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151. The (Im-)Possibility of Rational Socialism: Mises in China’s Market Reform Debate

Author:
Isabella Weber
Publication Date:
10-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Investigate the long first decade of reform in China (1978-1992) to show that Mises, in particular his initiating contribution to the Socialist Calculation Debate, became relevant to the reconfiguration of China’s political economy when the reformers gave up on the late Maoist primacy of continuous revolution and adhered instead to an imperative of development and catching up. During the Cultural Revolution, Mao had rejected the notions of efficiency and rational economic management. In the late 1970s, the reformers under Deng Xiaoping’s leadership elevated these notions to highest principle. As a result, Mises’ critique that socialism could not achieve a rational economic order came to be debated throughout the 1980s and Chinese economists developed their own reading of Mises and the Socialist Calculation Debate. When Deng Xiaoping reinstated market reforms in the early 1990s after the Tiananmen crackdown, a history of thought review of the possibility of rational socialism and socialist markets helped to justify the Socialist Market Economy with Chinese Characteristics the official designation of China’s economic system to this day.
Topic:
Markets, History, Reform, Economy, and Socialism
Political Geography:
China and Asia

152. Regulated Market, Trapped Workers: The Impacts of the "Tolerant and Prudent" Policy on Labour Precarity in China’s Online Ridehailing Sector

Author:
Wei Zhang, Hao Qi, and Zhongjin Li
Publication Date:
11-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Since 2017, China has adopted the "tolerant and prudent" policy in regulating emerging digital platform industries. The impacts of this policy on labour precarity have been rarely studied. Drawing on an original survey of over 600 ridehailing drivers in two Chinese cities, Nanjing and Beijing, we conduct a political economy analysis for a three-party framework involving the municipal government, capital, and labour. We find that, in accordance with the "tolerant and prudent" principle, municipal governments stipulated regulations regarding the qualifications of ridehailing vehicles and drivers. These regulations, although they can help reduce labour precarity in the marketplace for licensed drivers, have exacerbated precarity in the workplace. Specifically, in response to the regulations, the ridehailing platforms aligned with thirdparty rental companies that provided licensed vehicles. This arrangement has effectively trapped many ridehailing drivers in the industry: our quantitative analysis shows that drivers bounded by a rental or rent-toown agreement worked significantly longer hours than counterparts who steered their own vehicles.
Topic:
Markets, Labor Issues, Regulation, Digital Economy, and Precarity
Political Geography:
China and Asia

153. The State-Constituted Market Economy: A Conceptual Framework for China’s State–Market Relations

Author:
Isabella Weber and Hao Qi
Publication Date:
12-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
China has created a distinct economic system. Yet despite a growing literature with valuable contributions on the institutional arrangements under ‘capitalism with Chinese characteristics,’ the precise economic mechanisms underpinning China’s state–market relations remain undertheorised. In this paper we develop a conceptual framework of what we call China’s state-constituted market economy. We define essential as ‘systemically significant from the perspective of the state.’ We argue that the Chinese state ‘constitutes’ the market economy by creating, participating and steering markets for essentials in order to stabilise and guide the economy as a whole. We draw on China’s statecraft tradition as well as on proposals for financial policy reform in the U.S. to conceptualise the state market-constitution in China.
Topic:
Markets, Economy, and State-Market Relations
Political Geography:
China and United States of America

154. Predicting Chinese State-Owned Enterprise Policy Incidence

Author:
Sara Hsu
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
In this exploratory research, we examine the effect of economic and noneconomic indicators on the creation of Chinese state-owned enterprise policies. Using a VAR model, we find indicators that explain state-owned enterprise policy creation variance, which means that we can explain, to some extent, the incidence of state-owned enterprise policies. This reduces economic policy uncertainty, thereby having the potential to increase economic activity and reduce costs.
Topic:
Political Economy, Economy, and State-Owned Enterprises
Political Geography:
China and Asia

155. Predicting Chinese Banking Policy Incidence

Author:
Sara Hsu
Publication Date:
07-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
In this exploratory research, we examine the effect of economic and noneconomic indicators on the creation of Chinese Banking and Insurance Regulatory Commission policies using a VAR model. We find that CBIRC policies are predicted by State Council construction policies and policies set by the State Administration of Foreign Exchange. This indicates that the CBIRC is inward-looking, observing what other regulators are doing rather than responding to changes in the real and financial economy. This may be a product of market distortions due to China’s unique blend of state-oriented and market-based institutions.
Topic:
Political Economy, Regulation, and Banking
Political Geography:
China and Asia

156. The Hong Kong National Security Law and its Implications for Middle Powers

Author:
Tuvia Gering
Publication Date:
08-2021
Content Type:
Working Paper
Institution:
Jerusalem Institute for Strategy and Security (JISS)
Abstract:
In May 2021, an Israeli company became the first documented case of China imposing free expression limitations on a foreign business under the 2020 Hong Kong National Security Law. Democracies must ensure that their citizens are not prosecuted for exercising their basic rights.
Topic:
Security, Democracy, Freedom of Expression, and Freedom
Political Geography:
China, Middle East, Israel, and Asia

157. China’s biased role in the Israeli-Palestinian conflict

Author:
Tuvia Gering
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Jerusalem Institute for Strategy and Security (JISS)
Abstract:
Beijing’s anti-Israel statements and actions during the recent Gaza operation undermined Israeli trust in China.
Topic:
Diplomacy, Bilateral Relations, Conflict, and Negotiation
Political Geography:
China, Middle East, Israel, and Asia

158. China’s Experience in Building a Venture Capital Sector: Four Lessons for Policy Makers

Author:
Anton Malkin
Publication Date:
01-2021
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
China’s journey from being a technological backwater to a technological superpower was fuelled, in part, by the success of its venture capital (VC) sector in supporting start-ups. Its VC market is now the second largest in the world after that of the United States. As of 2019, China produced more “unicorns” (privately held, rapidly growing, early-stage technology companies valued at US$1 billion or more) than the United States. Policy makers can learn the following lessons from China’s growing VC sector: China’s use of labour market incentives promotes reverse migration of highly educated expatriates; weak intellectual property protection is not necessarily a deterrent to VC funding, especially in developing countries; government finance, when used appropriately, can help direct VC toward promising technology firms; and an emerging market does not need to wait until it becomes financially developed in order to create funding channels to support start-ups and entrepreneurship.
Topic:
Science and Technology, Hegemony, Finance, and Venture Capital
Political Geography:
China and Asia

159. Biotechnology and Security Threats: National Responses and Prospects for International Cooperation

Author:
Hanzhi Yu and Yang Xue
Publication Date:
03-2021
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
Cutting-edge biotechnology, mainly consisting of gene editing, gene drives and gene synthesis, is developing and changing rapidly. It acts as a double-edged sword, bringing benefits to human development in many fields, such as medical treatment and agriculture, while also posing serious threats to biological security, human existence and development. For example, the case of He Jiankui, a young scholar from the Southern University of Science and Technology of China who created gene-edited babies, triggered a global controversy and debate on biosafety in the winter of 2018. This paper argues that the problems China faces do not only exist in China — they are in fact common problems faced by all countries in the world. Due to the COVID-19 pandemic, the world is paying close attention to global health governance and biosafety issues. There is a window of opportunity for global collaboration to deal with biosecurity threats.
Topic:
Security, International Cooperation, Science and Technology, and Biotechnology
Political Geography:
China and Asia

160. China’s Techno-Industrial Development: A Case Study of the Semiconductor Industry

Author:
Alex He
Publication Date:
05-2021
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
This paper reviews the strategies and plans, policy-making institutions, process and problems in China’s techno-industrial development. Although it has made noticeable progress in some areas in the past two decades, China still lags behind in most core technology and advanced manufacturing fields, such as high-end chips. There have been several real breakthroughs in the semiconductor sector by private companies such as HiSilicon and rapid advancement in frontier technologies — artificial intelligence, fifth-generation wireless communication network technology, big data, blockchain and the Internet of Things — by private companies such as Huawei, Tencent, Alibaba and Baidu; however, state-sponsored technological innovation and breakthroughs have been crippled by the existing problems in China’s science and technology research system and a campaign-style catch-up strategy that rewards bureaucrats on short-term goals, as well as by weak links between academic research and industry and a swing between the market-oriented approach for technology acquisitions and indigenous innovation for technology breakthroughs. A case study of China’s semiconductor industry demonstrates both the problems and progress in China’s techno-industrial development, as well as the implications for the country's prospects of evolving into a technological powerhouse.
Topic:
Development, Science and Technology, Artificial Intelligence, Industry, and 5G
Political Geography:
China and Asia

