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51. Red Ink: Estimating Chinese Industrial Policy Spending in Comparative Perspective

Author:
Gerard Dipippo, Ilaria Mazzocco, and Scott Kennedy
Publication Date:
05-2022
Content Type:
Special Report
Institution:
Center for Strategic and International Studies
Abstract:
A new report by the CSIS Economics Program and the Trustee Chair in Chinese Business and Economics quantifies the size of total industrial policy spending by China and compares it to seven other major economies: Brazil, France, Germany, Japan, South Korea, Taiwan, and the United States. Much of the existing research on industrial policy focuses on its effects, but there are few, if any, published studies that attempt a systematic comparison and quantification of overall industrial policy spending. The heart of the report is the careful calculation of total industrial policy spending by China and the other economies, combining estimates from multiple tools, among them direct subsidies, tax breaks, below-market credit, and state investment funds. The report provides additional context by examining the historical trajectory of industrial policy of these economies and the evolution of industrial policy across these economies for three industries—aluminum, semiconductors, and electric vehicles. The historical and sectoral analyses point to some similarities across economies, but they also demonstrate how distinctive China has been in terms of both quantifiable spending and non-quantifiable policy tools. Finally, this report discusses several important policy implications, including greater transparency and more harmonized reporting about industrial policy spending and the potential ways in which policymakers could employ these data to more effectively limit industrial policy spending by China and other economies.
Topic:
Economics, Industrial Policy, Industry, and Labor Market
Political Geography:
China and Asia

52. 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

53. 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

54. CHIPS Act will spur US production but not foreclose China

Author:
Gary Clyde Hufbauer and Megan Hogan
Publication Date:
10-2022
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The CHIPS and Science Act, export controls, and agreements with allied countries will accomplish many of their multiple objectives. More US semiconductor fabrication plants will be built, US R&D will be accelerated, and advanced chips and chip-making machines will be denied to China, Russia, and other adversaries. However, the Act will not make a material difference to US chip supplies in the next two or three years. Slower economic growth has already tipped the chips market in favor of ample supplies. While collective measures have inflicted considerable short-term pain on China, causing a sharp drop in the fortunes of its high-tech firms, China will respond by redoubling its self-sufficiency programs. The United States, however, should not mimic China in pursuing self-sufficiency, as US self-sufficiency is an illusion. The United States currently exports high-value chips and imports low-value chips, so increasing self-sufficiency would require the United States to prioritize basic chip production at the same time it is supposed to be competing with China in advanced chip production. Continuing to prioritize advanced chip production—where the United States has a clear advantage—is the most efficient course of action.
Topic:
Economics, Legislation, Exports, Production, and Semiconductors
Political Geography:
China, Asia, and United States of America

55. South Korea should prepare for its exposure to US-China technology tensions

Author:
Mary Lovely and Abigail Dahlman
Publication Date:
07-2022
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The stated goal of the US-led Indo-Pacific Economic Framework for Prosperity (IPEF) is to create standards that enhance and elevate regional trade and investment flows, but it is clearly aimed at reducing the role of China in global supply chains. As China is Korea’s largest trading partner, US policy discouraging Chinese participation in supply chains has immediate detrimental implications for Korean manufacturers. The United States is the second-most important destination for Korean exports. Given the values of these triangular trade flows, Lovely and Dahlman assess South Korea’s exposure to US demands to remove or reduce Chinese participation in the manufacture of exports destined for the US market. The reliance of the proposed framework on certain standards will likely reduce Chinese participation in IPEF trade networks. Korea may benefit from this trend, but IPEF could also increase production costs for Korean companies, especially in the electronics sector, a problem that would worsen if China retaliates against these companies. To reduce these risks, Korea might find it prudent to reduce its reliance on intermediate goods from China for products it produces for export to the United States. The Korean government should also seek to better understand its exposure to US–China trade tensions and diversify its trade relations. Korean firms should start preparing for supply chain disruptions, perhaps by making investments at home. Korea could also help other IPEF members reduce supply chain disruptions while addressing security concerns over China.
Topic:
Economics, Science and Technology, Supply Chains, and Competition
Political Geography:
China, Asia, South Korea, North America, and United States of America

56. China's CPTPP bid spurs South Korea to act on Asia-Pacific trade pacts

Author:
Jeffrey J. Schott
Publication Date:
06-2022
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
China’s sudden application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in September 2021 has broad implications for South Korea’s economic relations with China, Japan, and the United States. In the past, Korea frequently debated but invariably postponed deciding whether to participate in negotiations on the CPTPP, despite the substantial benefits to be gained from doing so. However, China’s application has prompted Korean officials to get off the fence and apply as well. As China moves to deepen its ties to regional partners, Korea needs to follow suit, complementing the ongoing implementation of the Regional Comprehensive Economic Partnership (RCEP) with expedited negotiations to join the CPTPP and participation in the US-led Indo-Pacific Economic Framework for Prosperity (IPEF). Korean participation in the RCEP, CPTPP, and IPEF is desirable and mutually reinforcing and should allow Korea to sustain its strong commercial interests in both the US and Chinese markets.
Topic:
Economics, International Trade and Finance, Treaties and Agreements, and Trade
Political Geography:
China, South Korea, and Asia-Pacific

57. Public responses to foreign protectionism: Evidence from the US-China trade war

Author:
David Steinberg and Yeling Tan
Publication Date:
06-2022
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
America's recent turn toward protectionism has raised concerns about the future viability of the liberal international trading system. This study examines how and why public attitudes toward international trade change when one's country is targeted by protectionist measures from abroad. To address this question, the authors fielded three original survey experiments in the country most affected by US protectionism: China. First, they find consistent evidence that US protectionism reduces Chinese citizens' support for trade. This finding is replicated in parallel experiments on technology cooperation, and further validated outside of the China context with a survey experiment in Argentina. Second, they show that responses to US protectionism reflect both a "direct reciprocity" logic—citizens want to retaliate against the United States specifically—and a "generalized reciprocity" logic that reduces support for trade on a broader, systemic basis.
Topic:
Economics, International Trade and Finance, Protectionism, and Competition
Political Geography:
China, Asia, North America, and United States of America

58. Will economic statecraft threaten western currency dominance? Sanctions, geopolitics, and the global monetary order

Author:
Carla Norrlof
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Atlantic Council
Abstract:
The return of great power rivalry is stoking renewed fears of weakening Western currency dominance. Financial sanctions are becoming the preferred economic tool for accomplishing geopolitical goals. These instruments are especially popular with the United States and Europe. In response, rival great powers, notably China and Russia, are diversifying away from Western currencies and developing counterstrategies to maintain economic and foreign policy autonomy. As other countries are hit by increasingly punishing Western sanctions, the incentive to join Russia and China’s alternative international monetary order increases. New analysis, published in this report, shows early signs that some countries may be trying to diversify away from the dollar. A growing circle of countries attempting to evade the Western-centric financial and currency order may over time erode the dollar and the euro’s sizeable lead, though will likely fall well short of ending their global dominance. This report analyzes these trends and quantifies the extent of reserve diversification following Russia’s 2022 war on Ukraine. It also assesses the polarity of the international currency order since the onset of the euro in 2002. Reserve diversification out of the dollar, and into the euro, has been modest, though Chinese renminbi reserves grew after Russia’s February offensive in Ukraine. Dollar unipolarity declined acutely in 2017 as the number of countries sanctioned by the United States increased and the US President Donald J. Trump threatened to revoke alliance commitments. Using economic statecraft while retaining global economic influence will require the United States to keep its economic house in order and allies close, if the current unipolar currency order is to survive.
Topic:
Economics, Monetary Policy, Sanctions, and Geopolitics
Political Geography:
China, Europe, and Asia

