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21. Sanctions, SWIFT, and China’s Cross-Border Interbank Payments System

Author:
Barry Eichengreen
Publication Date:
05-2022
Content Type:
Policy Brief
Institution:
Center for Strategic and International Studies
Abstract:
In response to Russia’s attack on Ukraine, the United States and a coalition of cooperating countries imposed harsh financial sanctions on the Russian government, corporations, and individuals.1 These sanctions bar Russian banks from using SWIFT (the Society for Worldwide Interbank Financial Telecommunications) to facilitate cross-border payments, prohibit banks from doing most forms of business with Russian entities, and freeze assets held abroad by the Central Bank of Russia in the form of treasury securities and bank deposits. These developments have led Russia, as well as other countries contemplating whether they might find themselves in the same position, to explore alternatives. Such options could include building a substitute for SWIFT to send instructions regarding cross-border interbank transactions; identifying financial counterparties other than Western banks with which to do international business and platforms other than Western clearinghouses through which to make payment; and finding a vehicle other than the dollar for denominating and executing transactions. Specifically, countries are looking to China, which has large internationally active banks, has created its own clearinghouse for cross-border transactions and is embarked on a campaign to encourage broader international use of its currency, the renminbi.2 This note investigates how far China has gone in creating alternatives to SWIFT, Western banks, and the dollar. It explores whether Russia and other countries might be drawn toward this parallel international financial universe and what economic and political implications this has—for the United States, for its geopolitical rivals, and for global economics and politics. China is making strides in fostering cross-border use of the renminbi and building a renminbi-based interbank payments system that can serve as an alternative to SWIFT and Western clearinghouses. However, these remain somewhat limited alternatives—for the moment. The situation could change faster if lent additional impetus by Western sanctions. Thus, countries such as the United States that employ financial sanctions should prepare for the development of alternative financial arrangements in China and possibly elsewhere. This may mean relying more heavily on nonfinancial measures insofar as financial sanctions eventually become less effective.
Topic:
Economics, Sanctions, Finance, Borders, and Banks
Political Geography:
China and Asia

22. How China’s Human Capital Impacts Its National Competitiveness

Author:
Briana Boland, Kevin Dong, Jude Blanchette, and Ryan Haas
Publication Date:
05-2022
Content Type:
Policy Brief
Institution:
Center for Strategic and International Studies
Abstract:
How will the strengths and weaknesses of China’s human capital impact national competitiveness? China’s efforts to maintain economic growth, strengthen supply chains, develop strategic science, technology, engineering, and mathematics (STEM) sectors, and secure a modern military edge hinges on the ability to cultivate and utilize human capital. As the United States and other countries increasingly engage in multidomain competition with China, it is critical to start from a clear-eyed understanding of China’s human capital and Beijing’s strategy for nurturing national talent. Investments in higher education, strategic STEM sectors, and military talent demonstrate key areas in which Beijing is focusing on cultivating human capital. However, China must overcome significant obstacles to innovate as it faces substantial demographic pressures, socio-economic inequalities, and challenges to attracting and retaining top talent both domestically and internationally.
Topic:
Economics, Labor Issues, Human Capital, and Strategic Competition
Political Geography:
China and Asia

23. Bridging U.S.-Led Alliances in the Euro-Atlantic and Indo-Pacific: An Inter-theater Perspective

Author:
Luis Simon
Publication Date:
05-2022
Content Type:
Policy Brief
Institution:
Center for Strategic and International Studies
Abstract:
Although U.S. strategic competition with China and Russia is often presented as a challenge with two separate fronts, this brief argues that the Euro-Atlantic and Indo-Pacific theaters are increasingly linked. Insofar as preserving a favorable balance of power in these two regions hinges largely on U.S. power, and as long as they both continue to exercise a significant pressure on U.S. defense resources, their alliance and deterrence architectures should be looked at from an inter-theater perspective. Thus, optimally managing atwo-front challenge would require a serious effort to bridge U.S.-led alliances in both regions.
Topic:
International Cooperation, Hegemony, Alliance, Strategic Competition, Rivalry, and Strategic Interests
Political Geography:
Russia, China, Europe, Asia, North America, United States of America, and Indo-Pacific