161. The Road from Galwan: The Future of India-China Relations

Author:
Vijay Gokhale
Publication Date:
03-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
China and India struggle to comprehend each other’s international ambitions. The misperceptions that follow lead to a lack of trust, border skirmishes, and potentially worse. On June 15, 2020, Indian and Chinese troops engaged in a brawl that left twenty Indian soldiers dead while causing an unspecified number of Chinese casualties. The clash is a part of a broader border standoff along the Galwan River between the two forces on the Line of Actual Control that is yet to be resolved. The Indian strategic community is broadly in agreement that this border dispute marks an implacable decline in India-China ties. They argue that the very basis of relations that emerged after former Indian prime minister Rajiv Gandhi’s visit to Beijing in 1988 has been shaken, if not destroyed. Yet, how did the two countries manage to reach this nadir in ties, and furthermore, what does the Galwan clash signify for the future of Sino-Indian relations? This paper argues that, long before the present border dispute occurred, Sino-Indian relations had been steadily declining due to rampant misperceptions of the other side, contributing to a lack of trust. The most fundamental misperception between the two countries is the inability to comprehend each other’s international ambitions, yielding the fear that their foreign policies are targeted against the other. This paper traces the impact and development of these misperceptions on Sino-Indian ties through three different phases before considering the future of the relationship after the Galwan dispute.
Topic:
Foreign Policy, Bilateral Relations, Territorial Disputes, and Borders
Political Geography:
China, South Asia, India, and Asia

162. China’s Improvised Mask Diplomacy in Chile

Author:
Urdinez. Francisco
Publication Date:
04-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
During the pandemic, Chinese medical and equipment supplies to Chile have come mostly from a diverse cast of Chinese players with local experience in Chile. They adapted to Chile’s unique system of emergency and disaster management. China has become a global power, but there is too little debate about how this has happened and what it means. Many argue that China exports its developmental model and imposes it on other countries. But Chinese players also extend their influence by working through local actors and institutions while adapting and assimilating local and traditional forms, norms, and practices. With a generous multiyear grant from the Ford Foundation, Carnegie has launched an innovative body of research on Chinese engagement strategies in seven regions of the world—Africa, Central Asia, Latin America, the Middle East and North Africa, the Pacific, South Asia, and Southeast Asia. Through a mix of research and strategic convening, this project explores these complex dynamics, including the ways Chinese firms are adapting to local labor laws in Latin America, Chinese banks and funds are exploring traditional Islamic financial and credit products in Southeast Asia and the Middle East, and Chinese actors are helping local workers upgrade their skills in Central Asia. These adaptive Chinese strategies that accommodate and work within local realities are mostly ignored by Western policymakers in particular. Ultimately, the project aims to significantly broaden understanding and debate about China’s role in the world and to generate innovative policy ideas. These could enable local players to better channel Chinese energies to support their societies and economies; provide lessons for Western engagement around the world, especially in developing countries; help China’s own policy community learn from the diversity of Chinese experience; and potentially reduce frictions.
Topic:
Diplomacy, Disaster Relief, Health, Pandemic, and COVID-19
Political Geography:
China, Asia, South America, and Chile

163. The US–China trade war and phase one agreement

Author:
Chad P. Bown
Publication Date:
02-2021
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The Trump administration changed US trade policy toward China in ways that will take years for researchers to sort out. This paper makes four specific contributions to that research agenda. First, it carefully marks the timing, definitions, and scale of the products subject to the tariff changes affecting US-China trade from January 20, 2017 through January 20, 2021. One result is that each country increased its average duty on imports from the other to rates of roughly 20 percent, with the new tariffs and counter-tariffs covering more than 50 percent of bilateral trade. Second, the paper highlights two additional channels through which bilateral tariffs changed during this period: product exclusions from tariffs and trade remedy policies of antidumping and countervailing duties. These two channels have received less research attention. Third, it explores why China fell more than 40 percent short of meeting the goods purchase commitments set out for 2020, the first year of the phase one agreement. Finally, the paper considers additional trade policy actions—involving forced labor, export controls for reasons of national security or human rights, and reclassification of trade with Hong Kong—likely to affect US-China trade beyond the Trump administration.
Topic:
Education, Trade Wars, Trade Policy, and Protectionism
Political Geography:
China, Asia, North America, and United States of America

164. How China lends: A rare look into 100 debt contracts with foreign governments

Author:
Anna Gelpern, Sebastian Horn, Scott Morris, Brad Parks, and Christoph Trebesch
Publication Date:
05-2021
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
China is the world’s largest official creditor, but basic facts are lacking about the terms and conditions of its lending. Very few contracts between Chinese lenders and their government borrowers have ever been published or studied. This paper is the first systematic analysis of the legal terms of China’s foreign lending. The authors collect and analyze 100 contracts between Chinese state-owned entities and government borrowers in 24 developing countries in Africa, Asia, Eastern Europe, Latin America, and Oceania, and compare them with those of other bilateral, multilateral, and commercial creditors. Three main insights emerge. First, the Chinese contracts contain unusual confidentiality clauses that bar borrowers from revealing the terms or even the existence of the debt. Second, Chinese lenders seek advantage over other creditors, using collateral arrangements such as lender-controlled revenue accounts and promises to keep the debt out of collective restructuring (“no Paris Club” clauses). Third, cancellation, acceleration, and stabilization clauses in Chinese contracts potentially allow the lenders to influence debtors’ domestic and foreign policies. Even if these terms were unenforceable in court, the mix of confidentiality, seniority, and policy influence could limit the sovereign debtor’s crisis management options and complicate debt renegotiation. Overall, the contracts use creative design to manage credit risks and overcome enforcement hurdles, presenting China as a muscular and commercially savvy lender to the developing world.
Topic:
Foreign Policy, Debt, Government, and Banking
Political Geography:
China and Asia

165. The Vision Group on U.S.-ROK Relations: Insights and Recommendations

Author:
KEI
Publication Date:
01-2021
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
The Korea Economic Institute of America (KEI), with the generous support of the Korea Foundation, organized six “Vision Group” roundtable conversations with leading American scholars and commentators to discuss the United States’ relationship with the Republic of Korea. The first was held in December 2019, the last in November 2020. The intent was to consider the future of relations during a time of change. The Vision Group comprised a wide range of expertise and opinion. This record conveys some of the insights and recommendations that arose during the conversations.
Topic:
International Relations, Security, Foreign Policy, Economics, and Human Rights
Political Geography:
China, Asia, South Korea, North Korea, and United States of America

166. Limits of Public Diplomacy and Soft Power: Lessons from the THAAD Dispute for South Korea's Foreign Policy

Author:
Maximilian Ernst
Publication Date:
04-2021
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
This paper examines South Korea’s foreign policy towards China before, during, and after the Terminal High Altitude Area Defense (THAAD) missile defense dispute to investigate the limits of South Korea’s public diplomacy and soft power. South Korea’s official public diplomacy has the objective to “gain global support for Korea’s policies,” following Joseph Nye’s narrow definition of soft power. South Korea furthermore ranks high in the most relevant soft power indices. Based on the case of Chinese economic retaliation against South Korea in response to THAAD deployment, this paper argues that public diplomacy and soft power only work in the absence of traditional security contentions, but fail in the presence of such security contentions. The THAAD case also demonstrates the utility of traditional diplomacy, based on high-level summits and negotiations, to solve the very disputes that South Korea’s latent public diplomacy and soft power were unable to alleviate.
Topic:
International Relations, Foreign Policy, Diplomacy, Economics, and Weapons
Political Geography:
China, Asia, South Korea, and Korea

167. The changing nature of work and earnings inequality in China

Author:
Chunbing Xing
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper examines the evolution of China’s industrial and occupational structure in the last two decades and its impact on wage inequality. We find that non-routine cognitive and interpersonal tasks have increased, while routine cognitive tasks first increased and then declined. Occupation structural change is accompanying rising wage inequality. The wage premium for educated workers rose sharply in the 1990s and remained high thereafter. Occupations with high routine task intensity are associated with lower wages. While the return to education has become the largest contributor to wage inequality, routine task intensities have yet to play a significant role.
Topic:
Education, Labor Issues, Employment, Inequality, and Work Culture
Political Geography:
China and Asia

