Panel Shelves State Anti-China Investment Bans

Despite an emotional plea from a student leader who escaped the massacre at Tien An Men Square, state lawmakers on Tuesday pigeonholed two measures that would have forced the state to sell off billions of dollars in retirement fund investments in firms doing business in China.

The two measures--drafted as a response to the Chinese government’s repression of a pro-democracy movement--failed to muster even enough votes to clear their first legislative hurdle in the Assembly’s Public Employees, Retirement and Social Security Committee.

But the measures were kept barely alive when the committee’s chairman, Assemblyman Dave Elder (D-San Pedro), agreed to reconsider the bills after the Legislature convenes its next session in 1990--a delay that had one of the sponsors clearly concerned.

“I worry that the Chinese government’s fog machine will start to take effect,” said Assemblyman Tom Hayden (D-Santa Monica). “The whole struggle is between the power of memory and forgetting. And when you have a state power in Beijing on the side of forgetting, it is up to our Legislature to remember.”

Money managers and business interests welcomed the postponement and argued that any economic retribution against China would be premature, especially in light of recent economic reforms, and would actually inflame Communist hard liners.

“They would use this as an excuse to shut down the economy, to go back to a planned economy,” Kirk West, president of the California Chamber of Commerce, said after the committee hearing.

Hayden and Assemblywoman Carol Bentley (R-El Cajon) had introduced separate bills calling for the state treasurer and public employee retirement systems to begin next year to sell stocks and other investments in firms doing business in China. In addition, the Bentley bill would require the state treasurer’s office to shift millions of dollars in daily deposits to banks that can prove they are free of ties with China.

Effects Estimated

Although the measures adopted anti-apartheid tactics, state pension fund officers said the China bills would require selling off two to five times more stock and commercial paper than under the South African-related divestment ordered by the state in 1987.

The chief investment officer for the Public Employees’ Retirement System said China divestment would affect $5.9 billion of the fund’s massive $55-billion portfolio. A spokeswoman for the California State Teachers’ Retirement System said that fund would have to divest $5 billion of its $29-billion fund--nearly 17%.

Bentley tried to counter those pocketbook arguments by appealing to ideology and emotion. She showed committee members a videotape of the Tien An Man Square massacre and then turned the microphone over to Yan Liu, a 19-year-old college student who helped organize the student protest in Beijing.

“I’m was at the breaking point with tears when I saw the videotape,” Liu said through an interpreter. “It seemed like I was back at the Tien An Man Square again.”

Elder’s vote was the only one cast for the Bentley bill. The majority of committee members simply refrained from voting. Rather than declare the bill dead, however, Elder offered to expunge the record and reconsider it later, along with Hayden’s measure. Additional hearings could be scheduled after the Legislature adjourns in mid-September or after it reconvenes in January, Elder said.