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Senate committee advances bill requiring public funds to divest certain Chinese holdings
Summary
The Arizona Senate Commerce & Finance Committee voted to recommend SB 1221, which would bar publicly managed state funds from holding certain companies domiciled in or controlled by the People’s Republic of China.
The Arizona Senate Commerce and Finance Committee voted to give Senate Bill 1221 a favorable recommendation after testimony urging the state to stop holding certain Chinese-linked investments.
SB 1221 would prohibit a publicly managed fund ‘‘from holding certain investments in the People’s Republic of China, or in companies owned or controlled by or domiciled within the People’s Republic of China,’’ and would require procedures to identify prohibited holdings and immediate divestment. The bill defines a publicly managed fund as a short- or long-term investment structure overseen by the state or a political subdivision and includes an exemption for holdings that are under 1% of a fund’s total where the cost to divest would exceed 1% of holdings.
Supporters said the measure addresses national-security and fiduciary risks. Kelly Curry of State Armor told the committee that the federal Thrift Savings Plan avoided Chinese equities after federal action and that state funds could face similar forced divestitures or sanctions in a future conflict. ‘‘We were very successful in ultimately getting the Thrift Savings Plan to not invest in Chinese equities,’’ Curry said.
Michael Lucci, also representing State Armor, said many state pensions hold Chinese companies through index funds and that sudden federal action — citing January 2024 sanctions affecting Tencent — can cause steep losses. Lucci described private-equity and venture holdings as harder to liquidate and said a phased exit may be appropriate for illiquid investments.
Senator David Epstein pressed witnesses on timing and implementation costs. Lucci said index exposures can be switched quickly and suggested a one-year phase-out for directly held equities and a phased approach for private-equity and venture capital investments.
Committee members voted to return SB 1221 with a favorable recommendation. The roll call showed six ayes and no nays on the committee motion.
What happens next: SB 1221 now moves to the full Senate for consideration; the committee record includes testimony from national-security and investment-policy witnesses who urged clear implementation timelines for fund managers and trustees.
Votes at the committee: SB 1221 returned with a due-pass recommendation (committee vote recorded as 6–0).
