Congress Urged to Target Endowments Linked With China

Congress’s next move to limit partnerships with China could target America’s top colleges and universities—shutting down their investments in Chinese companies that “have been deemed an unacceptable national security risk,” Politico reported Friday.

Representative Greg Murphy, a North Carolina Republican, is drafting a piece of legislation called the Protecting Endowments From our Adversaries Act, which would encourage divestment from entities listed on the U.S. government sanction list, which includes companies that have engaged in activity that opposes national “security or foreign policy interest.”

The bill could impact any private college or university with an endowment worth at least $1 billion, which includes Harvard and Yale Universities and other institutions, none of which responded when approached for comment by Inside Higher Ed.

It would institute a 50 percent excise tax on the principal investment for all entities added to a U.S. sanctions list and a 100 percent excise tax once the entity has remained on the list for over a year.

On Thursday Murphy sent a letter to 15 of the nation’s top private universities, asking them to clarify whether their endowments were invested in a list of entities currently on lists maintained by the U.S. government to identify potentially dangerous entities. It also asks these institutions what policies they have in place to divest from any entity added to the U.S. government sanction list.

“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,” said Murphy in a statement on the legislation draft.

According to sources familiar with the matter, it is uncommon practice for universities to have investments in entities that are flagged as a national security concern, and there is little economic benefit to these universities to invest in such entities.

In 2019 BuzzFeed reported that the endowments of universities including Princeston, Duke University, and the Massachusetts Institute of Technology had investments in a China-based venture capital firm that had invested in a facial recognition software company, Megvii, whose technologies have been used by Chinese authorities to identify imprisoned Uyghur Muslims in government-operated re-education camps. 

Yale University announced in January 2021 that it would be reviewing its $42.3 billion endowment for any possible investments in entities contributing to Chinese human rights abuses.

When approached for comment on the legislation, Pedro Ribeiro, vice president for the Association of American Universities, which represents the nation’s top research universities, said, “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.”

The bill follows a movement that is looking to use congressional intervention into university endowments to lead to similar actions in the private sector.

The Athenai Institute, a student-led group that works to combat Chinese government involvement in higher education, is in support of the bill.

“We think this builds an important step towards ensuring that U.S. academic institutions aren’t knowingly or inadvertently investing entities complicit in the Chinese government’s human rights abuses,” said John Metz, president of the organization.

Metz said congressional action would ensure that such investments from university endowments, which are difficult to track, would be disclosed.

When asked about current government oversight over endowment investments from colleges and universities, Dylan Hedtler-Gaudetter, the government affairs manager at the Project on Government Oversight, said, “There really isn’t any regulatory framework around it. I think that’s why you see the issues here that particular members of Congress are trying to target.”

Hedtler-Gaudetter said that a move by Congress to intervene in how universities invest their endowments would be the first of its kind, but it would probably not have much receptivity in Congress.

“Questionable at least is what we can say around academic institutions and the relationships they have with foreign entities, including foreign entities that are potentially at cross-purpose with U.S. national interests,” said Hedtler-Gaudetter.