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Begin New Search Political Geography China Content Type Policy Brief Publication Year within 10 Years

211. Raising a caution flag on US financial sanctions against China

Author:
Jeffrey J. Schott
Publication Date:
01-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
China’s policies in Xinjiang, Hong Kong, and the South China Sea and its ongoing support for Iran, North Korea, and Venezuela pose major challenges for the United States, where bipartisan pressure is growing to ramp up punitive sanctions against leading Chinese firms and financial institutions. Financial sanctions freeze the US assets or bar US entry of the targeted individuals and firms and prohibit US financial firms from doing business with them. Schott explains why US officials should carefully weigh the risks to international financial markets and US economic interests before imposing punitive sanctions on major financial institutions engaged with China. The collateral costs of such sanctions would be sizable, damaging US producers, financial institutions, and US alliances. By restricting access of major banks to international payments in US dollars and barring use of messaging systems like SWIFT, tougher US financial sanctions would effectively “weaponize” the dollar; friends and foes alike would be pushed to seek alternatives to dollar transactions that, over time, would weaken the international role of the dollar. Instead of doubling down on current unilateral financial sanctions, US policy should deploy sanctions in collaboration with allies and calibrate trade and financial controls to match the expected policy achievements.
Topic:
Human Rights, Sanctions, Finance, and Economy
Political Geography:
China, Asia, North America, and United States of America

212. The unappreciated trend toward unilateral trade liberalization

Author:
Robert Z. Lawrence
Publication Date:
03-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Afrequently voiced complaint from the Trump administration was that US firms have faced a competitive disadvantage in exports because the US market is open and US tariffs are low but US trading partners protect their markets with high tariffs. The administration used this concern to justify raising US tariffs whenever it could. Lawrence argues that these claims should be more nuanced and account for the extensive unilateral liberalization by many countries over the past 30 years and that the grievances that motivated the Trump trade policies are increasingly misplaced. Many developing countries have reduced their tariffs unilaterally to rates that are far lower than they applied three decades ago and far less than the bound rates reflected in their World Trade Organization (WTO) obligations. Globally, on average, tariffs were not raised during the global financial crisis of 2008 and continued to decline through at least 2018. Even when shocks from imports resulted in serious injury to domestic industries, several developing countries temporarily provided safeguard protection but at levels that were lower than their WTO bound rates. This evidence of import liberalization also suggests that rising protectionism was not responsible for the slow growth in world trade that has been evident since 2011. It remains uncertain whether countries will now respond to disruptions to global supply chains since 2018 caused by Trump’s trade policies and the COVID-19 pandemic by reversing their tariff liberalization stance, but the sustained enthusiasm for new megaregional trade agreements suggests many countries will not.
Topic:
Emerging Markets, World Trade Organization, Trade Wars, and Protectionism
Political Geography:
China, Asia, North America, and United States of America

213. Improving China's participation in resolving developing-country debt problems

Author:
Martin Chorzempa and Adnan Mazarei
Publication Date:
05-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The COVID-19 shock has exacerbated the struggles of many emerging-market and developing economies (EMDEs) to repay their external debt. One of the most urgent challenges relates to debt owed to China, whose lending spree under its Belt and Road Initiative and other programs has played an outsized role in what amounts to a crisis for many countries. The scope of the problem is striking. China is owed more than $100 billion, or 57 percent of all debt owed to official creditors by the countries that need help the most. China is not a member of the Paris Club of official creditors, which coordinates, within a multilateral framework, the resolution of general sovereign illiquidity or unsustainable external debt of EMDEs. There is an urgent need to put in place more effective, long-term solutions to help durably lower the risks of prolonged debt difficulties in EMDEs. These problems could be partly addressed by creating creditor committees to coordinate debt relief with China. The Group of Twenty (G20) has taken some steps to include creditor committees in the context of the Common Framework for Debt Treatments beyond the Debt Service Suspension Initiative (DSSI), but only for low-income countries that qualify for the DSSI and only for official creditors. To better address debt distress, it needs to extend the approach, especially to middle-income debtor countries.
Topic:
Debt, Development, Emerging Markets, and G20
Political Geography:
China and Asia

