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Texas Governor Greg Abbott (R) has directed Texas state agencies to divest their investment portfolios from China, citing financial risks associated with the Chinese Communist Party (CCP). This action aims to protect the state’s financial security and reduce exposure to Chinese markets amid increasing geopolitical tensions and economic instability.
Governor Abbott’s Directive to State Agencies
In a letter addressed to state agency leaders, Governor Abbott outlined his concerns about the financial risks associated with investments in China. He noted that the CCP’s actions, including its aggression in the Southeastern Pacific region, have increased instability in global markets. According to Abbott, continued investments in China could expose Texas to heightened financial and geopolitical risks.
The directive prohibits state agencies from making any new investments in China and requires the divestment of existing holdings at the earliest opportunity. The governor has also emphasized that agencies must ensure compliance while maintaining the financial integrity of state-managed portfolios.
Previous Actions on Chinese Investments
The latest directive builds on prior steps taken by Governor Abbott to address concerns related to Chinese investments. Last year, Abbott, along with three other Governors, encouraged Vanguard, a major investment management firm, to create emerging market funds that exclude Chinese assets. This effort was intended to provide Texas with alternative investment options that limit exposure to risks associated with the CCP.
Additionally, earlier this week Abbott issued executive orders to empower the Texas Department of Public Safety to spearhead efforts to combat harassment and coercion campaigns linked to the CPP. He has also previously directed the University of Texas/Texas A&M Investment Management Company (UTIMCO) to divest its Chinese holdings. These earlier measures set the groundwork for the broader divestment mandate now applied to all Texas state agencies.
Conclusion
Governor Abbott’s directive to divest state funds from China represents a significant step in reducing Texas’ financial exposure to risks associated with the CCP. By prohibiting new investments and mandating the withdrawal of existing holdings, the directive aims to safeguard the state’s financial stability and align investment strategies with security priorities.
The directive builds on previous actions taken by Texas to address concerns about Chinese investments and aligns with national efforts to reevaluate financial ties with adversarial nations. As Texas implements this divestment strategy, state agencies will play a critical role in ensuring compliance while maintaining the financial integrity of the state’s investment portfolios.
It is likely that the Texas Legislature, which convenes in January 2025 for the 89th Legislative Session, will also attempt to address various concerns about China related to both investment and the purchase of land in the state of Texas itself. Several pieces of legislation have already been pre-filed to do so.
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