59. ‘Impactful projection’: long-range strike options for Australia

Author:
Marcus Hellyer and Andrew Nicholls
Publication Date:
12-2022
Content Type:
Special Report
Institution:
Australian Strategic Policy Institute (ASPI)
Abstract:
The Australian Government has stated that the ADF requires greater long-range strike capability. This was first stated by the previous government in its 2020 Defence Strategic Update (DSU), which emphasised the need for ‘self-reliant deterrent effects’. The present government has endorsed that assessment: Deputy Prime Minister and Defence Minister Richard Marles has stated that ‘the ADF must augment its self-reliance to deploy and deliver combat power through impactful materiel and enhanced strike capability—including over longer distances.’ He’s coined the term ‘impactful projection’ to describe the intended effect of this capability, which is to place ‘a very large question mark in the adversary’s mind.’ The term may be new, but the concept is not. To us, it’s a restating of the concept of deterrence by denial; that is, having sufficiently robust capabilities to convince an adversary that the cost of acting militarily against us isn’t worth any gains that might be made. But the need for the ADF to have those kinds of capabilities has become much more urgent. As the 2020 DSU noted, we no longer have 10 years of warning time of conventional conflict involving Australia. Moreover, this is not just the prospect of conflict far from Australia’s shores. People’s Liberation Army (PLA) force-projection capabilities have grown dramatically in the past two decades and include long-range conventional ballistic missiles, bombers and advanced surface combatants that have already transited through Australian waters.
Topic:
Defense Policy, NATO, and Economics
Political Geography:
Russia, China, Europe, Australia, and Australia/Pacific

60. Germany’s Economic Security and Technology: Optimizing Export Control, Investment Screening and Market Access Instruments

Author:
Tyson Barker and David Hagebölling
Publication Date:
11-2022
Content Type:
Special Report
Institution:
German Council on Foreign Relations (DGAP)
Abstract:
Technological development and increasingly fraught US-China competition have geopolitical consequences for technology access. The erosion of post-Cold War multilateral dual-use technology export control regimes, such as the Wassenaar Arrangement, and investment and other control frameworks have led to na-tional, EU, and ad hoc measures, such as the restrictions on Russian semiconductor access following the invasion of Ukraine. The German government must integrate technology access and control instruments – export controls, FDI screening, critical infrastructure access, research protection, and outbound investment– in its Digital Strategy and National Security Strategy. The former currently neglects critical technology access and control; the latter must address it comprehensively. German – and EU – dual-use export and FDI screening reforms have been updated and are now in place. Capacity building and alignment with EU and NATO partners now deserves greater attention. Measures could include more robust, institutionalized information-sharing and consultations on dual-use technology export, import, investment, and research controls in a Multilateral Technology Control Committee born out of the G7 or TTC. The commit-tee should also establish the capacity to deny end-user access to German technology through its own Foreign-Direct Product Rules and Entity List.
Topic:
Security, Economics, Science and Technology, Investment, and Exports
Political Geography:
China, Europe, Asia, North America, and United States of America

61. Don’t Get Caught in the Middle: A Geo-Economic Strategy for Germany to Survive US-Chinese Rivalry

Author:
Markus Jaeger
Publication Date:
12-2022
Content Type:
Policy Brief
Institution:
German Council on Foreign Relations (DGAP)
Abstract:
The economic fallout from the war in Ukraine has been very significant. The consequences of a war in East Asia involving the United States and China would be much worse. And even if a Sino-US military confrontation can be avoided, geo-economic conflict between the two powers is going to intensify. Washington will put increasing pressure on Germany and Europe to align their policies with Washington’s geo-economic strategy.
Topic:
Economics, Strategic Competition, Rivalry, and Geoeconomics
Political Geography:
China, Europe, Asia, Germany, North America, and United States of America

62. China’s Infrastructure Projects in the Middle East: Lessons from China’s Engagement Elsewhere

Author:
Dominika Urhová
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
Moshe Dayan Center for Middle Eastern and African Studies
Abstract:
In our latest issue of Iqtisadi, Ms. Dominika Urhova discusses the economic strategy and role of China in the Middle East, and analyzes the implications of China's growing influence in the region.
Topic:
Foreign Policy, Development, Economics, Belt and Road Initiative (BRI), and Strategic Engagement
Political Geography:
China, Middle East, and Asia

63. The Diminishing Path to Growth: Can Xi Jinping Avoid Crisis during China's Economic Transition

Author:
Thomas J. Duesterberg
Publication Date:
12-2021
Content Type:
Special Report
Institution:
Hudson Institute
Abstract:
Since Deng Xiaoping changed the trajectory of Chinese economic policy in 1978, the People’s Republic of China (PRC) has amassed an impressive record of economic growth. Starting as a poverty-stricken agricultural society under rigid socialist rule, the country has grown steadily and rapidly to become the second largest economy in the world and carved out a growth path whose strength and longevity is historically unprecedented. As the 21st century has unfolded, the PRC has become a near peer competitor to the United States and other developed countries in terms of economic and political power. It is deploying this power in multiple ways that explicitly challenge US leadership in both the economic and global political spheres. If the PRC manages to maintain recent growth rates of around 6 percent per year, it will soon overtake the United States as the world’s largest economy and enhance its ability to challenge the global US leadership position, which has been a pillar of stability since World War II. The US and its allies had hoped that the PRC would become a responsible stakeholder in a liberal international order, but these hopes have been undermined in recent years by China’s increasingly apparent mercantilist economic policies, its aggressive expansion of political power, the resurgent dominance of state-owned enterprises, and the ever-more evident suppression of political liberties and traditional cultures in its sphere of influence. Many economists and political analysts, however, have come to question whether the top-down, mercantilist economic system in the PRC is sustainable in the medium to long term. A number of trends suggest weaknesses in the traditional economic and political structures that have propelled growth in China: growing private and public sector debt, adversely shifting demography, the return to prioritizing state-run enterprises over private firms, the continued reliance on an export-oriented economic system, growing weaknesses in the financial system, dependence on external commodity and technology suppliers, persistent economic and geographic inequality, and continued reliance on external financing. Recent economic data show that bankruptcies are growing, returns on investment are shrinking, and capital controls are contributing to unrealistic valuations of internal capital stock and housing stock. Additionally, regulations are stifling innovative sectors of the economy, and opaque and unregulated consumer financing products are undermining central bank monetary policy and contributing to over-leveraged balance sheets among consumers and small businesses. Consumer purchasing power that is consistently too weak to absorb domestic production, along with incentives to increase that production, has resulted in sustained trade surpluses that create a closed loop of increased investment in manufacturing and the need for growing markets. More recently, US-led efforts to deny China access to certain high-technology products and materials have underscored Chinese vulnerabilities in key sectors like telecommunications and semiconductors. This dynamic results in trade tensions with developing countries and in economically questionable investment in the developing world. These tensions, along with the undermining of developing world markets through subsidized PRC production, are increasingly causing costly disruptions in trade flows and placing pressure on the state banking system, which is the source of most external financing. If the mounting problems with the current Chinese economic model result in material slowing of growth or even sustained recession in the PRC, this would have substantial impact on the United States and its allies in two important ways. First, given that the PRC is the second largest (or in some measures the largest) economy in the world and has been an engine of growth for economies in Europe and the rest of Asia, slower growth or recession in China would likely lead to a global slowdown or recession. Second, because growth has immense political salience in the PRC—it justifies the authoritarian system of governance—a significant slowdown or recession could lead to political instability. Given Chinese nationalist rhetoric and revanchist ambitions toward Taiwan, political instability could in turn motivate risky military activities that escalate into confrontations with democratic, market-oriented countries. From the perspective of the United States, a slowdown could exacerbate the already serious trade and economic tensions, especially if nationalist forces in China sought to cast the US as the scapegoat for its internal problems. In sum, a better understanding of the weaknesses within the PRC growth model and its potential frailties would allow policymakers to craft targeted tools when needed to support US policy objectives, either economic or political, and to deter PRC aggression or the undermining of US economic interests. Policy tools such as trade tariffs, export controls, and limitations on direct investments and access to US financial markets could have material impact on Chinese performance. A more robust understanding of the impact of these tools would help the United States and its allies craft overall strategies to meet the Chinese economic and political challenge. Even while operating in a time frame longer than twelve months, many financial analysts have begun to describe the unfolding economic challenges in the PRC. The general public, including political opinion leaders and government analysts, have not generally understood the extent of the danger of economic crisis in China. Instead, the common assumption is that growth in the PRC, albeit a continuing economic threat to the US economy, is not in danger of faltering. This white paper takes a different view, exploring the structural weaknesses characterizing the current Chinese economic model and the recent policy changes initiated by President Xi Jinping. Its working assumption is that the combination of these two factors will result in a material weakening of the dynamic growth China has enjoyed since Deng Xiaoping set his country on a more Western-style growth path in the late 1970s. At a minimum, various factors will slow growth to levels more characteristic of modern developed economies; and at the extreme these factors may possibly lead to negative growth and weakening of the political strength that underpins the dictatorship of the Chinese Communist Party (CCP).
Topic:
Foreign Policy, Economics, Economic Growth, and Xi Jinping
Political Geography:
China and Asia

