By Jessica Murdock
Increased Pressure on Chinese Investments
Texas Governor Greg Abbott has adopted a more confrontational approach towards China, urging the state government to sever ties with Chinese investments. This week, Abbott issued a series of directives aimed at distancing Texas from financial holdings in the country, citing rising risks associated with China’s “belligerent actions” on the global stage.
Divestment Orders
In a letter to state agency leaders, Abbott called for the immediate halt of new investments in China and urged the divestment of existing holdings. This move aligns with the tough rhetoric of President-elect Donald Trump, as Abbott emphasized the need to “harden state systems” against perceived threats from foreign adversaries, specifically targeting the Chinese Communist Party.
Concerns Over Critical Infrastructure
Abbott also instructed state agencies to prepare for potential threats to Texas’ critical infrastructure posed by hostile foreign governments or their proxies. This directive underscores a growing anxiety regarding security risks stemming from Chinese operations, particularly in light of recent geopolitical tensions.
Market Reactions
While Texas’s investments in China are relatively limited, Abbott’s statements have raised alarms that major U.S. investment funds may reconsider their exposure to China for political reasons. This shift in sentiment contributed to a selloff in Chinese stocks, compounded by disappointing earnings in the tech sector and the anticipation of Trump’s return to power.
Political Strategy
Gabriel Wildau, managing director at Teneo Holdings, commented on the political implications of Abbott’s actions. He noted that anti-China sentiment has become a compelling strategy for politicians at various levels, though the tangible impact on markets may be minimal. Nonetheless, Abbott’s directive signals a broader trend towards distancing from China.
Support from Investors
Abbott’s investment directive received support from prominent investor Kyle Bass, a vocal critic of Chinese markets. Bass praised the move as a “thoughtful and strategic approach” to protect Texas’ economic interests and national security, urging the federal government to follow suit.