214. Answering Beijing’s Growing Assertiveness beyond the Senkakus: Balancing Japan-China Relations

Author:
Valerie Niquet
Publication Date:
05-2021
Content Type:
Policy Brief
Institution:
Japan Institute Of International Affairs (JIIA)
Abstract:
To Japanese authorities, there is no such thing as the “Senkaku question”. China is pursuing with increased assertiveness a strategy of coercion, using ambiguity and “grey zone” operations to put the onus of potential escalation on Tokyo.1 The vague and ambiguous nature of this strategic power play makes it all the more dangerous and complex. When Tokyo proclaims, with reason, that “the government continues to control and administer the territory by such means as patrolling and law enforcement,” it seeks to answer the permanent pressure that China exerts in the zone.2 However, the maintenance of the status quo, when China exerts an almost continuous pressure in the waters surrounding the Senkaku Islands and Japanese fishermen do not have access to part of Japan’s own national territory, poses other types of problems that the People’s Republic of China tries to exploit at the service of broader ambitions. It also poses a challenge in crisis management: how can the Japanese government be active and in control of situational developments, and not just reactive, without going as far as sparking a major incident in the East China Sea?
Topic:
International Relations, Bilateral Relations, Geopolitics, and Crisis Management
Political Geography:
Japan, China, and Asia

215. How difficult is China’s business environment for European and American companies?

Author:
Uri Dadush and Pauline Weil
Publication Date:
05-2021
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Despite tensions over China’s discriminatory business practices, China’s trade continues to thrive, and the country has taken over from the United States as the first destination for foreign investment. American and European businesses continue to be engaged in China’s large and growing market, even amid a trade war between China and the United States. Drawing on surveys of companies and international comparisons, we show that – contrary to the prevailing narrative – China’s business practices have improved significantly in recent years. China’s business environment is today generally more favourable than that in other large countries at similar levels of development and, in some though certainly not all aspects, is in line with the Organisation for Economic Co-operation and Development average. Differences over geopolitics and human rights must be addressed, but it is clear that trade and investment agreements conditioned on accelerated reforms in China would yield substantial dividends. The benefits of such deals would accrue not only to foreign investors in China and exporters to China, but also to consumers and importers in the European Union and, especially, in the US, where punitive tariffs on China remain in effect. Critical aspects in the negotiations would include better access for American and European investors to China’s market for services and improved enforcement of rules and regulations in China. As in many middle-income countries, uneven enforcement of the law (rather than the law itself) remains a critical problem in China.
Topic:
Development, Bilateral Relations, European Union, Business, and Investment
Political Geography:
China, Europe, Asia, North America, and United States of America

216. Is the European Union’s investment agreement with China underrated?

Author:
Uri Dadush and André Sapir
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
The European Union is very open to foreign direct investment. By comparison, despite considerable liberalisation in the past two decades, foreign investors in China’s markets still face significant restrictions, especially in services sectors. Given this imbalance, the EU has long sought to improve the situation for its companies operating or wanting to operate in China. After eight years of negotiations, the EU and China concluded in December 2020 a bilateral Comprehensive Agreement on Investment (CAI). The text awaiting ratification aims to give foreign investors greater market access, enforceable via state-to-state dispute settlement. It does not yet, however, cover investor protection (such as against expropriation). Meanwhile, investor protection is covered by bilateral investment treaties between EU countries and China, which remain in force. The CAI has been met in some quarters with scepticism on economic and geopolitical grounds. The main criticism is that it provides little new market access in China, and that this small economic gain for the EU comes at the price of breaking ranks with its main political ally, the United States. Our assessment, which focuses on the economic implications, is different. It is true the CAI provides only modest new market access in China, but this is because China has already made progress in recent years in liberalising its foreign investment regulations unilaterally. The CAI binds this progress under an international treaty, marking an improvement for EU firms insofar as their market access rights can be effectively enforced. Most important, the CAI includes new rules on subsidies, state-owned enterprises, technology transfer and transparency, which will improve effective market access for EU firms operating in China. These bilateral new rules could also pave the way for reform of the multilateral rules under the World Trade Organisation, with the aim of better integrating China into the international trading and investment system – a goal shared by the EU, the United States and other like-minded countries. From an economic viewpoint therefore, the CAI is an important agreement, and one worth having. However, its ratification by the European Parliament is unlikely while China continues to apply sanctions against some members of the European Parliament and other critics of China’s human rights record.
Topic:
Science and Technology, Bilateral Relations, European Union, Investment, and Liberalization
Political Geography:
China and Europe