64. Building on the Middle: Diversifying South Korea’s Foreign Policy Narrative and Economic Ties

Author:
Carolin Wefer
Publication Date:
11-2021
Content Type:
Special Report
Institution:
Korea Economic Institute of America (KEI)
Abstract:
The rivalry between the United States and China is affecting countries in its midst. This particularly applies to South Korea. The country is a strong economic player with a successful net of free trade agreements. Additionally, it has branded itself as a middle power, a multilateralist, and good international citizen. However, South Korea’s middle power perspective has recently assumed a literal definition of being situated in the middle of two great powers. Seoul’s dependencies on both the U.S. and China are undeniable. As the conflict intensifies, it is thus essential for South Korea to diversify its ties through trade policy and multilateral fora. This requires leaving the literal middle power definition behind and leveraging its economic standing towards an increase in international status, as well as refocusing on the figurative middle power narrative that brought the country to its initial global esteem. Through diversification and the build-up of its economic and multilateral prowess, South Korea stands to lessen the shocks of the U.S.-China rivalry. Joining RCEP and obtaining a guest role at the G7 were important steps in that direction. They offer an expansion of both regional and global ties and an involvement in discussions on the redefinition of international fora, but more can be done.
Topic:
Foreign Policy, Economics, Multilateralism, Rivalry, and Middle Power
Political Geography:
China, Asia, South Korea, and United States of America

65. COVID-19, Supply Chains, and Dependence on China: The Indian Perspective

Author:
Amitendu Palit
Publication Date:
07-2021
Content Type:
Journal Article
Journal:
Joint U.S.-Korea Academic Studies
Institution:
Korea Economic Institute of America (KEI)
Abstract:
China is India’s largest source of imports, nearly 15 percent of which are sourced from China. Many of India’s major imports—electrical machinery, electronic and semiconductor devices, fertilizers, antibiotics, iron and steel products, and vehicular parts—are extensively sourced from China. The outbreak of the COVID-19 pandemic highlighted the critical dependence of India’s pharmaceutical industry on China for active pharmaceutical ingredients (APIs). The dependence on China for both intermediate and finished products, has encouraged India to incentivize greater production at home through production-linked-incentives (PLIs) and to work with Japan and Australia on reorganizing regional supply chains. The paper examines the repositioning of supply chains in the strategic industry of pharmaceuticals. Efforts to reduce dependence on China assume great importance in this regard as India strives to become the leading supplier of affordable vaccines for tackling COVID-19.) The decade of the 2020’s has begun with India embarking on the dedicated mission of reducing import dependence and increasing self-reliance. The COVID-19 pandemic has starkly exposed the frailties of supply chains relying heavily on China. For India, which relies extensively on China for several critical imports, no sector is more vulnerable to disruptions from over-dependence than its pharmaceuticals. India’s reputation as the “pharmacy of the world” drawn from its great proficiency in making affordable pharmaceutical formulations and vaccines, relies fundamentally on sourcing essential drug intermediates from China. As one of the leading actors in the world’s fight against COVID-19, India is wary of sourcing disruptions from China affecting its ability to contribute to expanding global health security. After focusing on the import dependence of India’s pharmaceutical industry on China, this paper analyzes the recent initiatives announced by India for increasing economic self-reliance and reducing such dependence. It concludes by reflecting on the prospects of India decoupling from China in sourcing pharmaceutical ingredients.
Topic:
Economics, COVID-19, Imports, and Supply Chains
Political Geography:
China, South Asia, India, and Asia

66. Taiwan’s Shifting Role in the Global Supply Chain in the U.S.- China Trade War

Author:
Jinji Chen, Hong-yu Lin, and Yi-ting Lien
Publication Date:
07-2021
Content Type:
Journal Article
Journal:
Joint U.S.-Korea Academic Studies
Institution:
Korea Economic Institute of America (KEI)
Abstract:
The U.S.-China trade war and the pandemic have had a profound impact on cross-border supply chains. In the past few years of U.S.-China tensions, China has been accused of engaging in unfair competition by abusing its national power, from trade and technology to COVID-19 responses. Amid such accusations, some countries have been stepping back from cooperating with China due to national security concerns. As the lockdowns have further disrupted value chains and highlighted the vulnerability of global supply chains, enhancing supply chain resilience has now become a national imperative for the U.S., Japan, and other countries, with an emphasis on strengthening their production capabilities in the semiconductor and medical care industries.
Topic:
Economics, National Security, Trade Wars, and Supply Chains
Political Geography:
China, Taiwan, Asia, North America, and United States of America

67. The Pandemic’s Impact on Supply Chains from China and their Evolution: The View from South Korea

Author:
Jin Kyo Suh
Publication Date:
07-2021
Content Type:
Journal Article
Journal:
Joint U.S.-Korea Academic Studies
Institution:
Korea Economic Institute of America (KEI)
Abstract:
Today’s global economy is highly interconnected and interdependent. Supply chains across the world are finely tuned to deliver parts just when they are needed, so that companies and industries do not need to waste money on maintaining big warehouses. The economic system runs with remarkable efficiency, and companies are able to keep inventory to a minimum. However, firms have started rethinking their supply chains in response to changing labor costs, advances in automation, rising protectionism, and external shocks, such as natural disasters. In particular, the COVID-19 pandemic has revealed the structural fragility of current global supply chains and has forced many global enterprises to fundamentally reconsider their approach to global manufacturing and sourcing. The crisis has also highlighted geopolitical tensions, trade restrictions, and nationalist politics aimed at promoting a country’s domestic industries, which are likely to continue reshaping the global business landscape. As a consequence, most global enterprises are going to be under greater political and competitive pressure to increase their domestic production, grow employment in their home countries, and rethink their use of lean manufacturing strategies that involve minimizing the amount of inventory held in their global supply chains. Previously, supply chains were designed to keep costs low and inventories lean. However, supply chains are now being reworked to reduce the risks of future disruption even if doing so means incurring additional costs. Because China is decidedly the world’s largest goods exporter and is also currently mired in a trade conflict with the United States, supply chains going through China may be among the most vulnerable to future disruptions. Hyundai, South Korea’s largest automaker, temporarily stopped production lines at its factories in South Korea because of shortages of Chinese parts. The Hyundai shutdown—encompassing the first factory lines to be idled outside China—could foreshadow considerably more serious disruptions in the complex networks that supply automakers with essential components and materials (Automakers are especially susceptible to interruptions in the flow of goods because the industry is global, and cars are complex products with a myriad of precision parts). Recognizing the risk that dependency on China poses to national industries, some governments have offered manufacturers incentives to exit China and ease the pain of diversification. For example, Japan put $2.2 billion of its COVID-19 economic stimulus package into supporting its manufacturers moving toward shifting production outside of China. There was also mounting public pressure in some countries, such as the United States, to move essential production of pharmaceuticals and medical equipment out of China and closer to home. It is, however, not that simple to reduce global supply chain reliance on China: the nation still retains not only considerable comparative advantages in many areas (e.g. electronics, machinery, and equipment manufacturing), but also enormous purchasing power as the world’s second largest market. Even those companies that have diversified production are finding it hard to break free of China’s pervasive influence. Anticipating a rise in tariffs due to the U.S.-China trade conflict, videogame producer Nintendo shifted the manufacturing of its blockbuster gaming console called Switch to Vietnam in 2019. There was, however, a shortage of Switch consoles in stores in early 2020 due to a lack of essential components flowing to the company’s Vietnamese factories, as COVID-19 paused production of component parts by Chinese suppliers. In addition, most businesses have developed complex interdependencies, resulting in a deep tiering of supply chains. Many manufacturers depend on first-tier suppliers which, in turn, rely on a second-tier, and so on. Therefore, relocating factories or replacing all Chinese suppliers would be infeasible in the short-term. This chapter reviews the impact of supply chain disruption caused by COVID-19 on the South Korean economy and examines the future of regional supply chains centered on China. The rest of the paper is structured as follows. How supply chain disruption caused by COVID-19 will affect the South Korean economy, including trade, is discussed in Section 2. According to the latest national GDP report by the Bank of Korea (BOK), South Korea is going to see a mere 1 percent GDP contraction for 2020, the second-best performance among major economies behind only China. Reasons for why the South Korean economy was not seriously affected by the pandemic are also discussed in Section 2. Section 3 highlights the difficulty of reducing global supply chain reliance on China. China is likely to remain a key player, and the world must look at the reality that global supply chains are highly interconnected with China and that disconnecting from China’s supply chain is not an easy economic task for many multinational companies. The final section offers a few concluding remarks on deepening regionalism specifically in Asia, including policy implications for South Korea.
Topic:
Economics, COVID-19, and Supply Chains
Political Geography:
China, Asia, and South Korea

