Florida prepares to drop China investments
TALLAHASSEE- Florida pension-fund managers are ready to begin the process of dropping investments in China-owned companies, anticipating that Gov. Ron DeSantis will sign a bill directing divestment.
The bill (HB 7071), which was unanimously approved last week by the House and Senate, would require the State Board of Administration to develop a plan by Sept. 1 for selling holdings tied to companies that are majority-owned by the Chinese government, the Chinese communist party or the Chinese military. Divestment would then have to occur within one year.
"The exposure is not very high for a number of reasons. But it is something that we will implement once that bill is, presumably, it will be signed or will become law here soon," State Board of Administration interim executive director Lamar Taylor said this week during a meeting of the agency's Investment Advisory Council.
The State Board of Administration oversees state investments, totaling about $225.4 billion as of mid-February. The Florida Retirement System pension plan accounts for about 84 percent of the assets.
Taylor said targeting companies with 50.1 percent or more ownership by the Chinese government is a "fairly ascertainable standard."
"There's a number of (outside) service providers that we can look to, to help us identify those companies so that we can implement that from a compliance process," Taylor said.
Taylor added current exposure to such companies is "under $300 million."
A House analysis released in February put investments in more than 200 Chinese state-owned entities at $277 million, or 0.16 percent, of the retirement system. Of that, $53.6 million was linked to China Construction Bank Corp. and $46.4 million was in Kweichow Moutai, which specializes in a particular Chinese liquor. The majority of the investments are each less than $5 million.
Similar bans have been imposed involving Cuba since 1993, Sudan and Iran since 2007 and Venezuela since 2018.
It remains unclear when DeSantis will sign the China investment bill, as the Legislature has not formally sent it to him. But the bill is the latest in a series of efforts by state leaders to try to cut economic ties with China and other countries.
In December 2021, DeSantis, Attorney General Ashley Moody and Chief Financial Officer Jimmy Patronis, in their role as trustees of the State Board of Administration, directed a review of Florida Retirement System investments to find links to the Chinese communist party.
Taylor in March 2022 announced a pause in new investments in China, which had been part of the state's "emerging market strategies" since the mid-1990s.
Other recent state laws included a 2023 measure restricting certain people from China and other "foreign countries of concern" from owning property in Florida.
Lawmakers this year considered a proposal to clarify the land-ownership law, a move that had support from the powerful business group Associated Industries of Florida. But the proposal died after DeSantis voiced opposition in February, arguing the measure was an "attempt to unwind what we've done to protect Floridians against the threat posed by China."
The law has drawn a constitutional challenge, with the 11th U.S. Circuit Court of Appeals scheduled to hear arguments in April.
Meanwhile, on a federal level, the U.S. House on Wednesday approved a measure that could bar the social-media app TikTok unless it is sold by its Chinese parent company.