168. Questioning Industrial Policy: Why Government Manufacturing Plans Are Ineffective and Unnecessary

Author:
Scott Lincicome and Huan Zhu
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
In the wake of the COVID-19 pandemic and rising U.S.-China tensions, American policymakers have again embraced “industrial policy.” Both President Biden and his predecessor, as well as legislators from both parties, have advocated a range of federal support for American manufacturers to fix perceived weaknesses in the U.S. economy and to counter China’s growing economic clout. These and other industrial policy advocates, however, routinely leave unanswered important questions about U.S. industrial policy’s efficacy and necessity: What is “Industrial Policy”? Advocates of “industrial policy” often fail to define the term, thus permitting them to ignore past failures and embrace false successes while preventing a legitimate assessment of industrial policies’ costs and benefits. Yet U.S. industrial policy’s history of debate and implementation establishes several requisite elements – elements that reveal most “industrial policy successes” not to be “industrial policy” at all. What are the common obstacles to effective U.S. industrial policy? Several obstacles have prevented U.S. industrial policies from generating better outcomes than the market. This includes legislators’ and bureaucrats’ inability to “pick winners” and efficiently allocate public resources (Hayek’s “Knowledge Problem”); factors inherent in the U.S. political system (Public Choice Theory); lack of discipline regarding scope, duration, and budgetary costs; interaction with other government policies that distort the market at issue; and substantial unseen costs. What “problem” will industrial policy solve? The most common problems purportedly solved by industrial policy proposals are less serious than advocates claim or unfixable via industrial policy. This includes allegations of widespread U.S. “deindustrialization” and a broader decline in American innovation; the disappearance of “good jobs”; the erosion of middle‐​class living standards; and the destruction of American communities. Do other countries’ industrial policies demand U.S. industrial policy? The experiences of other countries generally cannot justify U.S. industrial policy because countries have different economic and political systems. Regardless, industrial policy successes abroad – for example, in Japan, Korea and Taiwan – are exaggerated. Also, China’s economic growth and industrial policies do not justify similar U.S. policies, considering the market‐​based reasons for China’s rise, the Chinese policies’ immense costs, and the systemic challenges that could derail China’s future growth and geopolitical influence. These answers argue strongly against a new U.S. embrace of industrial policy. The United States undoubtedly faces economic and geopolitical challenges, including ones related to China, but the solution lies not in copying China’s top‐​down economic planning. Reality, in fact, argues much the opposite.
Topic:
Government, Industrial Policy, Manufacturing, and COVID-19
Political Geography:
China, Asia, North America, and United States of America

169. Catalyzing India’s Climate Ambition

Author:
Patrick Suckling
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Asia Society
Abstract:
China’s recent commitment to reach carbon neutrality before 2060 means that for the first time ever, India is on track to become the world’s largest emitter. At a time that demands urgent action if we are to stay within the goals of the Paris Agreement, this brings into contrast India’s traditionally bifurcated approach that it has used to guard against taking greater action in light of the responsibility of the developed world to lead the way. Nevertheless, in recent decades, a political appetite for climate action has been growing in India, including reinforcing its global leadership credentials at the behest of Prime Minister Narendra Modi. Climate-related disasters have also driven public support for more constructive engagement by Delhi. However, this appetite does not yet match growing international expectations for Indian action, as momentum for global climate action and ambition accelerates rapidly around the world in the lead-up to the COP26 Climate Conference in Glasgow in November 2021. The election of U.S. President Joe Biden and recent commitments to net-zero by other Asian economies such as Japan and Korea underscore the weight of growing expectations on India. A sophisticated and holistic strategy to catalyze climate ambition from India is needed if the world is to succeed and help the country navigate a new low-carbon development model. India’s recent establishment of an Apex Committee on the Implementation of the Paris Agreement and its commitment to produce a long-term strategy to reduce emissions provide two particular openings for this even if signals elsewhere are mooted, including the impact of India’s economic response to COVID-19. And at a geopolitical level, India’s relations with China can help reinforce the need for action, and so too can India’s shifting relations with the G77 group of developing nations. This strategy must involve a mix of both greater political and policy engagement and deeper technical and financial support to help accelerate action — including through helping unlock greater private finance domestically. The recently announced U.S.-India Climate and Clean Energy Agenda 2030 Partnership is an excellent first step in this regard. This Asia Society Policy Institute issue paper, Catalyzing India's Climate Ambition, authored by Senior Fellow and former Australian High Commissioner to India and Ambassador for the Environment Patrick Suckling, sets out how the wider international community should sensitively, constructively, and intelligently now work with India to catalyze greater climate ambition in the lead-up to COP26 and beyond.
Topic:
International Relations, Climate Change, Carbon Emissions, and Decarbonization
Political Geography:
China, South Asia, and India

170. Understanding American Voter Attitudes Toward U.S.-China Climate Cooperation

Author:
The Asia Society Policy Institute and Data for Progress
Publication Date:
02-2021
Content Type:
Working Paper
Institution:
Asia Society
Abstract:
After four years of U.S. absence from the global climate stage, a majority of voters—including a plurality of Republican voters—agree the United States should take ambitious actions to address climate change and lead the world in tackling the climate crisis, even if China and other countries do not increase their own ambition. With the exception of nuclear disarmament, a majority of voters see climate change as the most important issue for the United States and China to cooperate on—more so than tackling COVID-19. At the same time, competing with China to become the world leader in the development of clean energy technologies drives up support among voters across the political spectrum for the United States ramping up its own clean energy industry. Similarly, voter support for the United States enhancing its climate ambition increases if China takes additional steps. Despite voters expressing apprehension toward partnering with China on innovation and trade in a number of sectors like automobiles and healthcare, voters are also very receptive to a potential partnership around clean energy development. However, voters want President Biden to also uphold his campaign promise to devise policies that will hold China “accountable” for its climate commitments. Voters support this more than any of Biden’s other proposals for global climate action. With this in mind, voters support the idea of the United States providing competitive financing for renewable energy projects to Belt and Road Initiative countries and instituting a carbon border tax as possible ways to increase pressure on China to do more both at home and abroad. For instance, an overwhelming majority of voters think China should aim to achieve carbon neutrality much sooner than 2060. Notably, a near majority of voters are also supportive of the U.S. military and Chinese military working together even more to assess climate risks and improve disaster preparedness around the world. Though President Biden may face some roadblocks from Republicans who are less supportive of U.S.-China climate cooperation than Democrats and independents, messaging around maintaining U.S. leadership over China on climate action and clean energy development clearly resonates with Republican voters.
Topic:
Foreign Policy, Climate Change, Public Opinion, Voting, and COVID-19
Political Geography:
China and United States of America

171. What Does China’s Update of its Anti-Monopoly Law and New Regulations for the “Platform Economy” Mean for Business?

Author:
David Hoffman
Publication Date:
05-2021
Content Type:
Working Paper
Institution:
The Conference Board
Abstract:
The recently enacted revisions to China’s Anti-Monopoly Law, and its extensive provisions for regulating China’s “platform economy” – i.e., fintech and ecommerce platforms – are consequential for foreign investors in China, bearing both upside and downside risks. On the one hand, they reinforce the trend of increasing state intervention in China’s economy and commercial markets and raise concerns about a more confined and controlled play-space for the private sector in China, a cohort which includes foreign multinational companies and financial investors.
Topic:
Governance, Law, Economy, Business, Investment, Monopoly, Private Sector, and Commerce
Political Geography:
China and Asia

172. Headquarters-China "Co" Relations - Navigating the Very Contemporary Yins and Yangs of MNC Business in China

Author:
David Hoffman
Publication Date:
05-2021
Content Type:
Working Paper
Institution:
The Conference Board
Abstract:
Many China organizations of western multinational companies (MNCs) report increasing friction and misalignment with headquarters (HQ) across a range of China issues. We observe three primary sources of tension and misalignment: a differing appraisal of risks, including, importantly, confidence in abilities to protect IP; a differing calculus on the evaluation of opportunities; and concerns, at HQ and Board level, about the control implications of increasingly divergent, if not more autonomous, China operations.
Topic:
Economy, Business, Multinational Corporations, and Private Sector
Political Geography:
China, Asia, and Global Focus

173. Technological Competition: Can the EU Compete with China?

Author:
Francesca Ghiretti
Publication Date:
09-2021
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
The debate on technological development and the unfolding fourth technological revolution tends to neglect the role of the EU, relegating it to follower status. The leadership positions are occupied by the US and China, who compete with one another for technological supremacy. Yet, despite lagging behind in some areas, the EU is better placed than is often assumed and still stands a chance of guaranteeing the delivery of a technological revolution that is not only environmentally but also socially sustainable. This is critical in proposing a model of technological development alternative to that of China, in particular, and especially in such sectors as artificial intelligence, supercomputing and digital skills.
Topic:
Development, Science and Technology, and European Union
Political Geography:
United States, China, and Europe

174. How Green is China’s Belt and Road Initiative?

Author:
Alice Politi
Publication Date:
04-2021
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
China’s Belt and Road Initiative (BRI) has been described as the largest infrastructure project in history, affecting around 60 per cent of the global population. Whilst promoting a narrative of connectivity, growth and “win-win partnerships”, the project has received opposing assessments regarding its wider impact, particularly in the environmental domain.
Topic:
Climate Change, Infrastructure, Green Technology, and Belt and Road Initiative (BRI)
Political Geography:
China and Asia

175. Countering Zero-Sum Relations in the Middle East: Insights from the Expert Survey

Author:
Flavio Fusco
Publication Date:
01-2021
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
Building on emerging debates on the need to develop de-escalation mechanisms for the Middle East, the Istituto Affari Internazionali (IAI) and the Brussels-based Foundation for European Progressive Studies (FEPS), with support from the Italian Ministry of Foreign Affairs and International Cooperation, launched a one-year research and outreach project entitled “Fostering a New Security Architecture in the Middle East”. Connected to the research, an expert survey targeting European, US, Russian, Middle Eastern and Chinese experts and practitioners was conducted on key themes, principles and approaches associated with a potential new security architecture for the region. The results of the survey – first published in an edited book volume jointly published by IAI and FEPS in November 2020 – are analysed below, complete with tables and infographics on key themes associated with the research project and the search for new, inclusive mechanisms for dialogue and de-escalation in the Middle East.
Topic:
Conflict Prevention, Security, Foreign Policy, and Politics
Political Geography:
Russia, China, Europe, Middle East, and United States of America