217. China’s state-owned enterprises and competitive neutrality

Author:
Alicia Garcia-Herrero
Publication Date:
02-2021
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
As China’s economic weight continues to grow, so does the global impact of its companies. Chinese state-owned enterprises (SOEs) produce a large share of Chinese goods and services. Given their importance both in China and increasingly globally, it should be measured whether SOEs introduce distortions into markets and how significant those distortions are. Foreign governments negotiating trade or investment deals with China need this information so they can better measure how far China is from offering a level playing field to foreign companies on its domestic market. In this context, competitive neutrality is an important working concept that can be used to asses how far a market is from being a competitive environment. The Organisation for Economic Co-operation and Development defines a framework of competitive neutrality as one in which public and private companies face the same set of rules, and no contact with the state gives competitive advantage to any market participant. Quantifying the concept is difficult, but we provide a preliminary measure of the lack of competitive neutrality in relation to Chinese SOEs. In particular, we focus on debt and tax neutrality and compare the situation for Chinese state-owned and private firms on aggregate and sectoral levels. Our results support the view that China’s competitive environment is generally poor. The advantageous position of SOEs in China is true for most economic sectors, though to a variable extent, with the automotive sector one of the furthest away from competitive neutrality. A working measure of competitive neutrality applied in China could help improve the level playing field for foreign companies in China. It could also be applied globally given the very large size and global footprint of Chinese SOEs. The concept could even be introduced in a potential reform of the World Trade Organisation.
Topic:
Business, Trade, Neutrality, and State-Owned Enterprises
Political Geography:
China and Asia

218. SOUTHCOM Commander ADM Faller on U.S.-China Strategic Competition in the Western Hemisphere

Author:
Craig S. Faller
Publication Date:
06-2021
Content Type:
Policy Brief
Institution:
Project 2049 Institute
Abstract:
The Project 2049 Institute is pleased to announce the publication of remarks made by Admiral Craig Faller at our recent event, “Near and Present Danger: SOUTHCOM Commander ADM Faller on U.S.-China Strategic Competition in the Western Hemisphere.” In his remarks, Admiral Faller addresses the Chinese Communist Party’s (CCP) ambitions in Latin America and the Caribbean, from both an economic and strategic perspective, which support its pursuit of global dominance and the imposition of authoritarian values on international institutions. In addition, Admiral Faller highlights SOUTHCOM’s recent activities in the Western Hemisphere and suggests a practical framework to develop and sustain trusted partnerships in the region that will promote democratic values in the face of CCP coercion.
Topic:
Bilateral Relations, Authoritarianism, Geopolitics, and Strategic Competition
Political Geography:
China, Asia, North America, and United States of America

219. Australia's South China Sea Challenges

Author:
Malcolm Cook
Publication Date:
05-2021
Content Type:
Policy Brief
Institution:
Lowy Institute for International Policy
Abstract:
China will not agree to a South China Sea Code of Conduct (COC) that is consistent with the 2016 South China Sea arbitral tribunal ruling, and therefore any COC which China agrees with the Association of Southeast Asian Nations (ASEAN) will harm Australia’s interests. But a lack of Australian support for such a Code would aggravate relations with Southeast Asian states and ASEAN, and with China. Australia should use the time afforded by the drawn-out Code of Conduct negotiations to coordinate with the five littoral Southeast Asian states affected by China’s unlawful maritime claims. Australia should emphasise the need for consistency with international law, especially the 2016 arbitral ruling. The Biden administration is likely to increase pressure on Australia to conduct freedom of navigation operations (FONOPS) in the South China Sea. Such action may risk a significant Chinese response against Australia.
Topic:
Foreign Policy, Territorial Disputes, Maritime, Alliance, and Freedom of Movement
Political Geography:
China, Australia, Southeast Asia, Asia-Pacific, United States of America, and South China Sea

220. Eyes on the Prize: Australia, China, and the Antarctic Treaty System

Author:
Claire Young
Publication Date:
02-2021
Content Type:
Policy Brief
Institution:
Lowy Institute for International Policy
Abstract:
Australia’s interests in Antarctica are better served by the Antarctic Treaty System (ATS) than anything we could negotiate today. We should redouble our commitment to its ideals of science-driven, rules-based management — and counter the narrative of ATS ‘failure’. China is pushing the boundaries of ATS practice by exploiting fisheries and tourism, and probably seeking access to Western technologies in Antarctica. And in the future, Beijing could lead a coalition of states seeking mineral riches that only China is likely to be capable of retrieving. Australia should watch China’s activities closely, but react cautiously. We should be wary of false analogies with the Arctic and not overreact to marginal military developments. We should shield the ATS from Australia–China tension and US–China competition.
Topic:
Science and Technology, Treaties and Agreements, Natural Resources, Tourism, Geopolitics, Fishing, and Coalition
Political Geography:
China, Asia, Australia, and Arctic