GOP’s McCormick Led Bridgewater During China Military Investment

US Senate candidate David McCormick led Bridgewater Associates as the hedge fund steered millions of dollars of investments into Chinese companies that produce fighter jets, bombers, planes equipped to jam enemy radars, and the country’s first domestically built aircraft carrier, according to documents analyzed by Bloomberg Government.

McCormick — the Republican challenger in a critical contest in Pennsylvania— has long faced attacks over Bridgewater’s holdings in China. But previously unreported disclosures show new details of investments tied to its military and could undercut his attempts to cast himself as a China hawk in his campaign against Sen. Bob Casey (D-Pa.).

As a candidate, McCormick has called for barring US investments in Chinese companies that pose a threat.

But during his years as Bridgewater’s co-CEO or CEO its hedge funds held stock in at least 20 Chinese firms that were subsequently sanctioned by Presidents Donald Trump or Joe Biden for being part of the country’s military-industrial complex or surveillance efforts. The sanctions barred Americans from buying or selling publicly traded securities in the targeted companies.

Bridgewater’s investments with those companies — at one point worth at least $230 million — are outlined in filings with the US Department of Labor.

McCormick said Bridgewater abided by the sanctions; a Bridgewater spokesman said the company ultimately divested the holdings. He also noted they were part of a broad basket of investments meant to maximize returns for clients, and represented a sliver of the firm’s overall holdings. (The hedge fund managed $112.5 billion in assets at the end of last year.)

Republican David McCormick, former chief executive of Bridgewater Associates, is the presumptive challenger to Democratic US Sen. Bob Casey.

Photographer: Mark Makela/Getty Images

McCormick also said the federal government should ensure Americans aren’t inadvertently aiding a geopolitical rival.

“Only the US government knows which companies and subsidiaries are national security threats, and we know those threats have been increasing in recent years,” he said in a statement to Bloomberg Government, reiterating his support for more restrictions. “The private sector follows the government’s lead, and in the case of Bridgewater, once the government issued its executive orders, Bridgewater complied with all its terms.”

The disclosures show McCormick’s challenge in shifting from a world of satisfying private investors to one of winning over voters.

As he’s tried to counter attacks from rivals, he’s staked out tough stands on China in a book, speeches, and interviews. In testimony he submitted in September to the House select committee on China, McCormick warned that Americans might be funding the country’s military and technological advances, intentionally or not.

“In pursuit of returns, investors are unwittingly underwriting the development of China’s technological capabilities, both civilian and military,” he wrote. He cautioned against investments in both companies with direct links to the Chinese Army and those companies’ subsidiaries.

Similar investments by Bridgewater hedge funds grew substantially during McCormick’s time as chief executive, from 2017 through early 2022. Investments in companies that later faced sanctions doubled by 2019, rising above $200 million, according to the disclosures. The sanctions were imposed by Trump the next year, and Biden in 2021.

Bridgewater funds also held millions of dollars more in subsidiaries whose state-owned parent companies are among China’s leading producers of military aircraft, naval warships, missiles and nuclear power. Several have been listed by China’s government as among the most critical to the country’s strategic and economic interests, and were also hit with US sanctions after being added to the Chinese Military Industrial Complex List.

Only some of Bridgewater’s hedge fund holdings are included in its filings with the Labor Department. The disclosures, in Form 5500s, are required for investment funds that handle money for two or more private pension funds. So they likely reflect just a piece of Bridgewater’s investments in China.

The investments in the later-sanctioned companies accounted for less than 5% of the firm’s China holdings as of late 2020, the Bridgewater spokesperson said, adding that the holdings were part of a strategy meant to capture the entirety of the Chinese market.

The only aim, the spokesperson said, was to serve clients, adding that a Vanguard emerging markets fund available in some 401(k) plans also included many of the same Chinese companies in 2018.

The disclosures showed that Bridgewater held no investments in the sanctioned entities by 2021.

There’s little surprise, though, that broad investments in China intersected with the country’s military.

Chinese leaders have for more than a decade promoted “civilian-military fusion,” said Ho-Fung Hung, a professor of political economy and expert on China at Johns Hopkins University’s School of Advanced International Studies.

“In China nothing is not controlled by the state,” Hung said.

Strength and Vulnerability

The wealth McCormick amassed at Bridgewater has powered his campaigns, along with his background as a West Point graduate and Army Ranger who earned a Bronze Star in the first Gulf War.

The firm’s ties to China have become a glaring vulnerability — and have drawn new scrutiny as he’s become the presumptive nominee in one of a handful of races expected to decide control of the Senate.