176. Supply Chain Regulation in the Service of Geopolitics: What’s Happening in Semiconductors?

Author:
Dieter Ernst
Publication Date:
08-2021
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
Supply chain regulation can be a formidable tool to protect a country’s resilience against unexpected disruptions of trade, investment and the supply of skilled labour. Its utility, however, may erode when geopolitics rather than economics becomes the primary objective. This paper examines the implementation problems and the unintended consequences of a new supply chain doctrine in the service of geopolitics, with a focus on US President Joe Biden’s Executive Order on America’s Supply Chains to protect US technological leadership and national security against China. With semiconductors as a primary target, America’s supply chain controls are designed to exploit China’s most glaring weaknesses as supply chain chokepoints that the US Commerce Department can block, thus impeding timely and cost-effective access to essential products, services and technologies. The paper also highlights a second defining characteristic of America’s supply chain doctrine — regulatory supply chain controls are combined with a big push in domestic semiconductor manufacturing. Three propositions are presented as guideposts for further research. The paper concludes with a brief discussion of the implications for future US supply chain control against China: Will the quest for improved supply chain resilience succeed in mobilizing enough forces to shift the focus of US policy away from supply chain regulation in the service of geopolitics?
Topic:
International Cooperation, Labor Issues, Regulation, Rivalry, and Supply Chains
Political Geography:
China, Asia, North America, and United States of America

177. Don’t Interfere, Integrate: China Proposes (Yet Another) Middle East Peace Initiative

Author:
Tuvia Gering
Publication Date:
04-2021
Content Type:
Working Paper
Institution:
Jerusalem Institute for Strategy and Security (JISS)
Abstract:
Israel should work with China so that its initiative doesn’t interfere with the Abraham Accords, and should seek to capitalize on common denominators between Beijing and Washington.
Topic:
Diplomacy, International Cooperation, Treaties and Agreements, and Peace
Political Geography:
China, Middle East, Israel, Asia, North America, and United States of America

178. How China and Pakistan Negotiate

Author:
Katharine Adeney and Filippo Boni
Publication Date:
05-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Since being officially launched in April 2015, the China-Pakistan Economic Corridor (CPEC) has been one of the most watched set of projects under the aegis of Chinese President Xi Jinping’s signature Belt and Road Initiative (BRI). Having already injected around $25 billion into Pakistan, the CPEC not only has been dubbed the “flagship project” of the BRI, but it also holds a central role in Beijing’s global ambitions.1 While much has been said about the geopolitical implications of the CPEC, including for both India and the United States, less attention has been devoted to providing in-depth insights into the mechanics of how the BRI is unfolding on the ground in Pakistan. How do China and Pakistan negotiate the terms of CPEC deals? To what extent has Islamabad managed to exert agency in its dealings with Beijing? How does China adapt to the contexts it operates in? By now, the CPEC has been subject to much media, academic, and policy scrutiny, but these questions have not been answered. The power asymmetry between the two partners—coupled with the impression that the BRI represents a unidirectional Chinese endeavor, not just in Pakistan but also globally—has contributed to the erroneous representation that Beijing is merely imposing the CPEC on its all-weather partners in Islamabad. On the contrary, this study highlights China’s adaptive strategies in dealing with a host of Pakistani actors (including political parties, local communities, and the military) against the backdrop of Pakistan’s evolving political landscape and change in leadership following the country’s 2018 elections. In filling this gap, this paper foregrounds the importance of adopting a relational approach to studying how the BRI unfolds on the ground. This entails looking at how Pakistan and China have negotiated the CPEC’s energy, infrastructure, and industrial cooperation projects. The analysis is based on semi-structured elite interviews conducted by the two authors during three rounds of fieldwork in 2015, 2018, and 2020–2021 triangulated with a host of official reports, statements, and newspaper articles. Examining the domestic contours of the CPEC shows that Pakistani actors have wielded agency in important ways throughout the process, while Chinese actors at times have accommodated key Pakistani demands.
Topic:
Energy Policy, Bilateral Relations, Geopolitics, Economy, and Belt and Road Initiative (BRI)
Political Geography:
Pakistan, China, South Asia, and Asia

179. The Hidden Face of Informal Cross-Border Trade in Tunisia After 2011

Author:
Hamza Meddeb
Publication Date:
05-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Despite the heavy-handed approach to security that has been adopted at Tunisia’s land borders, informal cross-border trade continues to thrive. Land corridors have been shut down, but the continued dynamic activity in maritime corridors has compensated for this loss, allowing Turkish and Asian consumer goods adapted to the declining purchasing power of the Tunisian population to penetrate local markets. The dynamism of Tunisia’s maritime corridors owes much to the emergence of small entrepreneurs and underprivileged outsiders who operate informally through trade networks connecting Tunisian and Asian ports. Some well-established firms also have adopted informalization strategies to circumvent trade barriers and restrictions against bilateral trade between Turkey and Tunisia. The rise of these informal networks and approaches reflects a growing trend: the progressive shift of Tunisia’s trade away from Europe and the rise of Turkey and China as major trade partners.
Topic:
Borders, Trade, and Informal Economy
Political Geography:
China, Europe, Turkey, North Africa, and Tunisia

180. The Local Roots of Chinese Engagement in Pakistan

Author:
Muhammad Tayyab Safdar
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
China has deepened its economic engagement with Pakistan through elite-centered negotiations over the routes and projects of the China-Pakistan Economic Corridor (CPEC). But elites are not the whole story: China has made inroads beyond Pakistan’s political elites with a broader array of local stakeholders in the country’s education, media, and energy sectors. Pull factors in each of these areas are giving local Pakistani actors incentives to develop closer relationships with Chinese actors. In education, China’s status as a rising global power and the promise of future economic returns have driven ever more Pakistanis to learn Mandarin and opt to study abroad in China. In the media sector, the financial pressures facing Pakistan’s private media houses have contributed to increasing domestic buy-in for news sharing agreements with Chinese media organizations. In the power sector, the lack of alternative sources of external funding for local Pakistani conglomerates has resulted in the emergence of joint ventures on electricity generation projects with large Chinese state-owned enterprises (SOEs). At the same time, Chinese government policies are serving as push factors to incentivize Chinese actors to expand their interactions in different segments of Pakistani society. For example, China has opened and sponsors Confucius Institutes and classrooms across Pakistan, while also offering scholarships to Pakistani students interested in studying in China. As Chinese firms have expanded their presence in Pakistan, they have worked with local universities to adapt to local customs and cultural and religious values. In media circles, stakeholders like China’s Xinhua News Agency have worked with local Pakistani media outlets to localize information dissemination and shape Pakistani public opinion on important international issues in ways that are in sync with Beijing’s worldview. And Chinese investment in Pakistan’s power sector is aligned with Chinese SOEs’ Go Global strategy and the expansion of these firms’ operations in overseas markets as part of the BRI. China’s engagement with Pakistani political, social, and economic institutions comes in response to local conditions. By adapting to these conditions and working through local institutions and actors, a host of Chinese actors are poised to continue deepening their interactions with different parts of Pakistani society.
Topic:
Education, Partnerships, Media, Economy, and Engagement
Political Geography:
Pakistan, China, South Asia, and Asia

181. How Duterte Strong-Armed Chinese Dam-Builders But Weakened Philippine Institutions

Author:
Alvin Almendrala Camba
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Chinese construction contracts and development finance have increased massively in recent years. According to many experts, these projects are largely transplants designed to offshore and export Chinese technology, labor, and policy designs to host countries. However, these views have little regard for important nuances of place, time, and politics, ignoring the degree to which host countries—such as local elites, members of civil society, and norms—shape project design, implementation, and results on the ground. Under the regime of President Rodrigo Duterte, political elites in the Philippines have pressed Chinese firms to adapt to some of their demands for political expediency on key infrastructure projects. This pattern is evident from the Kaliwa Dam and the Chico River Pump Irrigation Project—both of which have made substantial progress during Duterte’s rule. In particular, Manila has bypassed local social and environmental regulations and has paved the way for Chinese dam builders to break ground on projects quickly so as to strengthen the Duterte government’s political standing. Around the world, Chinese firms have been highly attentive to the will of local political elites, limiting or sometimes completely avoiding relationships with opposition elites and ties to civil society members. Philippine politics is turbulent. Projects supported by the Duterte regime today might not have the same traction under his successor. So while these Chinese concessions have earned favor with Duterte and his allies, such tactics may prove unsustainable over the long term and could easily spur future resentment against China among local communities marginalized by this decisionmaking. In sum, it is Filipinos, not Chinese actors, who mostly have set the agenda on these major infrastructure projects, except on a few specific contractual terms.
Topic:
Development, Politics, Infrastructure, Rodrigo Duterte, and Construction
Political Geography:
China, Philippines, and Asia-Pacific

