Talk about cutting off the nose to spite the face. American President Donald Trump has threatened to block a United States government retirement fund from investing in Chinese stocks on grounds of national security? The fund is the Thrift Savings Plan, which invests for US federal employees for retirement. The index is the MSCI All Country World Index, to which the fund plans to devote about US$50 billion as a diversified investment. Needless to say, the index contains some Chinese companies, which amount to a whopping 4.66 per cent, while US equities dominate with 56.6 per cent, including such giants as Boeing, Costco and Microsoft. If Trump goes ahead with an executive order to block the investment, it would affect mostly American companies rather than Chinese ones. The noise coming out of the White House seems to have more to do with national insecurity than security. This doesn’t stop some senators such as Marco Rubio from politicising what was a purely technical and financial decision, made way back in 2017, by describing it as “an outrage”. Possible Trump ban on US pension fund investing in China stocks ‘symbolic’ Even if Trump does impose the ban, it’s unlikely other big private-sector funds such as Fidelity and Pimco would follow. They would continue to use the index as a benchmark, and allocate their funds accordingly. At best, the ban would be a Pyrrhic victory, for the kind of feel-good optics that appeal to Trump’s base. What’s next? Is the US government going to bar financial companies from constructing indexes with Chinese companies in them? How about cutting off access to the US financial system for foreign financial institutions and exchanges that index Chinese companies? In an election year, anything that has the word China attached to it makes a potential target in the US. That may be why the White House and other US politicians have been coming up with impractical schemes one after another to “punish” China. There have been talks about defaulting on Treasury debt owned by the Chinese as reparations for the spread of Covid-19 in the US. Thankfully, Trump has stopped mentioning it. Someone must have told him about this small thing which is Section 4 of the 14th amendment of the US Constitution: “The validity of the public debt of the United States, authorised by law,…. shall not be questioned.” Washington would be much better off by coming up with a coherent strategy rather than taking scattershot at China. Help us understand what you are interested in so that we can improve SCMP and provide a better experience for you. We would like to invite you to take this five-minute survey on how you engage with SCMP and the news.