In a move reflecting escalating tensions between the United States and China, the governor of Texas has directed state agencies to cease investing in China and to liquidate their assets in the country at the earliest opportunity.
Concerns over both financial and security risks are cited as the rationale behind this decision, which signals a potential impact on global capital flows.
Republican Greg Abbott recently expressed his concerns about the escalating risks to Texas’ investments in China in a letter addressed to state agencies.
Dated November 21 and published on his website, Abbott highlighted the “belligerent actions” of the ruling Communist Party in China, urging investors to consider pulling out.
“I am instructing Texas investing entities to refrain from making any new investments of state funds in China. If you currently have any investments in China, it is mandatory for you to divest at the earliest opportunity,” he emphasized.
Texas has become more proactive in its approach to agency investments, going so far as to limit public pension funds from engaging with Wall Street companies that have adopted environmental, social, and governance principles.
The Teacher Retirement System of Texas, as stated in its annual report, manages a substantial $210.5 billion at the end of August.
The TRS holds approximately $1.4 billion in Chinese yuan and Hong Kong dollar assets, with Tencent Holdings being its 10th largest position valued at around $385 million in current prices.
In a recent letter, Abbott revealed that he had instructed UTIMCO, the entity responsible for managing a substantial $80 billion, to divest from China earlier this year.
Texas Teachers and UTIMCO did not respond to a request for comment outside of business hours.
The Chinese markets experienced a significant decline on Friday, as the Shanghai Composite index dropped by 3%. In line with the overall market trend, Tencent shares also saw a decrease of around 2% during afternoon trade in Hong Kong.
Trade in Hong Kong has been relatively quiet, with dealers noting a lack of activity. The overall sentiment has been weak, primarily due to the disappointment in Chinese authorities’ failure to deliver on economic stimulus measures. This latest news has only served to further dampen the already downbeat mood.
Steven Leung, executive director at brokerage UOB Kay Hian in Hong Kong, expressed his view on the impact of news regarding policies against China from the U.S. He acknowledged that such news would negatively affect sentiment in the region.
Tom Westbrook in Singapore and Summer Zhen in Hong Kong reported the news. Jiaxing Li in Hong Kong also provided additional reporting. The article was edited by Tom Hogue and Jan Harvey.