182. What Railway Deals Taught Chinese and Brazilians in the Amazon

Author:
Adriana Erthal Abdenur, Maiara Folly, and Maurício Santoro
Publication Date:
08-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Over the past decade, Chinese investments in Brazil have expanded and diversified considerably, especially ones involving infrastructure. Chinese investors have also diversified geographically. Increasingly, major Brazilian infrastructure projects are being planned or implemented with Chinese backing in environmentally sensitive regions such as the Amazon rain forest and the Cerrado, a large savanna region in Central-West Brazil. Chinese actors have become directly involved in such projects against a backdrop of sharpening debates about sustainability and other consequences of large-scale infrastructure projects. This is especially true in protected areas such as land populated by Indigenous groups and conservation units. A notable example is the Ferrogrão project, a major railway line designed to cross sections of the Amazon and Cerrado to deliver goods to Brazilian ports. This paper examines the diverse ways that Brazilian and Chinese actors have learned from each other as they negotiate the terms of these deals. It also explores how these learning processes have been conditioned by intense domestic political debates over these projects in Brazil. Official documents and secondary sources reveal that, rather than a set Chinese way of doing business or a stock Brazilian response, such projects entail dynamic institutional learning. Such learning is shaped not only by the particulars of the Ferrogrão project but also by Chinese actors’ broader engagement with Brazilian infrastructure projects over the past ten years.
Topic:
Environment, Infrastructure, Investment, and Sustainability
Political Geography:
China, Asia, Brazil, South America, and Amazon Basin

183. China’s Digital Yuan: An Alternative to the Dollar-Dominated Financial System

Author:
Rajesh Bansal and Somya Singh
Publication Date:
08-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Central bank digital currencies (CBDC) are digital tokens issued by central banks. In a way, they are the digital version of cash; their value is guaranteed by a central bank. Unlike money held in credit cards and mobile wallets, CBDCs are not a mere representation of physical money stored elsewhere. Instead, they are a complete replacement for currency notes. While several countries are developing their digital currencies, China is well positioned to take the lead with the digital yuan. This paper highlights ways in which China can use its digital yuan to internationalize the renminbi (RMB) and gradually chip away at the hegemony of the dollar. The first part of the paper focuses on the dollar’s dominance in the global financial system and the privileges the United States accrues as a result of the dollar being the world reserve currency. The United States has a tight grip on the world’s payment rails, especially in the case of cross-border transactions. For example, the Society for Worldwide Interbank Financial Telecommunications (SWIFT)—the largest cross-border payment clearinghouse in the world—has to comply with and implement unilateral U.S. sanctions. These sanctions seriously hinder trade and damage the economies of the countries affected by them, as was the case with Iran, which lost $150 billion worth of revenue as a result of U.S. sanctions.1 Once a country is cut off from SWIFT’s network, it becomes extremely difficult for it to trade with the rest of the world. Thus, via the dollar’s dominance and its geopolitical muscle, the United States is positioned to maintain a tight grip on the world’s financial system. In an increasingly multipolar world, this outdated, decades-old system of the dollar as the apex currency and the United States’ position of power that allows it to pursue its own geopolitical interests has become outdated. The U.S. dollar’s hegemony has been challenged by economies like those of the European Union (EU), Russia, and China. Of all the countries, China finds itself in a dominant position to gain from this transition. In order to challenge the dollar’s hegemony and internationalize its currency, China will have to move away not just from the dollar but also from the payment rails dominated by the dollar. The best way to simultaneously do both would be to introduce a new payment rail like CBDCs. This paper analyses the way the launch of China’s CBDCs could greatly enhance its currency internationalization prospects. Considering China’s growing economy and influence over the world, the paper argues that China’s CBDC launch could bring a period of momentous change in the global financial system. In order to challenge the dollar, China will have to build the payments infrastructure required to facilitate the use of its digital yuan. It will also have to incentivize other countries to adopt its digital currency. China’s ability to successfully promote its currency using CBDCs will depend heavily on the country’s ability to relax capital controls and maintain the world’s trust in its institutions. China’s geopolitics will play a key role here. In the last decade, some of China’s major geopolitical efforts have set the stage for its CBDC launch. As China continues to use its foreign policy and technological capabilities to grow its influence in the global financial system, the launch of the digital yuan could be a significant step forward in this direction. This paper examines the reasons for China’s past efforts at currency dominance and explores ways in which the country can use its CBDC to further internationalize its digital yuan.
Topic:
Foreign Policy, Finance, Economy, Central Bank, and Currency
Political Geography:
China and Asia

184. Chinese Mining and Indigenous Resistance in Ecuador

Author:
Cintia Quiliconi and Pablo Rodriguez Vasco
Publication Date:
09-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Chinese mining companies were drawn to Ecuador by a strong interest in diversifying their sources of copper in Latin America. But Chinese mining operations in Ecuador, which could have contributed to Ecuadorian development, soon gained a negative reputation after these activities prompted a great deal of local pushback, especially from affected Indigenous communities. As a result, the major Chinese mining consortium that now controls Ecuador’s two main copper mines has taken adaptive steps to stabilize its mining investment and increase the security of its supply networks, steps that often have not produced the intended results. Working through two subsidiaries, the Chinese mining consortium has responded to this localized criticism with a blend of tactics that includes co-opting select local figures, colluding with national officials to sidestep environmental and sociocultural safeguards, and coercing inhabitants into relocating under the threat of force from accommodating Ecuadorian authorities. By turning Ecuadorian national elites against locals and using divide-and-conquer tactics among Indigenous communities, the Chinese-led mining projects have entrenched existing political cleavages, have undermined community cohesion, and ultimately have harmed Ecuador’s democratic fabric, especially the standing of civil society and Indigenous rights organizations. While Ecuador has welcomed Chinese capital and other sources of international investment, this infusion of financing has increased the risk of political abuses at the national and local levels. This paper explains the adaptive strategies employed by the Chinese consortium and its subsidiaries in charge of the Mirador and San Carlos Panantza mining sites, contrasting the differing results these tactics have produced in each case. Both projects are located in Ecuador’s so-called Copper Belt provinces of Morona Santiago and Zamora Chinchipe, which are part of a mountain range known as the Cordillera del Cóndor. They are embedded in an ecologically and culturally sensitive zone that includes territory of the Indigenous Shuar community in the Ecuadorian Amazon. In the case of Mirador, the Chinese mining consortium’s adaptive response helped its subsidiary overcome local resistance but only by crushing it. In the case of San Carlos Panantza, local resistance so far has not been overcome, so the Chinese consortium has remained unable to proceed with its project. Neither case, even the Mirador site where mining has moved forward, is a sign of success for future relationships between Chinese mining conglomerates and Ecuadorian communities. To understand why the Chinese consortium’s adaptive tactics were somewhat more successful in Mirador, it is important to focus on the differing composition of the inhabitants of the land where the two mines are located. Mirador sits on territory shared by Shuar and non-Shuar settler communities who have different bonds with the land. The non-Shuar settlers emphasize the productive and commercial value of the land over the spiritual and symbolic value that is key for many in the Shuar community. The Canadian-held and later Chinese-controlled companies active in Ecuador’s mining industry understood this difference between Mirador’s inhabitants and adapted accordingly: they managed to displace resistant residents despite widespread opposition through questionable and sometimes arguably illegal purchases of land. In San Carlos Panantza, a second subsidiary of the Chinese consortium chose to respond to local criticism with the same alleged practices of violence, occupation, and displacement used in Mirador. However, although the two projects are geographically near each other, the situation played out differently at the second would-be mine: ongoing opposition has prevented mining operations from beginning at all yet. Again, paying attention to the inhabitants of the land is instructive. San Carlos Panantza is in the heart of Shuar territory in Arutam, a region with few non-Indigenous settlers. The mining incursion by the Chinese-run subsidiary and the Ecuadorian security forces tasked with supporting it were seen as a threat to the area’s Shuar people, who have been strongly protesting and opposing the mining venture since late 2016. This state of affairs is likely to have far-reaching effects for Ecuador too. The apparent collusion between Ecuador’s national government and the Chinese consortium (and its subsidiaries) has crushed those who oppose mining, has upended the country’s policies on resource extraction, and has yielded documented violations of local communities’ human rights. These events have transpired because both the Chinese firms and the Ecuadorian state have tended to see local communities as an obstacle to the development of the country’s extractive industries. As a result, local social and environmental safeguards have been weakened, tenuous consultation processes have eroded, environmental licenses have been granted under dubious circumstances, and local communities have been forcibly displaced. This paper explores the implications of the adaptive tactics chosen by the Chinese mining subsidiaries that run the Mirador and San Carlos Panantza mines. It also addresses how Chinese companies have, in some cases, negotiated with local communities to begin mining exploitation, while also analyzing the ways the Chinese mining consortium has interacted with the Ecuadorian government and other players, such as the Canadian mining company it acquired and other peer companies that set up successful coalitions for mining development in Ecuador. Finally, the paper explores the effects the agreements between the Ecuadorian government and the Chinese consortium have had on local actors.
Topic:
Development, Government, Mining, Indigenous, and Resistance
Political Geography:
China, Asia, South America, and Ecuador

