The National Pension Service (NPS), which manages the precious retirement funds of the people, has been engulfed in a fierce controversy over transparency and ethical management standards as it was revealed that it has continuously invested in the initial public offerings (IPOs) of Chinese military and security-linked companies.

In a situation where major advanced nations, including the United States, are strengthening measures to prohibit investments in Chinese military-related companies amid accelerating U.S.-China security conflicts, criticisms are erupting from within and outside the political sphere and the financial investment industry that South Korea’s representative pension fund has opened the floodgates for these companies’ financing with the public’s funds.

This article provides a multifaceted analysis of the background and structural problems of this controversy, comparisons with major overseas pension funds, and the tasks the National Pension Service must pursue between securing profitability and environmental, social, and governance (ESG) and security values.

The Core of the Controversy: “The Blood, Sweat, and Tears of the People’s Money Going to Chinese Military Companies”

The starting point of this controversy is the disclosure of details showing that the National Pension Service has acquired shares by participating in the IPO public subscriptions of Chinese state-owned defense contractors and military technology-related companies listed on the Chinese stock markets (Shanghai, Shenzhen, and Hong Kong) in recent years.

The problem is that these companies are included in the ‘Chinese Military-Industrial Complex Companies (CMIC)’ or security threat blacklists designated by the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) or the Department of Defense. The U.S. Department of Defense and the Department of the Treasury have legally prohibited the investment of domestic capital by designating companies involved in the development of advanced weapons, the supply of surveillance technology, and human rights violations in connection with the Chinese military as blacklists.

However, the National Pension Service participated in the IPOs of these Chinese companies in passive (index tracking) and active methods through external asset management companies.

Most notably, during the late July 2026 IPO on the Hong Kong Stock Exchange for Zhongji Innolight, a Chinese optical transceiver equipment manufacturer for AI data centers, NPS joined global investors like BlackRock in signing a cornerstone investment agreement totaling $250 million to purchase public offering shares.

The core issue lies in the timing. Just 42 days before NPS signed the investment agreement, the U.S. Department of Defense (War Department) designated the firm as a Chinese Military-Industrial Complex Company (CMIC) directly or indirectly linked to the People’s Liberation Army, barring it from procurement contracts. Despite the U.S. government officially placing the company under effective security sanctions, NPS effectively provided listing capital using public retirement funds. This marks the first confirmed case of NPS investing in a company’s IPO following its official CMC designation.

In addition, NPS holds shares in numerous major Chinese tech and manufacturing corporations that are either newly added to or already listed on the U.S. Department of Defense’s “Section 1260H Blacklist,”a registry of entities identified as linked to the Chinese military.

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