Texas lawmakers are calling for the state to adopt an anti-China approach, but the state has already invested billions in the country.
The state of Texas has at least $9 billion invested in China as Gov. Greg Abbott and other state leaders repeatedly speak out against the Chinese Communist Party (CCP) and the human rights abuses in the nation, according to the San Antonio Express. In 2021, Abbott signed a law designating China as a "hostile nation," and the attorney general compared the country to "1930s Germany."
“It’s not just the human rights, which I think has clearly gotten worse over a period of time, but how individuals or companies are treated," State Sen. Paul Bettencourt, who serves on the Senate Finance Committee, told the San Antonio Express. "It’s not the same governmental structure that we’re used to, and the rules can change rapidly, as we’ve seen, for other companies and for investments. So that’s one of the downsides of investing in an environment that does not have a long history of having a stable environment for capital."
Bettencourt added that he expects the legislature to consider divesting from China.
Seven of Texas' pension funds, totaling $9.12 billion, are invested in Chinese companies, the majority of that share invested in large companies like Tencent and Alibaba.
“You make these huge investments in the Chinese economy even though you face not only economic risk, you face a lot of political risk doing that,” John Diamond, director of the Center for Public Finance at Rice’s Baker Institute, told the San Antonio Express. “It doesn’t really make sense. It’s kind of like talking out of both sides of your mouth. On one hand, you say you’re going to be tough with China ... but then, when it comes to investments and where to put our money, then we are — or at least the pension funds — are very quick to chase returns.”
The $9.12 billion estimate is likely to be very conservative, as it only includes state-level funds and not the 92 local funds across the state.
“The Legislature, in its wisdom, has legislated what we must be transparent about and what we must keep confidential. They made that trade-off because they recognize a balance must exist, and they want the funds to achieve their assumed rate of return, which they likely would not if they were prohibited from investing in professionally managed private funds,” Britt Harris, a former investment officer with TRS, told the San Antonio Express.
Tim Lee, president of the Retired Teachers Association Board, believes that financial decisions should be made by experts at the pension fund, according to the San Antonio Express.
“I think it’s worth asking those questions sometimes. But if elected officials become too involved in how pension funds make those decisions, the slippery slope is elected officials saying we were successful with ‘x,’ now you should do ‘y,’” Lee said.