U.S. public pension funds are splintering in their approach to China, reflecting rising investment risks and the increasingly fractious politics of the two largest global economies.

Retirement-plan officials are staking out a range of positions. California's teacher-pension fund launched in late August a search for its first dedicated China stock managers, while Texas' teachers retirement fund is cutting its China stock allocation by half. Florida's public-worker fund earlier this year halted new investment strategies in China, citing past crackdowns on education and tech companies.