The Trump administration is moving ahead with discussions around possible restrictions on capital flows into China, with a particular focus on investments made by U.S. government pension funds, people familiar with the internal deliberations said.

The efforts are advancing even after American officials pushed back strongly against a Bloomberg News report late last month that a range of such limits was under review. Trump officials last week held meetings on the issue just hours after White House adviser Peter Navarro dismissed the report as “fake news,” and zeroed in on how to prevent U.S. government retirement funds from financing China’s economic rise, the people said.

The office of Larry Kudlow, director of the White House’s National Economic Council, convened a policy-coordination committee meeting last Tuesday, which also included officials from the National Security Council and the Treasury Department, the people added. An NEC spokesman declined to comment.

The yen strengthened against the dollar, U.S. stock futures went lower and bond yields extended declines.

According to people familiar with the meeting, the administration’s focus is now on ways to further scrutinize index providers’ decision to add Chinese firms they consider a material risk for American investors. It’s still unclear what legal authority the White House would rely on to force major indexes to drop certain Chinese companies.

Pension Fund

At least one of the issues under consideration is time-sensitive. The Federal Retirement Thrift Investment Board in 2017 made a decision that by mid-2020 the international fund offered to workers in the government’s pension would mirror the MSCI All Country World Index, which captures emerging markets, including China.

Some U.S. lawmakers and China hawks outside the government have pushed the board to reverse that decision and, if necessary, have the administration use executive power to protect U.S. government workers. They argue that Americans are harmed by channeling money into Chinese firms that are allegedly involved in human-rights violations and at the center of U.S. national security concerns.

The change would expose almost $50 billion in retirement assets of federal government employees, including members of the U.S. Armed Forces, to severe and undisclosed material risks associated with many of the Chinese companies listed on the index, opponents argue.

Blacklist

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