185. India’s Fog of Misunderstanding Surrounding Nepal–China Relations

Author:
Vijay Gokhale
Publication Date:
10-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
India’s postindependence ties with Nepal were predicated on the intimate cultural and historical links between the two countries. As India’s first prime minister, Jawaharlal Nehru, noted, “though Nepal was an independent country, it was very closely allied to India in culture and tradition and we did not look upon it as a foreign country.” New Delhi also regarded China as an “interloper” in Nepal in 1950 who threatened India’s security and interests in the region, ignoring at least a century of Sino-Nepali history centering around Tibet. This paper argues that New Delhi’s close relationship with Nepal, bound in history and culture, and the misperception about China’s relations with Nepal before 1950 have contributed to a skewed understanding of Sino-Nepali relations. The Working Paper looks at the impact that New Delhi’s misperceptions of Sino-Nepali relations, termed the “fog of misunderstanding,” has had in the context of the triangular relations between China, India, and Nepal. The paper is divided into four sections arranged chronologically. The first section looks at the historical Sino-Nepali relationship from the mid-eighteenth to the mid-twentieth centuries. It establishes that this early relationship was centered on Tibet. While the Gorkha kings of Nepal sought to preserve their trade privileges in the region, the Chinese were concerned about the security of their southwestern frontier. Notably though, Beijing’s concern with security does not appear to have extended into any desire to conquer Nepal. This section also touches upon British India’s policy toward Nepal in the nineteenth century, and the subsequent approach that the government of independent India took in the first few years, without an adequate appreciation of Kathmandu’s history with China. As a consequence, India developed a suspicious attitude toward Beijing’s desire to re-establish ties with Kathmandu after the Chinese Civil War, and shaped its policy toward Nepal with this factor in mind. The second section delves into Indian and Chinese policies toward Nepal in the period from 1955 until the end of the monarchy in 2008. It showcases how, during this long period, the three kings of Nepal sought to leverage their ties with China in order to maintain some semblance of balance and how China, in turn, followed a limited but strategic approach that was centered on the kings. The fog of misunderstanding continued to shroud India’s attitude to Nepal-China relations during this period and, consequently, India’s Nepal policy lacked a working template to manage relations with a smaller neighbor sandwiched between India and China in a way that would preserve New Delhi’s influence in a positive way. In contrast to China’s political approach, New Delhi fluctuated between the monarchy and an assortment of democratic political parties, suggestive of a provincial approach in New Delhi’s dealing with Kathmandu. As a result, China’s approach ensured that its main objective in Nepal, namely the security of its southwestern frontier, was secured with a relatively low-risk and low-cost strategy. The third section deals with the aftermath of the fall of the Nepali monarchy, 2008 to 2016. During this important period, New Delhi had a fresh opportunity to reset ties by providing the support to democratic forces in Nepal, that could have resulted in a transformation of the Indo-Nepali ties. However, India appeared to hew to its traditional policy. China, on the other hand, quickly built new ties with the post-monarchical dispensation. India’s perceived actions as a result of the adoption of the new constitution of Nepal plunged Indo-Nepali ties to a nadir. It seems to have pushed Kathmandu to strengthen its relationship with China. This section of the paper also outlines the changing nature of China’s policy and objectives in Nepal, especially in the second decade of the twenty-first century, and its possible implications on the future course of the triangular relationship, as well as for India-Nepal relations. It postulates that under President Xi Jinping, China’s policy toward Nepal has shifted from protecting its periphery to a broader goal of bringing Nepal under its strategic control. This section highlights the political and economic levers that Beijing is using to build a preeminent position in Nepal. The paper concludes with an assessment of options available to all three countries going forward, and India’s options in Nepal in the face of China’s new policy in the region. It suggests that a decisive reset in policy toward Nepal is required to restore healthy relations that are based on mutual respect and mutual sensitivity. New Delhi may need to re-orient its thinking toward Nepal in the context of triangular relations, including on the boundary issue and the 1950 Treaty of Peace and Friendship that have been long-standing irritants in the India-Nepal relationship. Nepal, for its part, should also reflect carefully on whether its leveraging of China might become counterproductive in the light of changing strategic balance in its vicinity, and the implications of giving up the policy of balance for one that tilts decisively toward Beijing. The paper concludes that there is sufficient scope and opportunity for course correction by India, and that through sustained efforts India may be able to preserve its influence and security in Nepal and counter China’s expanding footprint.
Topic:
Security, Foreign Policy, Bilateral Relations, and Geopolitics
Political Geography:
China, South Asia, India, Asia, and Nepal

186. China’s Influence in South Asia: Vulnerabilities and Resilience in Four Countries

Author:
Deep Pal
Publication Date:
10-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
China’s economic and political footprint has expanded so quickly that many countries, even those with relatively strong state and civil society institutions, have struggled to grapple with the implications. There has been growing attention to this issue in the United States and the advanced industrial democracies of Japan and Western Europe. But “vulnerable” countries—those where the gap is greatest between the scope and intensity of Chinese activism, on the one hand, and, on the other, local capacity to manage and mitigate political and economic risks—face special challenges. In these countries, the tools and tactics of China’s activism and influence activities remain poorly understood among local experts and elites. Both within and beyond these countries, meanwhile, policy too often transposes Western solutions and is not well adapted to local realities. This is especially notable in two strategic regions: Southeastern, Central, and Eastern Europe; and South Asia. China’s economic and political profile has expanded unusually quickly in these two regions, but many countries lack a deep bench of local experts who can match analysis of the domestic implications of Chinese activism to policy recommendations that reflect domestic political and economic ground truth. To address this gap, the Carnegie Endowment initiated a global project to better understand Chinese activities in eight “pivot” countries in these two strategic regions. The project’s first objective was to enhance local awareness of the scope and nature of Chinese activism in states with (1) weak state institutions, (2) fragile civil societies, or (3) countries where “elite capture” is a feature of the political landscape. Second, the project aimed to strengthen capacity by facilitating a sharing of experiences and best practices across national boundaries. Third, the project sought to develop policy prescriptions for the governments of these countries, as well as the United States and its strategic partners, to mitigate and respond to activities inimical to political independence or well-balanced economic growth and development. To establish a comprehensive picture of China’s activities and their impact, this project dug deeply into Chinese activism in four case countries in each region—eight countries in total. We began by holding workshops, so that influencers across countries could share experiences and compare notes. Invited participants included policymakers, experts, journalists, and others—all with deep local knowledge, steeped in their countries’ politics, economies, and civil societies. In Europe, the four countries were Georgia, Greece, Hungary, and Romania, and in South Asia, Bangladesh, Maldives, Nepal, and Sri Lanka. Cross-national discussions among these regional participants aimed to raise awareness, discuss the implications of China’s growing activism in their countries, and compare notes on the diverse ways in which these various countries had managed the rapid influx of Chinese capital, programs, people, technology, and other sources of influence.
Topic:
International Relations, Foreign Policy, Development, Economy, Engagement, Regionalism, and Resilience
Political Geography:
Bangladesh, China, South Asia, Sri Lanka, Nepal, and Maldives

187. China’s Influence in Southeastern, Central, and Eastern Europe: Vulnerabilities and Resilience in Four Countries

Author:
Erik Brattberg, Philippe Le Corre, Paul Stronski, and Thomas de Waal
Publication Date:
10-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
China’s presence has brought socioeconomic opportunities to Georgia, Greece, Hungary, and Romania. Yet it has exacerbated governance shortfalls, undermined elements of political and economic stability, and complicated the European Union’s ability to reach consensus on key issues.
Topic:
Foreign Policy, Governance, European Union, Political stability, Resilience, and Economic Stability
Political Geography:
China, Europe, Greece, Romania, Hungary, Georgia, and United States of America

