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Texas increases pressure on Chinese investments with exit order
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Texas increases pressure on Chinese investments with exit order

(Bloomberg) — Texas Gov. Greg Abbott is taking an increasingly hostile view toward China.

President-elect Donald Trump’s Republican ally issued a series of warnings and directives against China this week, including calling on the Texas state government to abandon its 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. existing assets.

Echoing Trump’s harsh words against the country, the governor also issued an order on November 19 to “harden state systems” against hostile foreign nations, citing “the Chinese Communist Party’s malicious espionage operations.” . A day later, the governor asked the state “to prepare for potential threats to Texas’ critical infrastructure from a hostile foreign government or its proxies,” citing the dangers posed by China.

Even though Texas’s holdings in China are limited, the governor’s statement stoked concerns that some of the largest U.S. funds might avoid investing in the country for political reasons. This affected market sentiment on Friday, as disappointing tech sector earnings and concerns over Trump’s imminent return caused a sell-off in Chinese stocks.

winning strategy

“Governor Abbot’s recent actions demonstrate the extent to which politicians, even at the state level, view anti-China positions as a winning political strategy,” said Gabriel Wildau, chief executive officer of Teneo Holdings LLC, a private equity firm. consultancy based in New York.

“I doubt whether quiet actions like this at the state level will have a significant impact on the market, but Abbott’s action points in the direction we should take,” Wildau said via email.

The Chinese embassy in Washington did not immediately respond to a request for comment.

Abbott said he asked 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 vocal 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 U.S. government to follow the state’s lead.

–With help from Jacob Gu.

(Updates with analyst comment in sixth paragraph.)

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