The Brief:

  • Texas Governor Greg Abbott has directed state agencies to divest from China, citing financial and security risks posed by China’s ruling Communist Party.
  • The directive prohibits new investments in China and mandates the immediate divestment of existing assets, affecting major agencies like the Teacher Retirement System of Texas.
  • This policy shift highlights Texas’ heightened vigilance over national security and financial stability amid escalating U.S.-China tensions.

In a decisive move that underscores the growing tensions between the United States and China, Texas Governor Greg Abbott has issued a directive for state agencies to divest from China.

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This unprecedented step, outlined in a letter dated November 21, reflects growing concerns over the financial and security risks posed by China’s ruling Communist Party. Gov. Abbott’s directive mandates that no new investments be made in China and requires the immediate divestment of existing assets at the earliest opportunity.

This policy shift marks a significant escalation in Texas’ approach to managing its investment portfolio, particularly in light of previous actions taken against Wall Street firms aligned with environmental, social, and governance (ESG) principles.

The directive affects major state agencies such as the Teacher Retirement System of Texas (TRS), which manages over $210 billion in assets. As of August, TRS’s exposure to Chinese markets included approximately $1.4 billion invested in yuan and Hong Kong dollar assets, with Tencent Holdings being one of its top positions valued around $385 million.

Gov. Abbott’s decision is seen as a response to what he describes as “belligerent actions” by China, signaling heightened vigilance over national security concerns and financial stability within Texas’ investment strategies. This move could have widespread implications for global capital flows, especially at a time when U.S.-China relations are marked by increasing strain and economic competition.

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