Texas Governor Greg Abbott has issued a firm directive for state agencies to divest from Chinese investments and halt any future dealings.
This decision, announced on November 21, stems from escalating concerns over financial risks and national security threats tied to China’s growing hostility toward the United States.
Abbott’s order targets major state-managed funds, including the Teacher Retirement System of Texas (TRS), which oversees $210.5 billion in assets.
TRS holds approximately $1.4 billion in Chinese and Hong Kong dollar-linked investments, with Tencent Holdings—a Chinese tech giant—valued at $385 million among its top positions.
The University of Texas/Texas A&M Investment Management Company (UTIMCO), managing nearly $80 billion, was also instructed to divest earlier this year.
Texas Governor Orders State Agencies to Cut Financial Ties with China. (Photo Internet reproduction)
In his letter, Abbott highlighted the dangers of investing in a system controlled by the Chinese Communist Party (CCP). He pointed to the CCP’s “belligerent actions” in the Indo-Pacific region and its opaque economic practices as destabilizing factors.
Texas Targets Chinese Investments
Unlike free-market economies, Chinese industries often prioritize state objectives over profitability, leaving foreign investors vulnerable.
Many U.S.-listed Chinese companies, such as Alibaba and Baidu, use risky structures like variable interest entities (VIEs). Under this arrangement, investors technically own offshore shell companies rather than the actual firms.
These structures are illegal under Chinese law, meaning Beijing could dismantle them at any time, potentially wiping out trillions in investments.
The directive aligns with Texas’s broader push to safeguard its financial independence. Previously, the state restricted public pension funds from engaging with Wall Street firms promoting environmental, social, and governance (ESG) principles.
Abbott’s move doubles down on protecting Texas’s economic interests from external threats. The announcement sent shockwaves through global markets.
The Shanghai Composite Index fell 3%, while Tencent shares dropped 2% in Hong Kong trading. This underscores growing investor unease as U.S.-China tensions intensify.
Abbott’s decision reflects a larger trend of reevaluating economic ties with China amid fears over security and financial stability. As geopolitical tensions rise, Texas’s bold stance could set a precedent for other states to follow.
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