68. The Future of U.S. Supply Chains: National Security and the Pandemic

Author:
Troy Stangarone
Publication Date:
07-2021
Content Type:
Journal Article
Journal:
Joint U.S.-Korea Academic Studies
Institution:
Korea Economic Institute of America (KEI)
Abstract:
The COVID-19 pandemic has been the most significant economic disruption to the international economy since the Great Depression. The IMF estimates that the global economy contracted by 3.5 percent last year, while the WTO has projected a 5.3 percent decline in global trade. The economic impact on the United States has been significant as well. Early in the pandemic the United States experienced shortages of critical medical supplies and products, while the need to social distance has continued to place restrictions on the overall economy. For 2020, the pandemic saw GDP decline by 2.3 percent, while exports fell by 12.9 percent and imports by 6.4 percent. All of this has resulted an increased focus on supply chains and their vulnerabilities.
Topic:
Economics, National Security, COVID-19, and Supply Chains
Political Geography:
China, Asia, North America, and United States of America

69. The Big Squeeze: Japanese Supply Chains and Great Power Competition

Author:
Mireya Solis
Publication Date:
07-2021
Content Type:
Journal Article
Journal:
Joint U.S.-Korea Academic Studies
Institution:
Korea Economic Institute of America (KEI)
Abstract:
Japan led, and was transformed, by the global supply chain revolution. Facing growing protectionism in industrialized markets and reeling from sharp yen appreciation in the aftermath of the 1985 Plaza Accord, Japanese firms responded with a drastic increase in their overseas investment activities. In so doing, many of these companies spearheaded the movement towards the fragmentation of production across national boundaries that sought efficiency gains by pooling the competitive advantages of different locations. Japan’s experience with the first supply chain revolution was transformative. It altered its export-led model with important implications for its foreign policy. Japanese investments in the United States helped abate trade frictions; integrated production was at the heart of the project to rebuild relations with China, and Japan’s lead as foreign investor in Southeast Asia has been a pillar of its blueprint for regional integration. The strains in the rules-based international trade order, however, have raised questions about the ability of global supply chains to continue to operate effectively. The U.S.-China geopolitical rivalry has manifested in a damaging trade war, and moves to restrict tech flows are creating decoupling pressures. The COVID-19 pandemic has exacerbated these trends with lockdowns that disrupt supply chains while export protectionism and calls to renationalize production are on the rise. The intensified risk environment could lead to a second supply chain revolution with a greater emphasis on redundancy and diversification and bifurcation of productive chains. How will Japan respond to the challenges to international production, a central engine of its economic prosperity, and with what consequences for its relations with major powers? To provide greater clarity on this overarching question, this paper is organized as follows. Section 1 describes the central role of Japanese firms in the emergence and deepening of regional production networks. Although Japan’s overall share of intra-regional trade has decreased in the 21st century—in tandem with China’s rise as regional hub- Japanese firms have retained their central role in GVCs (Global Value Chains) through their advanced manufacturing capabilities. Section 2 offers a glimpse of past and recent supply chain shocks—China’s embargo of rare earth metals, the Great East Japan Earthquake in Tohoku, and the Japan-Korea export control dispute—to illustrate both sources of vulnerability and resilience of Japanese GVCs. Section 3 assesses the systemic shift brought about by revived great power competition, and identifies some early adjustment responses from Japanese firms to a new normal of heightened geopolitical tension.
Topic:
Economics, Strategic Competition, and Supply Chains
Political Geography:
Japan, China, and Asia

70. Hong Kong’s future on edge: Countering China’s national security law

Author:
Ash Jain, Joel Kesselbrenner, and Peter Mattis
Publication Date:
06-2021
Content Type:
Special Report
Institution:
Atlantic Council
Abstract:
Over the past seventy-five years, the United States and its allies have constructed and defended a rules-based international system that has provided unprecedented levels of peace, prosperity, and freedom. In recent years, the system has come under increasing strain, as a new era of great power competition has emerged. Despite hopes that China would become a “responsible stakeholder” in a rules-based system, Beijing has grown increasingly assertive, especially under President Xi Jinping. Beijing’s more confrontational path poses a significant challenge to a rules-based system. The challenge presented by China is particularly acute in the context of Hong Kong, where the Chinese Communist Party (CCP) has brashly violated an international treaty and curtailed democratic institutions and human rights. As the world enters an era of strategic competition with China, Beijing’s actions in Hong Kong should be a priority for policymakers in the United States and allied countries. This report addresses the importance of Hong Kong within the context of China’s broader challenge to the rules-based system and offers recommendations for how the United States and its allies can prevent a further erosion of democracy in Hong Kong and, over time, seek to restore it. It suggests that the United States and its allies still have available a range of pragmatic policy tools that can can be used to exert pressure and impose meaningful costs on Beijing. These should be implemented as part of a broader, comprehensive strategy to prevent China from undermining the rules-based system in the security, economic, and governance domains. On June 30, 2020, the CCP imposed a sweeping new National Security Law on Hong Kong, effectively giving Beijing direct control over the autonomous territory. Since then, China has acted to erode Hong Kong’s liberal traditions, in violation of Beijing’s treaty commitments under the Sino-British Joint Declaration. The National Security Law has for all practical purposes outlawed democratic activism, organizing, and speech. Over the past year, Beijing has cracked down on Hong Kong’s democratic institutions and thrown the pro-democracy movement into disarray. Beijing’s crackdown in Hong Kong is aimed at achieving several objectives. First, China’s leaders seek to maintain the legitimacy of the CCP in the face of a pro-democracy movement that it fears could spread to the mainland. Second, they seek to advance the unification of China by harmonizing the cultural, social, and economic aspects of life across the country, including Hong Kong. Third, the CCP aims to achieve a comprehensive modernization of China, while retaining the Party’s leadership, including by reaping economic benefits from the Greater Bay Area Integration Plan. Finally, China’s crackdown is aimed at stemming the advance of a liberal, democratic world order by pushing back on democratic norms that it views as antithetical to the Party and a danger to its efforts to modernize China on its own terms.
Topic:
Diplomacy, Economics, Human Rights, Politics, Sanctions, and Business
Political Geography:
China, Asia, and Hong Kong

