ban investments within China; provide for changes of investment policies and states that a fiduciary of an Employee Retirement Income Security Act may divest plan assets from China.

Johnson told the Argus Leader on Thursday the legislation gives states the flexibility and opportunity to ban investments into the Chinese Communist Party.

“We know that lots of investment dollars across our country are going to Chinese military manufactures,” he said. “We know that lots of dollars in this country are being invested into helping China develop technologies that will someday be used to injure America.”

This isn’t the first time legislation to curb state and local investments in foreign governments has been proposed. Congress passed similar legislation in 2007 to divest assets from Sudan, at a time when Sudanese troops and a government-back militia, known as the Janjaweed, were attacking and killing civilians in the Darfur region in one of the first recognized genocides of the 21st century.

Congress has also passed legislation divesting from Iran in 2010 in response to the country’s growing nuclear weapons capability and its history of human rights abuses.

Johnson said Gov. Kristi Noem had come to him during the summer, looking for a solution that would give states an extra tool against China to ensure state dollars weren’t going to the country.

“Her investment council told her that they didn’t have that flexibility and she’s been working with me to make sure that we can give the state of South Dakota that flexibility and we’re happy to do so,” Johnson said.

“I am grateful that Congressman Johnson sees the national security threat that China poses,” Noem wrote in a statement. “Protecting South Dakota from nations that hate America has been a priority of mine as Governor, and I am glad that he is doing the same in Congress.”

Noem also announced Tuesday that she was backing a bill in the U.S. House introduced by Rep. Mike Gallager, R-WI, who’s also the chairman of the Select Committee on China, to curb “foreign adversaries” like China from purchasing U.S. farmland.

Why now?

The legislation follows an investigation being conducted by the Select Committee on China examining two U.S. investment firms, BlackRock and MSCI. The committee found that the two companies are investing Americans’ savings into what the committee called “dozens of blacklisted Chinese companies that threaten U.S. national security or support the Chinese Communist Party’s human rights abuses.”

Johnson said while the legislation he’s proposing is a separate issue from the committee’s investigation, it’s part of a broader package of policy actions the committee is planning on introducing to the rest of Congress in the coming days.

The bill is also part of Johnson’s multi-year effort to re-examine the U.S.’s economic relationship with China.

“I’ve asked some tough questions about our trade policy with China and I’ve been a leader in trying to advance solutions on that front as well,” he said.