Texas Raises Pressure on Chinese Investments With Exit Order
(Bloomberg) — Texas Governor Greg Abbott is taking an increasingly antagonistic view towards China.
The Republican ally of President-elect Donald Trump issued a series of warnings and directives this week against China, including telling the Texas state government to ditch investments in the country.
The financial risk of holdings in China is increasing because of the nation’s “belligerent actions” in the Pacific region and around the world, Abbott said in a letter to the heads of Texas state agencies. He told them to halt new investments in China and divest existing holdings.
Echoing Trump’s tough talk against the country, the governor also issued an order Nov. 19 to “harden state systems” against hostile foreign nations, citing “the Chinese Communist Party’s malicious espionage operations.” A day later, the governor told the state “to prepare for potential threats against Texas’ critical infrastructure from a hostile foreign government or their proxies,” citing dangers posed by China.
While Texas holdings in China are limited, the governor’s statement fanned concerns that some of the largest US funds may avoid investing in the country out of political considerations. That hit market sentiment on Friday as disappointing tech earnings and concerns over Trump’s imminent return spurred a selloff in Chinese stocks.
“Governor Abbot’s recent actions demonstrate the extent to which politicians, even at the state level, view anti-China posturing as a winning political strategy,” said Gabriel Wildau, managing director at Teneo Holdings LLC, a New York-based advisory firm.
“I doubt that discrete actions like this at the state level will have a significant market impact, but Abbott’s action signals the direction of travel,” Wildau said by email.
The Chinese embassy in Washington didn’t immediately respond to a request for comment.
Abbott said he instructed Utimco, the $78 billion endowment of the University of Texas and Texas A&M University, to divest from China earlier this year. Other state funds include the $210.5 billion Teacher Retirement System of Texas and the Employees Retirement System of Texas, which manages more than $40 billion.
Abbott’s investment directive drew praise from one of the state’s most outspoken China hawks. Investor Kyle Bass, a longtime bear on Chinese markets, called the move “a thoughtful and strategic approach to safeguarding Texas’ economic interests, national security, and long-term prosperity.” Bass called on the US government to follow the state’s lead.
–With assistance from Jacob Gu.
(Updates with analyst comment in sixth paragraph.)
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