Austin, TX- Texas Gov. Greg Abbott on Nov. 21 ordered all state agencies to conduct risk assessments and withdraw state funds from investments in China.
“I direct Texas investing entities that you are prohibited from making any new investments of state funds in China,” Abbott wrote in a letter to agencies. “To the extent you have any current investments in China, you are required to divest at the first available opportunity.
“As Chinese aggression against the United States and its allies seems likely to continue, the financial risk associated with holding investments in China will also rise.”
Last year, the governor called on state universities to divest themselves of Chinese investments, and he and other governors called on investment management company Vanguard to put state money in funds that do not invest in China.
Abbott said the Chinese Communist Party (CCP) is a foreign adversary to the United States and pointed to its “belligerent actions” in the Indo-Pacific region as a destabilizing factor that increases financial risk.
China’s economy under the CCP is not a free market economy, as industries operate to meet the Party’s goals rather than market demand. It is also notoriously opaque, allowing foreign investors only limited access to data.
Further, the risk associated with VIEs is high because they are technically illegal in China. If Beijing chooses to crack down on the use of this structure, Western investors could immediately lose trillions.
For example, although Alibaba and Baidu are currently listed on the New York Stock Exchange, when investors purchase their stocks, they are actually buying ownership in an offshore shell company. This shell company receives a portion of Alibaba’s or Baidu’s profits, but investors do not have any legal claim to either company’s actual assets.
Abbott’s divestment directive is the latest in a string of orders he issued this week to protect Texans from CCP influence.
On Nov. 19, the governor signed an executive order to protect Texans from the CCP’s espionage operations.