71. Ambitious Plans and Economic Pragmatism - China in the Face of Climate Change

Author:
Marcin Przychodniak
Publication Date:
10-2021
Content Type:
Special Report
Institution:
The Polish Institute of International Affairs
Abstract:
China’s policy on climate change mainly serves to improve its international image, increase the competitiveness of its economy, and strengthen the legitimacy of the Communist Party’s (CPC) power. China’s activities include the development of green technologies and the announcement of a plan to reduce greenhouse gas (GHG) emissions by around 2030. However, the plans are unevenly implemented, sometimes even contrary to expectations, as evidenced by the construction of new coal-fired power plants. The problem of satisfying the country’s energy needs while protecting the environment means that the EU and the U.S. should treat China’s pro-climate declarations with caution.
Topic:
Climate Change, Economics, European Union, Green Technology, and Pragmatism
Political Geography:
China and Asia

72. The China-Pakistan Economic Corridor

Author:
Ali Haider Saleem and Arhama Siddiqa
Publication Date:
08-2021
Content Type:
Journal Article
Journal:
Baku Dialogues
Institution:
ADA University
Abstract:
The term Silk Road is used by scholars to describe a network of trading posts and markets linking East Asia to the Mediterranean. In terms of geographical context, the editors of Baku Dialogues define the region as the “geographic space looking west past Anatolia to the warm seas beyond; north across the Caspian towards the Great Plain and the Great Steppe; east to the peaks of the Altai and the arid sands of the Taklamakan; and south towards the Hindu Kush and the Indus valley, looping down around in the direc­tion of the Persian Gulf and across the Fertile Crescent.” States falling under this parasol include China, Pakistan, Iran, Turkey, the five Central Asian republics, Azerbaijan, and Russia. China’s Belt and Road Initia­tive (BRI), which traverses several continents, is a long‑term, strategic investment plan with the objective of facilitating economic integration of countries in line with the historic Silk Road. In April 2015, China’s President, Xi Jinping announced the China‑Pakistan Economic Corridor (CPEC), which amounts to BRI’s flagship project. This en­terprise, which encompasses road, rail, and oil pipeline links, will help Beijing advance its influence across South and Central Asia.
Topic:
Economics, International Cooperation, International Trade and Finance, Bilateral Relations, Infrastructure, and Silk Road
Political Geography:
Pakistan, China, and Asia

73. Xi Jinping’s Evergrande Dilemma

Author:
John Lee
Publication Date:
09-2021
Content Type:
Policy Brief
Institution:
Hudson Institute
Abstract:
Evergrande is one of the top-two real estate developers in a still highly fragmented Chinese sector. Its main strategy is to achieve ever-increasing scale (rather than profitability) in order to move ahead of and crowd out commercial competitors. It has also amassed the largest land reserves of all Chinese developers, which were financed through massive borrowings. By 2018, Evergrande held 822 pieces of undeveloped land in 228 cities, with a planned gross floor area of 3.28 billion square feet of new homes—the equivalent of 10 percent of Germany’s entire housing stock. It paid $75 billion just for this undeveloped land. Although Evergrande’s market share is only around 4 percent, its borrowings stand out. Its current balance sheet liabilities amount to an estimated 2 percent of China’s gross domestic product (GDP), while its off-balance-sheet liabilities could be another 1 percent of China’s GDP. This makes Evergrande the most indebted property developer in the world. Burdened by this debt, struggling to meet its debt interest and repayment obligations, and viable only if property asset values and sales continue to increase, Evergrande faces possible financial collapse—an event bound to have flow-on effects for the Chinese economy. However, the unusually high global interest in Evergrande has arisen because its woes are increasingly seen as symptomatic of those faced by the broader Chinese economy, which is struggling with enormous levels of indebtedness and overreliance on the real estate sector. Debt held by nonfinancial institutions in China increased from about 115 percent of GDP in 2010 to around 160 percent of GDP currently. This is the most rapid and largest increase in a 10-year period for any major economy and makes the level of debt held by Chinese nonfinancial institutions one of the highest in the world. The real estate sector accounts for around 15 percent of GDP, while property services account for another 14 percent—the highest in any developing economy. The share of the real estate sector as a proportion of GDP was only about 4 percent in 1997 and 9 percent in 2008. Since 2008, up to a third of all domestic fixed investment has gone into real estate, and up to half of total national debt is linked to the real estate sector.
Topic:
International Relations, Foreign Policy, Debt, Economics, Markets, and Business
Political Geography:
China and Asia

74. Winning the Geo-Tech Battle and Building the Quad Alliance in the Indo-Pacific

Author:
Eric B. Brown, John Lee, and Thomas J. Duesterberg
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
Hudson Institute
Abstract:
Under Xi Jinping, the People’s Republic of China (PRC) has established as its paramount geopolitical objective the replacement of the free and open, rules-based order in Asia with an alternative world order, one that is to be dominated by the interests and values of the Chinese Communist Party (CCP). This decision presents a danger to the entire world, not just to any one state or group of states. For, as US Secretary of State Antony Blinken said at the March 2021 US-PRC meeting in Alaska, the alternative to a rules-based order “is a world in which might makes right and winners take all, and that would be a far more violent and unstable world for all of us.” In furtherance of its objectives, the PRC is in the midst of a large military build-up, but there is much more. For today’s CCP, political power grows not only from the “barrel of the gun,” as Mao Zedong once put it, but also from cutting-edge technologies. Thus, while Beijing pours billions into artificial intelligence and surveillance tech to impose its new “digital totalitarianism” inside the PRC, from Hong Kong to Xinjiang, it is also using its growing technological prowess to press its larger geopolitical agenda in the Indo-Pacific and beyond. It is weaponizing technology and connectivity, along with trade, finance, and other policy instruments to try to rule the key technologies and industries of the future, as well as to improve its strategic positioning and acquire political power over other countries—for instance, through its bid to dominate other nations’ most sensitive data networks, or via the export of its suite of “social stability” technologies, i.e., the “techno-tyrant’s toolkit.” In all this, the CCP’s intent is to entrench its power and Leninist norms and practices to the extent it can do so beyond the PRC’s borders, and to make other nations, or at the least their ruling elites, beholden to it. So in addition to the PRC’s militarily destabilizing activities in the West Pacific and incursions into India’s Himalayas, there is also a “geo-technological front.” If Xi’s CCP succeeds at enmeshing other countries in its expanding “PRC sphere of technological influence,” it could unlock and be able to exploit decisive military, economic, diplomatic, and ideological advantages.
Topic:
International Relations, Security, Economics, and Alliance
Political Geography:
China, South Asia, East Asia, and Asia-Pacific

75. The Chinese Communist Party’s Economic Challenge to the Free World

Author:
Miles M. Yu
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
Hudson Institute
Abstract:
The Chinese economy and the philosophical roots of China’s system have greater implications for the United States economy than many assume. The one critical fact to understand about the People’s Republic of China is that it is a communist dictatorship ruled by a Marxist-Leninist party. The Party is dedicated to maintaining and strengthening its monopoly on all powers in the world’s most populous country and to mounting the most serious challenge to the free world since the Cold War. This policy memo will examine the Chinese economy’s distinct traits, how it operates, and why it thrives under a monopolistic government that exploits and challenges the global free market system, along with possible policy recommendations for the United States and its allies. Unlike most other communist countries, China has been afforded the benefits of a global free-market system and enjoys largely open access to international trade, capital markets, and advanced technologies. The paradox of a communist nation fully participating in a largely capitalist system has enriched and strengthened the Chinese Communist Party (CCP), to the point where Beijing poses a mortal threat to the United States and to the international free market economic system that has enabled the rise of the communist state. The West played a role in creating the current state of play. But too many conversations in the United States focus only on our own strategic thinking. In his historic speech at the Richard Nixon Library in July 2020, former Secretary of State Mike Pompeo aptly described the situation and how we got here: “Our policies—and those of other free nations—resurrected China’s failing economy, only to see Beijing bite the international hands that were feeding it.” As President Richard Nixon admitted in his later years, his initiative to open up China in 1972 might have created a Frankenstein.
Topic:
Foreign Policy, Communism, Economics, and Chinese Communist Party (CCP)
Political Geography:
China, Asia, and United States of America

