HONG KONG – Texas Governor Greg Abbott has directed all state agencies to divest from Chinese assets, citing escalating financial and security risks tied to China’s ruling Communist Party. The move, outlined in a letter dated Nov 21 and posted to his official website, marks a significant escalation in U.S.-China tensions impacting global investment flows.
Abbott’s directive prohibits new investments in Chinese assets and mandates the sale of existing holdings at the earliest opportunity. “The belligerent actions of the Chinese Communist Party have increased the risk to Texas investments in China,” he stated in the letter, emphasizing the need for immediate action to safeguard the state’s economic and strategic interests.
This decision aligns with Abbott’s broader efforts to scrutinize and manage state investments. Texas has already imposed restrictions on public pension funds engaging with financial firms that support environmental, social, and governance (ESG) principles.
Among the affected entities is the Teacher Retirement System (TRS) of Texas, which manages $210.5 billion in assets, including approximately $1.4 billion in Chinese and Hong Kong investments. Tencent Holdings, one of China’s largest tech companies, ranks as TRS’s 10th largest investment, valued at about $385 million.
Abbott previously instructed the University of Texas/Texas A&M Investment Management Company (Utimco), managing nearly $80 billion, to divest from China earlier in 2024.
While neither TRS nor Utimco has publicly commented on the directive, the announcement has sent ripples through global markets. On Nov 22, China’s Shanghai Composite Index dropped 3%, and Tencent shares fell about 2% in Hong Kong trading, reflecting heightened investor anxiety.
Market sentiment in Hong Kong has already been fragile due to limited economic stimulus from Beijing. “While these policies are not unexpected, they still impact sentiment whenever formalized,” said Steven Leung, executive director at UOB Kay Hian in Hong Kong.
The divestment order underscores the growing political and economic rift between the U.S. and China, with Texas taking a leading role in restricting financial ties to Beijing. This move may set a precedent for other states to follow suit, further reshaping the landscape of U.S.-China relations.