188. How Central Asians Pushed Chinese Firms to Localize

Author:
Dirk Van Der Kley and Niva Yau
Publication Date:
10-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
There has been a sea change in China’s economic involvement in Central Asia. Large-scale transport and electricity projects funded by Chinese government loans have dried up. Hydrocarbon exports to China continue, but they are not the focus of most new projects. Instead, there are a growing number of industrial projects that seek to make value-added products that can be exported. These projects are increasingly staffed by Central Asians who receive technical training from Chinese firms. This change has been primarily driven by Central Asian states. The region’s governments have long pushed for industrial capacity building, including the upskilling of local workers. In addition, debt concerns in Kyrgyzstan in particular have made Chinese loans less attractive and less prevalent. This trend has coincided with Chinese policy banks’ embrace of more conservative lending policies globally for infrastructure projects. Chinese firms have begun adapting to these demands. They have steadily increased their proportions of local hires by training Central Asian workers both onsite and in China to address skills shortages. They have tried to engage local communities to earn a social license for their overseas operations. The Chinese government is now following suit. It is developing more formal cooperation agreements on industrialization and upskilling in addition to pre-existing, ad-hoc arrangements by individual companies. So far, the outcomes have been mixed. Many Chinese firms in Central Asia are employing more locals. Yet the more closely integrated these Chinese firms become with the region’s economies, the more they must deal with, or be co-opted by, localized corruption and political fights. Newly available polling data shows that public sentiments toward China are becoming more negative. Chinese companies are flexibly adapting to this environment of heightened expectations in a variety of ways. The views that outside observers in Washington and elsewhere harbor of China’s infrastructure investments through the Belt and Road Initiative (BRI) in Central Asia are outdated and do not reflect how much Chinese firms and eventually the Chinese government have adapted to meet local needs. Any Western-proposed alternative to the BRI needs to take these considerations into account.
Topic:
Economics, Business, Industry, and Job Creation
Political Geography:
China, Central Asia, and Asia

189. How China Learned to Harness Israel’s Media and Booming Tech Scene

Author:
Roie Yellinek
Publication Date:
10-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Israel and China established full diplomatic relations only in 1992, making Israel almost the last Middle Eastern country to do so. Starting in the early 2000s, ties between the two countries began to blossom, mostly because the Chinese government started to view Israel as a global technology hub and began seeking to capitalize on Israel’s innovation capabilities to help meet its own developmental needs and strategic challenges. In addition, as China’s rivalry with Israel’s leading ally, the United States, has heated up, Beijing’s interest in Israel also has gotten stronger. In light of Israel’s status as a major technology hub and a leading U.S. ally, China has sought to deepen its influence in Israel through media engagement and other forms of outreach. As Chinese actors have pursued technological innovation and greater political influence in Israel, they have employed three basic approaches to court favor in and through Israeli media circles: direct messaging to the Israeli public in local Hebrew-language newspapers, the use of Chinese outlets (especially the Hebrew department of China Radio International) targeted at Israeli audiences, and efforts to leverage prominent public figures friendly toward China to amplify favorable messages delivered on these local Israeli and Chinese platforms. China’s messaging strategy in Israel has evolved in three stages. Early on, this strategy mainly included recycled talking points from the Chinese Communist Party that do not always translate well overseas. Between 2015 and 2018, this messaging from Chinese actors started to become more direct and tailored for the Israeli people. Since 2018, Chinese engagement has expanded to include a much wider variety of Israeli media outlets, which has meant even more direct access to ordinary Israelis. This strategy and other elements of China’s diplomatic outreach to Israel seem to be having an impact. According to 2019 polling from the Pew Research Center, Israeli respondents view China more positively than those in any other Western-oriented countries that took part in this survey did. These results are an outgrowth of China’s desire to build influence vis-à-vis Israeli society, especially in terms of Israelis’ views on China. Chinese government officials and other actors see this campaign toward the Israeli people as part of a broader and more important strategic campaign, as Beijing competes with Washington for worldwide influence. Israel has a clear national interest in carefully examining how and why Beijing deploys such strategic messaging and how Chinese actors have leveraged local conditions, language habits, and consumer preferences to advance their objectives. The new Israeli government under Prime Minister Naftali Bennett must act prudently and keep these Chinese messaging activities in mind as it balances and advances Israel’s foreign policy interests, seeking to underscore that it does not see China as an enemy but that cooperation with Beijing needs to be pursued in the right way.
Topic:
Diplomacy, Science and Technology, Bilateral Relations, and Media
Political Geography:
China, Middle East, Israel, and Asia

190. How Argentina Pushed Chinese Investors to Help Revitalize Its Energy Grid

Author:
Juliana González Jáuregui
Publication Date:
12-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
China’s modernization strategy integrates both domestic and foreign policy, especially through two complementary prongs—the so-called Going Global strategy and the Belt and Road Initiative (BRI). This push to internationalize China’s development strategy has ushered in a new era in Beijing’s relationships with countries and regions around the world. In Latin America, these policies have triggered a dynamic pattern of interactions between China and the region’s political economy. Being rich in fuels, energy, foodstuffs, and basic products, countries in Latin America have emerged as significant suppliers for China, but they also have become important destinations for Chinese-made industrial products, and, subsequently, Chinese investment and lending. For Latin American countries, China’s rise as an influential investor, lender, trader, and builder has created an array of new challenges and opportunities. While Beijing has harnessed its engagement in Latin America to support its own development, countries in the region have sought to direct some of China’s economic and financial resources to promote their own strategic sectors. Argentina illustrates this dynamic well, particularly in the energy sector. Argentinian government officials and business leaders have attracted Chinese investment and finance into renewables and other types of energy to promote Buenos Aires’s goals of taking a hybrid path to an energy transition. For its part, China has seized this opportunity to advance its own development goals and to participate in Argentina’s energy transition strategy. Though Argentina has not yet formally joined the BRI, Argentinian officials have reported publicly that Buenos Aires has already decided to endorse the initiative and is waiting for the right moment to do so.1 Argentina has been weighing the pros and cons of signing on to the BRI. On the one hand, signing on could enhance the presence of Chinese actors in the Argentinian renewables sector, as China seeks to intertwine its engagement in Latin America with the deployment of the Green BRI, the dimensions of the initiative that are framed in terms of environmental sustainability. More broadly, joining the BRI could attract new Chinese investment and finance in alternative energy and electricity transmission infrastructure, further contributing to Argentina’s goals for an energy transition. On the other hand, Argentina faces the challenge of designing and implementing a long-term national energy plan that complements its role in the BRI. This means devising an energy plan that, among broader objectives, seeks to help Argentina harness Chinese know-how on renewables and develop innovation and technological capacities of its own. In the meantime, Argentina’s lack of committed engagement with the BRI to date has not impeded the expansion of Chinese overseas investment and financing for renewables and other types of energy projects in the country. In a clear sign of political agency, the diplomatic outreach of key Argentinian national and provincial government officials, as well as corporate players’ push for local associations, has been central in the quest to increase Chinese engagement in Argentina’s solar and wind power sectors and in other alternative energy projects. These interactions have allowed Argentinian policymakers to help shape an adaptive partnership to strengthen the alignment between Chinese investments and Argentinian development objectives. Admittedly, this engagement has at times encountered resistance due to environmental and social risks in certain localities. Even so, these concerns are part of the learning process and set a tone for future cooperation on energy projects. Renewables and alternative energy will continue to be a magnet for global investment as countries around the world strive to address climate change. Thus, local tensions are pushing both Argentinian and Chinese actors to learn from the problematic impacts of some projects and do more to address local communities’ concerns jointly. Successful responses to such concerns would further enhance the basis of Argentina and China’s energy-focused adaptative partnership.
Topic:
Infrastructure, Economy, Business, Investment, and Energy
Political Geography:
China, Asia, Argentina, and South America

191. Mind the Gap: Priorities for Transatlantic China Policy

Author:
Wolfgang Ischinger and Joseph S. Nye Jr.
Publication Date:
07-2021
Content Type:
Working Paper
Institution:
Aspen Institute
Abstract:
Working together with partners such as Australia, India, Japan, New Zealand, South Korea, and many others with whom areas of agreement can be identified will be crucial to achieving success.9 In the case of Russia, a constructive dialogue on China is clearly not a near-term prospect. But given Russia’s strategic interests it is a conversation to which the West should revert once conditions permit. The rise of a domestically authoritarian and globally assertive China renders transatlantic cooperation more relevant than at any time in recent history. Transatlantic partners need to be ready for long-term strategic competition. They must also seize opportunities for cooperation with China, starting with issues such as climate change, global health, and food security. By working together from a position of strength, they will improve the chances of arriving at more productive relationships with China.
Topic:
Security, Diplomacy, International Cooperation, and Rivalry
Political Geography:
China, Europe, Asia, and North America

192. Mapping China’s Multilateralism: A Data Survey of China’s Participation in Multilateral Development Institutions and Funds

Author:
Scott Morris, Rowan Rockafellow, and Sarah Rose
Publication Date:
11-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
A considerable body of recent research attempts to shed light on China’s bilateral aid and finance flows, but there have been fewer efforts focused on China’s participation in multilateral development channels. As a result, China’s role across the landscape of multilateral institutions and funds is poorly understood, even as China has emerged as a leading donor within many of these entities. Part of China’s increased multilateral engagement reflects its economic growth, with shareholding and assessed contributions based largely on economic size. But the government of China’s policy choices are also revealed, in part, through its patterns of voluntary funding, cooperation agreements, and influence through personnel instated in leadership positions. By collating data on China’s financial and non-financial engagement with multilateral development banks and other financial institutions, sector-based vertical funds, and the development entities of the United Nations, among others, this paper seeks to provide a clear picture of China’s role in the multilateral development system and the evolution of that role over the past decade. This assessment brings to light the weight of China’s voting power across the multilateral development banks, the extent to which Chinese firms benefit from procurement opportunities in multilateral institutions, and the degree to which China has achieved a singular position of being a large-scale donor and recipient in the multilateral system.
Topic:
Development, International Cooperation, Hegemony, and Multilateralism
Political Geography:
China and Asia