76. Transforming the Middle East: The Origins, Impact, and Evolution of the Abraham Accords

Author:
Robert Greenway
Publication Date:
03-2021
Content Type:
Special Report
Institution:
Hudson Institute
Abstract:
The Abraham Accords constitute the beginning of a transformation of a region that has confounded many, and that will continue to be a vital battleground astride the security and economic interests of world powers. American leadership was a necessary but alone insufficient condition to the emergence of this agreement. American leadership will remain essential to its growth and evolution. The alignment of our regional partners and allies in both economic and security domains will ensure that the agreement endures. It will also incentivize others to join us in pooling critical capacities to advance and defend mutual interests. This transformation serves to constrain Iran – the threat from which has been recognized as causal – even as it constrains the malign influence and predatory practices of China and Russia. They will continue to manufacture and exploit fissures among the U.S. and its regional partners if we fail to exploit the favorable shift in the region’s security and economic architecture. On the other hand, appropriate support will allow the Abraham Accords to advance and secure America’s interests with the use of significantly fewer resources and with more capable partners integrated as never before.
Topic:
International Relations, Security, Foreign Policy, Diplomacy, Economics, and Negotiation
Political Geography:
Russia, China, Middle East, Israel, and Palestine

77. Directions of Innovation Policy: Contrasting Views of China and the US

Author:
Anna Jaguaribe and Kamila Aben Athar
Publication Date:
08-2021
Content Type:
Special Report
Institution:
Brazilian Center for International Relations (CEBRI)
Abstract:
At the 24th China Analysis Group Meeting, experts analyzed the contrasting views of innovation policies in China and in the United States. The 14th five-year plan continues most of the economic efforts that characterized the last decade while also challenging some certain well-established elements. Internet development is still the dominant focus, but we can also observe the shift towards a service-based economy and high investment in infrastructure. According to the participants, one of the most relevant differences between the US and China is the way non-state actors are connected to the national government. American innovation efforts heavily feature research groups and private corporations having an active role, while in China the government puts up barriers that distort the market and influence it more directly. The tension between the two countries is stronger than ever and the new Biden administration brings a new set of uncertainties to the table, but at the same time, both China and the US are heavily dependent on each other economically. China’s efforts to expand its influence worldwide by negotiating with multiple countries will most likely exacerbate the conflict and talks regarding a decoupling, which currently seems unlikable.
Topic:
Foreign Policy, Economics, Markets, Infrastructure, and Innovation
Political Geography:
China, Asia, and United States of America

78. Vietnam Tacks Between Cooperation and Struggle in the South China Sea

Author:
International Crisis Group
Publication Date:
12-2021
Content Type:
Special Report
Institution:
International Crisis Group
Abstract:
Together with the Philippines, Vietnam is on the front line of maritime disputes with China. The risk of armed confrontation is low but growing. Hanoi should redouble efforts to build confidence, starting with less sensitive issues, and to establish an effective Code of Conduct.
Topic:
Economics, Regional Cooperation, Maritime, Conflict, and Peace
Political Geography:
China, Asia, and Vietnam

79. Containing Crisis: Strategic Concepts for Coercive Economic Statecraft

Author:
Emily Kilcrease, Emily Jin, and Rachel Ziemba
Publication Date:
12-2021
Content Type:
Special Report
Institution:
Center for a New American Security (CNAS)
Abstract:
As the United States and China seek to manage an increasingly tense relationship, both sides have turned to coercive economic statecraft as a core part of their broader foreign policy, with disruptive impacts on the global economic order. A growing body of research examines the use of coercive economic tools, including prior work by the CNAS Energy, Economics, and Security program. This report adds to that literature by specifically examining the use of coercive economic tools during periods of geopolitical crisis to assess their value in de-escalating tensions or deterring further economic coercion. The researchers developed scenario exercises to examine these dynamics, supported by a literature review and extensive engagement with subject matter experts. The insights from the research informed the development of two overarching strategic concepts intended to guide U.S. policymakers when deploying economic tools as part of a crisis management situation.
Topic:
Security, Foreign Policy, Economics, Bilateral Relations, and Crisis Management
Political Geography:
China, Asia, North America, and United States of America

80. The EU–China Comprehensive Agreement on Investment: Lessons Learnt for Indonesia

Author:
Yan Lili Ing and Junianto James Losarili
Publication Date:
08-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
The European Union (EU) and China have recently reached an agreement: the EU–China Comprehensive Agreement on Investment (CAI). As one of the most recent investment agreements concluded by the EU, the paper aims to assess specific concessions made in the agreement, and provides lessons learnt for Indonesia on the ongoing negotiations of the Indonesia–EU free trade agreement, the Comprehensive Economic Partnership Agreement (IEU CEPA). The paper will present an overview of the main areas covered under the CAI, assess the potential impacts of the CAI on EU investment into Indonesia, and set out lessons that can be learnt from the CAI.
Topic:
Economics, International Cooperation, International Trade and Finance, European Union, and Investment
Political Geography:
China, Europe, Indonesia, and Asia

81. China's Ties with Southeast Asia : From Green Shoots to Sustained Recovery

Author:
Kensuke Tanaka
Publication Date:
01-2021
Content Type:
Policy Brief
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
China's rebound happened relatively quickly owing to a large extent to timely macroeconomic policy responses to the crisis. Lagging somewhat behind China, most Southeast Asian countries have now entered the transition from recession to recovery. Some export-dependent Southeast Asian countries shifted their export destination to China to benefit from its early recovery. This switch of export destination to China illustrates China's important role in leading the recovery of the region. Enhancing regional macroeconomic co-operation would help reduce vulnerability of the region and ensure a sustained recovery. Regional macroeconomic co-operation remains at an early stage in Southeast Asia, but possibilities for further co-operation should be explored.
Topic:
Development, Economics, International Cooperation, International Trade and Finance, and Economic Recovery
Political Geography:
China, Asia, and Southeast Asia

82. Economic Sanctions as a Tool of China’s Hybrid Strategies

Author:
Rafal Wisniewski
Publication Date:
01-2021
Content Type:
Journal Article
Journal:
Polish Political Science Yearbook
Institution:
Polish Political Science Association (PPSA)
Abstract:
The article aims to analyze the role of economic sanctions in the People’s Republic of China’s overall approach to achieving its security objectives in the international arena. During the last two decades, Beijing used this instrument on numerous occasions to exert pressure on a varied group of actors. China’s current strategy toward a range of disputes and conflicts it is engaged in (the South China Sea territorial disputes most prominently stand out) is often described using the popular vocabulary of “hybrid warfare” or “grey zone conflicts”. Putting the conceptual complications aside, the author agrees that the PRC’s approach can be viewed as part of a growing trend for great powers to employ what can be called “hybrid strategies” toward its opponents. As part of a broader category of economic statecraft, economic sanctions form an important element of this approach. Considering current scholarship on both “hybrid” (or “grey area”) warfare and economic sanctions, the article answers the question of why the PRC increasingly resorts to hybrid strategies (including economic coercion) and identifies the main characteristics of Chinese economic sanctions. It also provides preliminary conclusions on their effectiveness.
Topic:
Diplomacy, Economics, Territorial Disputes, and Sanctions
Political Geography:
China, Asia, and South China Sea