24. China’s New 2019 Defense White Paper

Author:
Anthony H. Cordesman
Publication Date:
07-2019
Content Type:
Working Paper
Institution:
Center for Strategic and International Studies
Abstract:
For all the furor over Iran and the Gulf, or Britain and Brexit, the most important foreign news of the month is what would normally be a relatively obscure Chinese official document: China’s National Defense in the New Era. This White Paper was issued on July 22nd in both Chinese and English. Unlike China’s previous defense white papers — the most recent of which came out in 2015 and was blandly reassuring to the point of being vacuous — the new White Paper picks up the gauntlet that the U.S. threw down in its 2017 National Security Strategy and in 2018 National Defense Strategy. Both of these documents effectively made China the key objective in strengthening U.S. military forces and single it out as America’s primary strategic competitor. China’s National Defense in the New Era is a clear and detailed 51-page response to the massive shift in U.S. strategy from a focus on counterterrorism and extremism to competition and possible conflict with China and Russia. It flags the fact that America and China are now competing superpowers, and that China’s growing military forces are developing to the point where they will be able to challenge the United States. More than that, the detailed contents of the White Paper are a direct response to the official U.S. reports on Chinese Military Power issued by the Office of the Secretary of Defense and by the Defense Intelligence Agency.
Topic:
Defense Policy, Intelligence, Military Strategy, and Conflict
Political Geography:
China, Asia, North America, and United States of America

25. Emerging Technologies and Managing the Risk of Tech Transfer to China

Author:
James Andrew Lewis
Publication Date:
09-2019
Content Type:
Working Paper
Institution:
Center for Strategic and International Studies
Abstract:
There are deep interconnections between the U.S. and Chinese economies, and China has built its technology base on what it has acquired from the West. China’s government and some Chinese companies will use any means, legal or illegal, to acquire technology. The United States’ relationship with China cannot continue unchanged, but given the interconnections, change must be managed carefully. New restrictions are needed, but counterintuitively, these should be shaped by recognizing that being open makes the United States stronger than being closed. The best approach is an incremental and flexible approach to technology transfer centered on the need to avoid harm to the U.S economy. This report outlines the policy tools that the United States can use to mitigate risk while maintaining the openness that is a hallmark of the U.S. economy.
Topic:
Science and Technology, Intellectual Property/Copyright, Conflict, and Emerging Technology
Political Geography:
China, Asia, North America, and United States of America

26. Research Collaboration in an Era of Strategic Competition

Author:
Stephanie Segal and Dylan Gerstel
Publication Date:
09-2019
Content Type:
Working Paper
Institution:
Center for Strategic and International Studies
Abstract:
There is a growing concern in Washington that certain aspects of international scientific collaboration pose a risk to U.S. economic and national security, making it the latest front in rising U.S.-China competition. At the same time, the U.S. innovation ecosystem depends greatly on foreign scientists and partnerships with foreign research institutions. A well-calibrated strategy to manage these risks will maximize openness while protecting intellectual property, research integrity, and national security. These efforts should preserve the ability of the United States to attract top talent, including by maintaining a welcoming environment for foreign researchers, while improving domestic investment in science, technology, engineering, and math outcomes. This report outlines the vulnerabilities arising from foreign research collaboration, the risks of policy overreach, and recommendations to manage risks while maintaining scientific openness.
Topic:
Security, Science and Technology, Innovation, and Strategic Competition
Political Geography:
China, Asia, North America, and United States of America

