U.S. Universities To Divest Endowments From Chinese Entities

A bill has been drafted in congress to push universities to divest their endowments from Chinese entities suspected of involvement in human rights violations.

As a potential superpower, China has been attempting to extend its global influence with soft and hard power. The country’s attempt to spread its language and culture, as a part of its soft power, in the U.S. through Confucious Institutes has mostly been curtailed since 2018 with the growing anti-China sentiment under the Trump administration. On the other hand, its hard power has surprisingly been more successful on the global stage; it has constructed artificial islands in the South China Sea to expand its military presence in the region. Other than the U.S. sending aircraft carriers and navy fleets to pass through the area and a few sanctions, there have not been any serious consequences.

The U.S. government has been more cautious about China’s other manifestation of hard power —investment — in the country. The restrictions on foreign investment, especially from China, have become tougher during Trump’s presidency followed by the trade war between the two nations. Donations and endowments to U.S. higher education institutions were also put under scrutiny a few years later.

Strangely enough, in the meantime, investments in foreign, namely Chinese, entities by U.S. colleges with their endowments have not been monitored at a similar level. However, an attempt to change the status quo was made earlier last month.

Representative Greg Murphy, a Republican congressman from North Carolina, drafted the Protecting Endowments From Our Adversaries Act “discourag[ing] billion-dollar, tax-advantaged university endowments from investing in entities that have been deemed an unacceptable national security risk.” The “adversarial” entities are those included under the U.S. Government Lists (USG), such as Entity List, Military End User (MEU) List, Unverified List, and FCC Covered List. The infamous Huawei, the world’s second-largest smartphone maker and the world leader in telecommunications (especially in 5G technology), is listed under the FCC Covered List.

He stated in the draft, “We know that U.S. endowment dollars have funded Chinese companies in the past, and this draft seeks to address the pervasiveness of the problem. Colleges and universities have been warned about the national security implications of funding our adversaries. It’s time that Congress have an open and honest conversation about the risks these investments carry and take action to address it.”

If signed into law, the bill will apply to private colleges and universities with endowments over $1 billion. It is reported that Murphy sent letters to 15 private universities with the largest endowments at the beginning of this month. Although the names of all 15 private institutions are not revealed, the 2021 NACUBO-TIAA Study of Endowments provides a clearer picture. In the letter, he asks the school whether they have invested endowments in any entity on the aforementioned USG lists and what policies they have to divest from entities added to the sanction lists.

This is not the first time such concerns were raised, just as Murphy mentioned in his statement. In 2019, BuzzFeed questioned several U.S. universities for funding Chinese firms responsible for developing face recognition technology surveilling Muslim ethnic minorities in China. About a year later in 2020, Keith Krach, the former Under Secretary of State for Economic Growth, Energy, and the Environment, wrote a letter to the governing boards of American universities, urging them to divest from entities involved in human rights violations.

Schools have not changed their course of action, at least until recently. However, the situation seems to have changed. Harvard University, which has the largest endowment of $51.9 billion, is considering reducing investment in China for “growing political and market risks.” Likewise, Yale University, which collected the third-largest amount of endowment of $42.2 billion in 2021, will initiate a review of its investments “to determine whether some may be deemed ineligible for Yale investment in light of the Chinese government’s widespread human rights violations.”

While this is the first official congressional move to check and manage university endowments’ connection to “adversarial” entities, the chance of it becoming law does not seem entirely marginal. Florida’s Republican Senator Marco Rubio introduced a bill last month to restrict colleges from working with Chinese higher education institutions in any areas related to military capability. Democratic Senator Mark Warner of Virginia joined him at a meeting in April to voice concerns on the same issue. Even though the bill was not regarding the endowments, it showed that there are mutual congressional concerns about U.S. colleges’ ties to Chinese entities.

Pedro Ribeiro, vice president of the Association of American Universities (AAU), commented to Insider Higher Ed News following the meeting with Senator Warner in April, “We are currently reviewing the legislation and share Representative Murphy’s goal of protecting our national security and defending human rights. AAU universities are at the forefront of innovation that drives not only our economy but also our national health and security. We are committed to working with Congress to protect our immensely important work from undue foreign influence.”

 

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