83. Protect, Constrain, Contest: Approaches for coordinated transatlantic economic and technological competition with China

Author:
François Chimits, Ashley T. Lenihan, Jonathan Liebenau, Stephen Paduano, Anthony Vinci, and Peter Watkins
Publication Date:
01-2021
Content Type:
Special Report
Institution:
LSE IDEAS
Abstract:
The Biden Presidency offers opportunities for a renewed effort at formulating a coordinated allied approach to technological and economic competition with China. The latest report from China Foresight at LSE IDEAS provides a guiding framework for transatlantic coordination, and offers insights into key elements of future cooperation. While challenges abound, the opportunities for action prove just as great in number.
Topic:
Economics, Science and Technology, Transatlantic Relations, and Strategic Competition
Political Geography:
China, Asia, and United States of America

84. The Dragon Lands in Belgrade: The Drivers of Sino-Serbian Partnership

Author:
Vuk Vuksanovic
Publication Date:
07-2021
Content Type:
Special Report
Institution:
LSE IDEAS
Abstract:
In recent years, the partnership between Serbia and China has been elevated to a historically unprecedented level. This partnership manifests itself through Chinese economic statecraft, technological partnership, security partnership, with political ties reaching an unprecedented degree during the COVID-19 pandemic. However, as Vuk Vuksanovic examines, the future of this partnership will be dependent on the trajectory of China’s relationship with the West. As US-China relations are becoming adversarial, and as China’s relations with the EU are shaken, it will become increasingly difficult and risky for Belgrade to maintain its ties with Beijing. From ‘vaccine diplomacy’ to ‘debt-trap diplomacy’, this Strategic Update examines the Sino-Serbian partnership we are witnessing and what the future has in store for Serbian policymakers.
Topic:
Security, Foreign Policy, Economics, Partnerships, and COVID-19
Political Geography:
China, Asia, and Serbia

85. 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

86. 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

87. China's Belt and Road Initiative and Georgia: A Short Overview

Author:
Ekaterine Lomia
Publication Date:
09-2021
Content Type:
Journal Article
Journal:
Journal of Liberty and International Affairs
Institution:
Institute for Research and European Studies (IRES)
Abstract:
Since the beginning of the 2000s, China has embarked on an unprecedented path of economic development, as evidence of which is the largest economic project of the XXI century initiated by the People's Republic of China. The global Belt and Road Initiative announced by the first person of the country, Xi Jinping, is a shortened name of the ‘Silk Road Economic Belt’ and ‘XXI Century Maritime Silk Road’. It covers the Asia-Pacific, Europe, Central Asia, Southeast Asia, West Asia, and Africa and involves more than a hundred countries, international organizations, and leading economic actors. The main participants in the project are China, Mongolia, Russia, Azerbaijan, Belarus, Poland, Germany, the Netherlands, Kazakhstan, Kyrgyzstan, Pakistan, Bangladesh, Iran, and India. The article reviews the role of the Chinese project in a global context. The paper focuses on the role and purpose of Georgia in the Belt and Road Initiative. This study will try to reveal the results for the benefit of Georgia, which is one of the participating countries, and the role of China through research to be made from documents and academic studies on the subject. Georgia tries to conduct its relations with China, as a partner in the project, with a policy of balance without disturbing its relations with the West.
Topic:
Economics, Bilateral Relations, Infrastructure, Hegemony, and Belt and Road Initiative (BRI)
Political Geography:
China, Europe, Asia, and Georgia

88. Ahead of Biden-Moon Summit, South Koreans and Americans Align on China and North Korea

Author:
Karl Friedhoff and Suh Young Park
Publication Date:
05-2021
Content Type:
Commentary and Analysis
Institution:
Chicago Council on Global Affairs
Abstract:
Chicago Council survey data find majorities in South Korea view China as more of a security threat than a security partner and as more of an economic threat than an economic partner. On May 21, South Korea’s President Moon Jae-in will meet President Joe Biden at the White House. In his first 100 days in office, Biden’s foreign policy has focused on repairing alliances and setting the administration’s policy toward China—in March and April alone, the administration participated in US-China talks in Alaska, 2+2 meetings in South Korea and Japan, trilateral talks among national security advisers, and Japanese Prime Minister Yoshihide Suga's visit to Washington. Moon’s visit will add North Korea to the agenda. The two leaders meet at a time when there are significant gaps on their preferred paths forward to dealing with Beijing and Pyongyang. However, recent Chicago Council surveys find that attitudes among publics in South Korea and the United States are remarkably similar when it comes to China and North Korea.
Topic:
Security, Foreign Policy, Economics, and Public Opinion
Political Geography:
China, Asia, South Korea, North America, and Southeast Asia

89. Decoupling Europe

Author:
Gabriel Felbermayr, Steffen Gans, Hendrik Mahlkow, and Alexander Sandkamp
Publication Date:
07-2021
Content Type:
Policy Brief
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
The COVID-19 pandemic revealed the vulnerability of international value chains in the face of global shocks. This has triggered a political discussion regarding a possible reshoring of vulnerable supply chains back home. The aim is to reduce dependencies on foreign suppliers and thus improve crisis resilience of the domestic economy. The debate is also rooted in the growing dependence on Asian suppliers and the colliding political and ideological systems between China and the West. Unilateral decoupling of the EU from China (a doubling of trade costs) would reduce real income in the EU on average by 0.8 percent. In terms of GDP in 2019, this equals a permanent loss in real income of 131.4 bn EUR. Should China retaliate, real income would fall by 1.0 percent (170.3 bn EUR). With its extremely interconnected economy, real income in Germany would even decline by 1.4 percent (48.4 bn EUR). China would also lose from such a trade war, with real income declining by 1.3 percent. Should the EU increase its trade barriers against all its non-European trading partners, real income in the Union would fall by 3.5 percent or 584.3 bn EUR in case of a unilateral increase and by 5.3 percent or 873.1 bn EUR in case the rest of the world responds by also raising trade barriers.
Topic:
Economics, Regional Cooperation, European Union, Economic Cooperation, Pandemic, and COVID-19
Political Geography:
China and Europe

90. The internet of things: China’s rise and Australia’s choices

Author:
John Lee
Publication Date:
12-2021
Content Type:
Commentary and Analysis
Institution:
Lowy Institute for International Policy
Abstract:
The Internet of Things (IoT) is connecting a growing range of economic and social activity across national borders, while simultaneously expanding the security challenges implied by these connections, including to Chinese state power. Despite US-led efforts to exclude Chinese actors from digital networks worldwide, the economies of East and Southeast Asia are becoming more densely integrated with China through evolving IoT ecosystems and supply chains. These trends threaten to disadvantage Australia and require policies to build up the country’s own technological capacities while devising innovative ways to manage, rather than avoid, the risks entailed in growing digital connections with China.
Topic:
Security, Economics, Science and Technology, Internet of Things, and Supply Chains
Political Geography:
China, Asia, Australia, and United States of America

91. Chinese Investments in Brazil: Economic Diplomacy in Bilateral Relations

Author:
Virginia Soledad Busilli and Maria Belen Jaime
Publication Date:
09-2021
Content Type:
Journal Article
Journal:
Contexto Internacional
Institution:
Institute of International Relations, Pontifical Catholic University of Rio de Janeiro
Abstract:
The People’s Republic of China has consolidated its status as a great power and strengthened its presence in different regions of the planet. In accordance with its economic development strategy, Beijing’s growing bond with Latin America is part of China’s need to guarantee access to raw materials and energy resources. In this framework and through economic diplomacy, China has strengthened its trade relations, as well as loans and investments in most of the region’s countries.Brazil is an example of this relationship pattern, as one of China’s most important partners and top investment destination in Latin America. It became Beijing’s top commercial partner in 2012. This paper will analyse the composition and evolution of Chinese foreign direct investment (FDI) in Brazil between the years of 2004 and 2020. In order to do so, we will study the main projects carried out by the country, as well as the characteristics of the Chinese companies (state or non-state) that participated in the process, in order to understand their most important features. Likewise, we will analyse the articulation of the Chinese FDI with its trade flows. We will start from the premise that Chinese investments in Brazil are directly linked to Beijing’s strategic interests, while at the same time guided by market logics that try to maximise profits. In this vein, within the framework of the ‘going out strategy’,state companies play a fundamental role.
Topic:
Diplomacy, Economics, Bilateral Relations, and Hegemony
Political Geography:
China, Asia, Brazil, and South America