193. Submarine Collision Highlights Turbulent South China Sea

Author:
Chin Yoon Chin
Publication Date:
11-2021
Content Type:
Working Paper
Institution:
Maritime Institute of Malaysia
Abstract:
Navigating through or under the water can be very trying when the area that one is transiting or operating is not well surveyed and charted. A vast area in the Spratly and Paracel island chain in the South China Sea is covered with corals and seamounts which could grow or pop up after a seismic disturbance. It is believed that there are vast areas of oil and gas deposits and precious metal in its depth, and it is also a rich fishing ground for these states bordering the South China Sea. For the past two decades or so, six littoral parties (China, The Philippines, Malaysia, Vietnam, Brunei and Taiwan) have staked claims over this body of water. In recent years, the United States has been challenging China’s legitimacy to the claim by conducting freedom of navigation operations (FONOPs) through China’s claimed areas. Why the US employed a submarine-like USS Connecticut to the South China Sea and for what purpose is anyone’s guess. Whatever task the submarine had undertaken, if it had operated within the confine of the gazetted sea lanes, it would not have run into this incident. The most likely situation was it operated “outside the normal” operational area when the incident occurred. It is believed that China’s underwater technology has improved over the last decades. This incident, in a way, has hyped up military activities in the South China Sea. The turbulence will not subside but will result in further escalation of tension which all the countries in this region would not want it to happen. To manage and mitigate tension, confidence-building and dialogues among all parties concerned are necessary to set aside differences, have mutual respect, and achieve the common goal of enhancing safe navigation and protecting the environment, instead of creating doubts and suspicions.
Topic:
Energy Policy, Oil, Natural Resources, Hegemony, Gas, Maritime, and Rivalry
Political Geography:
China, Asia, North America, and United States of America

194. Between a Rock and a Hard Place: How Should South Korea Manage its Relations with the United States and China?

Author:
Zhiqun Zhu
Publication Date:
11-2021
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
This paper deals with one of the most critical issues in contemporary international relations: how China’s rise challenges foreign policies of U.S. allies, with a focus on the Republic of Korea (ROK) or South Korea. South Korea has been carefully hedging between the United States and China, its traditional security patron and largest trade partner, respectively. Strategic rivalry between the two great powers has put South Korea in an awkward position as pressure grows from the two powers to pick a side. Using a modified dual-track economics-security nexus framework, this paper suggests that the United States and China each has a significant impact on South Korea’s security and economic policies, making it important but challenging for South Korea to simultaneously manage relations with the two great powers. So far, South Korea has maintained these two sets of relationships remarkably well, but it may be difficult to continue with business as usual in the years ahead. For its own national interests, South Korea must seek to preserve the status quo under which it can continue to benefit from good relations with both great powers. The paper also proposes that South Korea should form a “middle power coalition” with like-minded nations to deflect pressures and avoid the dilemma of having to choose sides.
Topic:
International Relations, Security, Foreign Policy, Alliance, and Trade
Political Geography:
China, Asia, South Korea, and United States of America

195. Turkey’s Soft Power in the Balkans Reaching its Limits

Author:
Ekrem Eddy Güzeldere
Publication Date:
07-2021
Content Type:
Working Paper
Institution:
Hellenic Foundation for European and Foreign Policy (ELIAMEP)
Abstract:
With the EU putting the Western Balkan countries in an undefined waiting room, there was more room for maneuver for non-EU players. Turkey among others used this space to broaden its influence in the Balkans from politics to the economy, from culture to military cooperation, albeit from a very low starting point. The bilateral relations with all countries of the region are rather good, President Erdogan enjoys the recognition he is often lacking in other parts of the world. While the pandemic further harmed the EU’s image, it was mostly China and Russia who could fill the void with their own vaccines. Lacking its own vaccine so far, Turkey was much less visible. However, in the long-run, Turkey is not interested in an EU-Turkey confrontation over the Western Balkans, but that these countries join the EU. Through this, Turkey would increase the number of allies in a bloc where friends have become few.
Topic:
Conflict Prevention, Bilateral Relations, European Union, and Soft Power
Political Geography:
Russia, China, Europe, Turkey, and Balkans

196. Coordination Failure: Risks of US-China competition in space

Author:
Gidon Gautel
Publication Date:
04-2021
Content Type:
Working Paper
Institution:
LSE IDEAS
Abstract:
The 2020s will see a flurry of space activity, with both national and commercial programs picking up pace. Both the United States and China hold strong ambitions in telecommunications, lunar exploration, and beyond. However, currently fraught relations between the superpowers are unlikely to improve and may yet deteriorate further. On the one hand, competition between both countries may drive space activities and foster technological innovation. On the other, as both superpowers expand their activities in space, geopolitical tensions may increase the risk of harmful dynamics that could endanger the sustainable rollout of future programs. In this Strategic Update, Gidon Gautel seeks to outline and call attention to two high-risk flash points arising from the development of the US and China’s national space programmes and industries.
Topic:
Geopolitics, Space, Innovation, and Strategic Competition
Political Geography:
China, Asia, North America, and United States of America

197. Twitter and Digital Diplomacy: China and COVID-19

Author:
Chris Alden and Kenddrick Chan
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
LSE IDEAS
Abstract:
This Strategic Update explores how official Chinese foreign policy entities have used Twitter as a public diplomacy platform during the outbreak of the COVID-19 pandemic, the nature of their Twitter activity, and what this means for Chinese Twitter Diplomacy in the future.
Topic:
Diplomacy, Social Media, COVID-19, Twitter, and Digital Policy
Political Geography:
China and Asia

198. How Can America Challenge China's Political Ambitions in an Age of Deglobalisation?

Author:
Dimitri Zabelin
Publication Date:
09-2021
Content Type:
Working Paper
Institution:
LSE IDEAS
Abstract:
COVID-19 has accelerated the trend of deglobalisation and further entrenched China into the growing political and economic fort of Asia. This has made the US less effective at implementing policies aimed at curbing Beijing’s political ambitions and strength in the region. Washington must therefore make itself indispensable in Asia and employ strategies for bringing China into a global network that can collectively reign in the Asian giant’s growing influence.
Topic:
Economics, Politics, Strategic Competition, and COVID-19
Political Geography:
China, Asia, North America, and United States of America

199. Shaping the Indo-Pacific? Japan and Europeanisation

Author:
Yee-Kuang Heng
Publication Date:
11-2021
Content Type:
Working Paper
Institution:
LSE IDEAS
Abstract:
In this Strategic Update, Professor Yee-Kuang Heng investigates European power projection and presence in the Indo-Pacific, and its converging nature with Japan’s attempt to shape the regional environment in its favour. While UK threat perceptions have converged significantly with Japan’s since former Prime Minister David Cameron’s promulgation of a “golden era” in relations with China, managing expectations of Japan’s attempt to ‘shape’ and encourage Europeanisation remains crucial. But is it fair to conclude that Japan has been successful in encouraging a stronger European presence to help it shape the Indo-Pacific order?
Topic:
International Relations, Foreign Policy, Europeanization, and Strategic Competition
Political Geography:
Japan, China, United Kingdom, Europe, and Indo-Pacific

200. Melons as Lemons: Asymmetric Information, Consumer Learning and Seller Reputation

Author:
Jie Bai
Publication Date:
03-2021
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
There is often a lack of reliable quality provision in many markets in developing countries and firms generally lack a reputation for quality. One potential explanation is that mistrust due to past bad behavior can make reputation-building difficult. I examine this hypothesis in a setting that features typical market conditions in developing countries: the retail watermelon markets in a major Chinese city. I first demonstrate empirically that there is substantial asymmetric information between sellers and buyers on quality and a stark absence of quality premium at baseline. I then randomly introduce one of two branding technologies into 40 out of 60 markets–one sticker label that is widely used and counterfeited and one novel expensive laser-cut label. The experiment findings show that laser-branding induced sellers to provide higher quality and led to higher sales profits. However, after the intervention was withdrawn, all markets reverted back to baseline. I incorporate the experimental variation into an empirical model of consumer learning and seller reputation building. The results suggest that consumers are hesitant to upgrade their perception under stickers, which makes reputation-building a low-return investment. While the new technology enhances learning, the resulting increase in profits is not sufficient to cover the fixed cost of the technology for small individual sellers. Counterfactual analysis shows that information friction and fragmented market lead to significant under-provision of quality.
Topic:
Economics, Markets, and Developing World
Political Geography:
China, Asia, and Global Focus