US Sen. Bob Casey (D, Pa.) has said McCormick will be his toughest challenger.

Photographer: Mandel Ngan/AFP via Getty Images

Worries about China are especially potent in Pennsylvania, where the state’s proud manufacturing base has eroded and blue-collar workers bristle at the notion of executives pursuing overseas profits at any cost.

When McCormick left Bridgewater to run for US Senate in 2022, Republican rivals hammered him on the issue.

He lost the GOP primary by fewer than 1,000 votes to Mehmet Oz. (The celebrity surgeon lost the general election to Democrat John Fetterman.) McCormick immediately geared up for a second run, this one against Casey, a three-term incumbent whose family is a Pennsylvania political institution.

McCormick’s running unopposed in the April 23 primary. Casey has called him his toughest challenger ever.

In his testimony last fall, McCormick told the House’s China committee he held “deep reservations” about Bridgewater’s “exposure to the moral and patriotic hazards” there. But he also said that “as CEO, I had a fiduciary responsibility to our shareholders and our clients to maximize returns in line with their needs.”

Democrats have accused him of saying whatever he needs as his ambitions shift.

“David McCormick is lying about holding China accountable,” said TaNisha Cameron, a spokesperson for Pennsylvania’s Democratic Party. “McCormick only looks out for his own bottom line — and he has shown that Pennsylvanians can’t trust him.”

Fighters, Bombers, Aircraft Carriers

Bridgewater has long had an aggressive posture toward China, fueled by its founder, Ray Dalio. McCormick’s time as CEO came as that interest turned into even bigger action.

Bridgewater’s holdings in China or Hong Kong stocks rose from at least $1.6 billion in 2017, when McCormick became co-CEO, to more than $2 billion in 2019, among the funds included in the Labor Department filings.

A Chinese J-15 fighter jet preparing to take off from the deck of the Liaoning aircraft carrier during military drills in the Bohai Sea, off China’s northeast coast in December 2016.

Photo: STR/AFP via Getty Images

Among the direct investments in companies that were later sanctioned:

– $4.5 million in 2019 in the China Shipbuilding Industry Co., the publicly traded arm of the state-owned China Shipbuilding Industry Corp., a major supplier of naval vessels. The parent company two years earlier had launched China’s first domestically produced aircraft carrier. The US sanctioned both the parent and subsidiary.

– $9.7 million in 2020 in four subsidiaries of the Aviation Industry Corp. of China (AVIC), the state-run company that designs and produces China’s military aircraft and is working on the H-20 stealth bomber, according to a Department of Defense report to Congress last year.

That amount includes $2.1 million in AVIC Shenyang Aircraft Co. a year before the company rolled out an upgraded version of its J-15 Flying Shark fighter, and the J-16D, a plane equipped to jam radar systems while accompanying other attack jets. Another $3.6 million was invested in 2020 in the AVIC Xi’an Aircraft Industry Group, which builds the H-6 bomber. AVIC itself was also sanctioned.

- $67.6 million in CNOOC, a state-owned oil and gas company.

The single largest investment in a company that faced sanctions was $113.8 million in 2019 in China Mobile Ltd., one of several significant holdings in companies involved in telecommunications and satellites.

In other cases, Bridgewater funds held stock in subsidiaries whose parent companies faced sanctions. They included $1.9 million in 2019 in Aisino, a state-backed company flagged by the FBI in 2020 for producing tax software that could install malware and allow spying on Western companies operating in China. Aisino’s parent company, the China Aerospace Science and Industry Group, is the country’s largest missile maker and has been sanctioned.

Another $1.4 million was invested that year to the China National Nuclear Power Co. Its parent, the China National Nuclear Corp., produces nuclear power for military and civilian use and was later sanctioned.

The Biden administration said it sanctioned companies operating in China’s “defense and related materiel sector or the surveillance technology sector,” or owned or controlled by people who had worked in those areas. (Two of the companies have since been removed from the list).

Other investors had similar issues: At the same September hearing for which McCormick submitted testimony, the China committee’s top Democrat, Rep. Raja Krishnamoorthi (Ill.) noted that the retirement program covering millions of federal workers, including members of Congress and the US military, offers an index fund that invests in AVIC subsidiaries.

In Bridgewater’s case, the pension funds with money invested in Chinese firms include those for Pennsylvania teachers, and employees at Target, UPS, and Campbell Soup.

Casey has touted a bipartisan bill he co-sponsored to require investors to notify the Treasury Department when they put money into Chinese companies in sensitive sectors.

McCormick has praised the measure, and said the Senate should go even farther.