92. The Prospects of Thailand-U.S. Economic Cooperation

Author:
Kaewkamol Karen Pitakdumrongkit
Publication Date:
11-2021
Content Type:
Special Report
Institution:
East-West Center
Abstract:
Dr. Kaewkamol Pitakdumrongkit, S. Rajaratnam School of International Studies (RSIS) of Nanyang Technological University, Singapore., explains that “data runs contrary to the perception that Bangkok is leaning towards Beijing… Thailand embraces American economic clout while dreading its Chinese counterpart.”
Topic:
Foreign Policy, Economics, Trade, and Economic Cooperation
Political Geography:
China, North America, Thailand, Southeast Asia, and United States of America

93. Currency Power & International Security

Author:
Benjamin Cohen
Publication Date:
12-2021
Content Type:
Journal Article
Journal:
Fletcher Security Review
Institution:
The Fletcher School, Tufts University
Abstract:
For anyone concerned about U.S. national security, international finance today poses an intriguing dilemma. On the one hand, in geopolitical terms, the United States seems to have entered a period of relative decline. Some commentators speak of a broad power transition from unipolar hyperpuissance to a new, more threatening multipolar world. Others focus more narrowly on the rise of China and the risk of a “Thucydides Trap.”72 Yet in global finance, the U.S. dollar remains undeniably dominant, still by far the most popular national monetary unit in use for international purposes.73 The greenback is as mighty as ever. Can this disparity continue, or should we expect that geopolitical decay will be followed by—perhaps even exacerbated by—an erosion of the dollar’s standing? Much rides on the answer. An international currency is a source of power for the economy that issues it.74 For some three-quarters of a century, the greenback’s central role in monetary affairs has enhanced the political capabilities of the United States. America’s security has been amplified by currency power. At a time, therefore, when the nation is feeling increasingly vulnerable to adversaries abroad, the outlook for the dollar’s future takes on added importance. Three questions are addressed in this essay. First, how does a currency’s international standing affect the political capabilities of the issuing country? Second, how has currency power been used by the United States? And third, what are the prospects for the greenback looking forward? Much analysis suggests that the outlook for the currency is not bright.75 Some experts worry that we are approaching a tipping point that could lead to an abrupt and panicky dumping of the dollar. I disagree. No sudden rush to the exits would appear to be likely. But over time it does seem plausible to anticipate a gradual, maybe even accelerating loss of monetary primacy. The threat to the greenback—and hence to U.S. security—is not the sudden appearance of a wolf at the door. The risk, rather, is a persistent spread of termites in the woodwork.
Topic:
Economics, International Security, Geopolitics, Finance, and Currency
Political Geography:
China and United States of America

94. How China Loses: The Pushback Against Chinese Global Ambitions

Author:
Luke Patey and Elizabeth Wishnick
Publication Date:
03-2021
Content Type:
Video
Institution:
Weatherhead East Asian Institute, Columbia University
Abstract:
From its Belt and Road Initiative linking Asia and Europe, to its "Made in China 2025" strategy to dominate high-tech industries, to its significant economic reach into Africa and Latin America, China is rapidly expanding its influence around the globe. Many fear that China's economic clout, tech innovations, and military power will allow it to remake the world in its own authoritarian image. But despite all these strengths, a future with China in charge is far from certain. Rich and poor, big and small, countries around the world are recognizing that engaging China produces new strategic vulnerabilities to their independence and competitiveness. Researching the book took Dr. Patey to East Africa, Latin America, Europe, and East Asia over the past five years and he will discuss how countries in these parts of the world are responding to China’s rise and assertiveness. This event was cosponsored by the Weatherhead East Asian Institute, the APEC Study Center and the Columbia Harvard China and the World Program at Columbia University.
Topic:
Diplomacy, Economics, Geopolitics, Soft Power, and Belt and Road Initiative (BRI)
Political Geography:
China and Asia

95. U.S. Economic Challenges for the Biden Administration

Author:
Paweł Markiewicz
Publication Date:
06-2021
Content Type:
Special Report
Institution:
The Polish Institute of International Affairs
Abstract:
The U.S. economy is emerging from the recession caused by the COVID-19 pandemic. To maintain growth and at the same time achieve climate and technology goals, the Biden administration is pushing large socio-economic programmes. To pass them in Congress, the administration will be forced to reach compromises with factions within the Democratic Party. Biden also will need some Republican support. In foreign policy, these programmes aim to strengthen the U.S. position in its rivalry with China, something that also opens greater possibilities for closer cooperation with the EU.
Topic:
Economics, Politics, COVID-19, and Joe Biden
Political Geography:
China, North America, and United States of America

96. 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

97. 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

98. The Coast Guard Law: China's Readiness for a Maritime Military-Civil Fusion Strategy

Author:
Chisako T. Masuo
Publication Date:
04-2021
Content Type:
Research Paper
Institution:
Japan Institute Of International Affairs (JIIA)
Abstract:
The core problem in the Chinese Coast Guard Law is that it shows the Chinese authorities' readiness to use it as a domestic foundation for implementing a maritime military-civil fusion (MCF) strategy aimed at establishing Chinese control inside the first island chain in East Asia. China has improved its surveillance capabilities over the ocean dramatically in last years. Intentionally adopting an ambiguous strategy mingling security and economic affairs altogether, China is trying to expand its maritime sphere of influence and even make incursions into others' waters, using private fishermen as well as civilian officials and military personnel as the situation demands. Countries that share concerns with China should strengthen international technical cooperation in strategic domains and build seamless surveillance systems to keep an eye on various Chinese actors' external activities.
Topic:
Security, Economics, Maritime, Coast Guard, and Readiness
Political Geography:
China and Asia

99. U.S. Trade Policy toward China: Learning the Right Lessons

Author:
Scott Lincicome
Publication Date:
01-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Labor market and cultural disruptions in the United States are real and important, as is China’s current and unfortunate turn toward illiberalism and empire. But pretending today that there was a better trade policy choice in 2000—when Congress granted China “permanent normal trade relations” (PNTR) status and paved the way for broader engagement—is misguided. It assumes too much, ignores too much, and demands too much. Worse, it could lead to truly bad governance: increasing U.S. protectionism; forgiving the real and important failures of our policymakers, CEOs, and unions over the last two decades; and preventing a political consensus for real policy solutions. Indeed, that is happening now.
Topic:
International Relations, Economics, Markets, Bilateral Relations, Trade, and Protectionism
Political Geography:
China, Asia, North America, and United States of America

100. Financial Development in Hong Kong and China: A Hayekian Perspective

Author:
Kam Hon Chu
Publication Date:
01-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
In addition to foreign investment absorption, Hong Kong plays a pioneering role in the internationalization of the renminbi (RMB). Despite the lack of comprehensive statistics on the volume of offshore RMB transactions, Hong Kong is for sure one of the largest, if not the largest, global centers for offshore RMB businesses. According to the Triennial Central Bank Survey (BIS 2019), for instance, Hong Kong was the largest global offshore RMB foreign exchange market, with an average daily turnover of US$107.6 billion as of April 2019, considerably higher than the US$56.7 billion for London and the US$42.6 billion for Singapore.
Topic:
Economics, Markets, Investment, and Financial Development
Political Geography:
China, Asia, and Hong Kong