27. CSIS Brief: Beyond the Brink: Escalation and Conflict in U.S.-China Economic Relations

Author:
Matthew P. Goodman, Dylan Gerstel, and Pearl Risberg
Publication Date:
09-2019
Content Type:
Working Paper
Institution:
Center for Strategic and International Studies
Abstract:
As the United States and China mark their 40th anniversary of formal diplomatic relations in 2019, the world’s most important bilateral relationship is increasingly defined by mistrust, competition, and uncertainty. After four decades of deepening economic integration, the talk in Washington today is about the extent to which the two economies will “decouple” over the years ahead. In a recent study, the CSIS Simon Chair drew on several different academic disciplines to model how an economic conflict between the United States and China could escalate and eventually de-escalate. Our findings suggest that economic conflict is likely to be an enduring feature of the U.S.-China relationship for many years to come. Until perceptions of relative costs in the two countries shift, Washington and Beijing seem set on a path of continued escalation, no substantial trade deal, and at least partial decoupling of their economies.
Topic:
International Trade and Finance, Conflict, Trade Policy, and Economic Cooperation
Political Geography:
China, Asia, North America, and United States of America

28. Smart Money on Chinese Advances in AI

Author:
William A Carter and William Crumpler
Publication Date:
09-2019
Content Type:
Working Paper
Institution:
Center for Strategic and International Studies
Abstract:
Few countries have embraced the vision of an AI-powered future as fervently as China. Unlike the United States, the Chinese government is dedicating significant resources and attention to AI development and creating a supportive policy environment to facilitate innovation and experimentation and proactively manage risk. However, numerous misconceptions and competing narratives around China’s innovation economy have made it difficult for U.S. policymakers to understand the AI ecosystem in China and its links to AI innovation in the United States. This report seeks to improve this understanding by examining China’s progress toward achieving its four strategic goals. We find that while China’s progress towards AI leadership remains uneven, its commitment to building domestic innovation capacity could allow the country to become a world-leading AI power in the coming decades. China’s progress in AI can complement and accelerate U.S. AI development, and policymakers should avoid responding to China’s advances with counterproductive policies that undermine the U.S. innovative capacity to little or no gain. Instead, the United States should focus on developing a positive agenda for driving its own AI development.
Topic:
Science and Technology, Innovation, Artificial Intelligence, and Emerging Technology
Political Geography:
China, Asia, North America, and United States of America

29. China’s Pursuit of Semiconductor Independence

Author:
James Andrew Lewis
Publication Date:
02-2019
Content Type:
Working Paper
Institution:
Center for Strategic and International Studies
Abstract:
While China has made immense investments in science and technology, and while these are producing results, it is still dependent on Western technology. This is particularly true for semiconductors. China’s dependence on foreign semiconductors has worried Beijing for decades. China suspects that Western semiconductors contain “backdoors,” intentional vulnerabilities that can be exploited for intelligence and military purposes. In 2016, President Xi Jinping said, “the fact that core technology is controlled by others is our greatest hidden danger.” Vice Premier Ma Kai said at the 2018 National People’s Congress, “We cannot be reliant on foreign chips.”1 China intends to end this dependence, but despite 40 years of investment and espionage, it is unable to make advanced semiconductors. Along the way, there have been embarrassing frauds and expensive failures.
Topic:
Science and Technology, Hegemony, Investment, and Emerging Technology
Political Geography:
China and Asia

30. Innocent Bystanders

Author:
Judd Devermont and Catherine Chiang
Publication Date:
04-2019
Content Type:
Working Paper
Institution:
Center for Strategic and International Studies
Abstract:
Speaking at the United Nations General Assembly, President Nana Akufo-Addo of Ghana warned of the repercussions of escalating U.S.-China trade tensions on African nations. Although largely absent from the discourse surrounding the so-called “trade war,” sub-Saharan Africa has suffered from its impacts. Uncertainty hovering over global and African markets has already undermined investor confidence, triggering drops in commodity prices and local currencies. A slowdown in Chinese production and global growth could threaten to throw African markets further off balance. U.S. protectionist measures stand out for their repercussions on African economies and U.S.-Africa relations. Tariff tensions risk indirectly undercutting U.S. goals of promoting African self-reliance, increasing U.S.-Africa trade and investment, and countering China’s expanding influence on the continent.
Topic:
Development, Hegemony, Conflict, and Trade Wars
Political Geography:
Africa, China, Asia, North America, and United States of America