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1. The Future of the Belt and Road in Europe: How China’s Connectivity Project is Being Reconfigured across the Old Continent – and What It Means for the Euro-Atlantic Alliance

Author:
Nicola Casarini
Publication Date:
02-2024
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
China’s Belt and Road Initiative (BRI) has entered the twilight zone in the old continent, following a deterioration of bilateral relations between the EU member states and China over the last years. Italy’s official exit from the BRI at the end of 2023 was a further blow to Chinese President Xi Jinping’s signature foreign policy. Yet, the BRI in Europe is being reconfigured rather than being terminated. In Western Europe, the BRI is moving away from physical infrastructure projects and investment in industrial assets – the latter being increasingly protected from Chinese takeovers by both national and EU legislation – to financial and monetary connectivity. This shift is welcomed by various European actors, including some policymakers at the national level, eurozone institutions and major banks. Concurrently, most of Eastern European countries continue to promote BRI projects and seek to attract Chinese investments, suggesting that there is a two-speed Europe when it comes to China, both in terms of geography and sectors.
Topic:
Infrastructure, Foreign Direct Investment, European Union, Belt and Road Initiative (BRI), and Currency
Political Geography:
China, Europe, Asia, and Italy

2. Ensuring Energy Security and Carbon Neutrality: Implications for Korea

Author:
Jinyoung Moon, Seung Kwon Na, Sunghee Lee, and Eunmi Kim
Publication Date:
03-2024
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
The international community faces two major challenges: securing stable energy supplies and achieving carbon neutrality. Concerns about energy security that aroused due to the oil crises in the 1970s are no longer limited to the stable supply of fossil fuels. The concept of energy security is changing in line with the need for transition from fossil fuels to clean energy. As energy prices have soared due to the recent Russia-Ukraine war, major countries are actively pursuing related policies and external cooperation to diversify their energy supply chain and decarbonize their economic structures. In order to appropriately respond to these challenges, continuous efforts are needed to gradually reduce the use of fossil fuels and in crease the use of clean energy in the medium to long-term. In particular, as the proportion of power generation from variable renewable energy sources increases, maintaining the stability of the power grid becomes a more important task. Demand for minerals essential for clean energy related technologies is expected to increase, however, production of these minerals is concentrated in specific countries. Major concerns related to carbon neutrality or clean energy investment include whether sufficient investment is being made, whether funds are being directed to countries or sectors in urgent need of financial support, and how to induce private investment through public funds. Accordingly, our study analyzed energy security from the perspective of energy transition, and derived key issues and notable cases of international cooperation to ensure energy security and carbon neutrality. Based on our findings, we suggested policy implications for Korea.
Topic:
Climate Change, Fossil Fuels, Carbon Emissions, Russia-Ukraine War, and Energy Security
Political Geography:
Asia and South Korea

3. Xi Jinping’s Visit to France: Stumbling Blocks Pile Up on the Path of Bilateral Cooperation

Author:
Marc Julienne
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
Institut français des relations internationales (IFRI)
Abstract:
On May 6 and 7, Chinese President Xi Jinping will pay a state visit to France, his first to Europe since 2019 and the Covid-19 pandemic. Emmanuel Macron and Xi Jinping will celebrate Franco-Chinese friendship and the sixtieth anniversary of the establishment of diplomatic relations between their two countries. It comes at a time when the bilateral relationship is officially perceived as positive on both sides, especially after the French President’s visit to China in April 2023. However, beneath the diplomatic varnish, obstacles are piling up, and the space for cooperation between the two countries is receding. Of the four major areas of cooperation on the visit’s agenda – Ukraine, economic relations, human and cultural exchanges, and global challenges – the first three are already facing significant limitations. Beyond the strictly bilateral relationship, the two heads of state have radically different visions of and for Europe. Finally, there is a number of issues that remain absent from the discussions, which are not likely to ease tensions: the Taiwan Strait, nuclear arms control and Chinese interference in Europe. They will need to be addressed sooner or later.
Topic:
Foreign Policy, Diplomacy, Bilateral Relations, Emmanuel Macron, and Xi Jinping
Political Geography:
China, Europe, Asia, and France

4. Power and Financial Interdependence

Author:
Brad Setser
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
Institut français des relations internationales (IFRI)
Abstract:
The link between financial self-reliance and geopolitical power has long been debated. The unbalanced Sino-American trade relationship has created asymmetric financial ties which generate potential sources of leverage for both parties and will not quickly disappear. Absent a clarifying major crisis, it will be difficult to definitively determine which party has greater leverage. Many in the United States (US) are concerned about indebtedness to its primary strategic rival, and the risks posed by a sudden Chinese withdrawal from US financial markets. US policymakers actively sought to encourage China’s top leadership not to withdraw financing from the market for US Agency securities in the run-up to the global financial crisis. Yet China also sees risks in this unbalanced financial relationship. Chinese policymakers have expressed concern about the domestic political consequences of losses on either their Treasury or Agency holdings and actively have sought to diversify China’s reserves – including by substituting the risk of lending to developing economies for the visibility associated with large holdings of Treasuries in US custodians. China increasingly worries that its dollar holdings and the dollar’s global role increase its vulnerability to potential financial sanctions. Both parties thus worry about the possibility that financial interdependence can be weaponized yet find it hard to extricate themselves from the inevitability of financial interdependence absent a clean break from an entrenched pattern of trade imbalances.
Topic:
International Trade and Finance, Bilateral Relations, Finance, and Interdependence
Political Geography:
China, Asia, North America, and United States of America

5. South Korea’s Emergence as a Defense Industrial Powerhouse

Author:
Wooyeal Paik
Publication Date:
02-2024
Content Type:
Working Paper
Institution:
Institut français des relations internationales (IFRI)
Abstract:
In recent years, South Korea’s ascent in the global arms market has been remarkable. This surge, particularly amid a shifting geopolitical landscape and the ongoing Ukraine-Russia War, has captured the attention of security watchers worldwide. This paper delves into the intricacies of the South Korean defense industry’s rapid emergence, wherein arms sales skyrocketed to 17.3 billion USD in 2022, and provides an in-depth analysis of its portfolio, capacity, and the rationales guiding its development over the last five decades. It explores how South Korea has capitalized on critical opportunities, including overcoming steep barriers to entry to major contracts with Central and Eastern European countries, especially Poland. It sheds light on South Korea’s competitive technologies, mass production capacity, and cost-effectiveness, and addresses the crucial role played by the government’s diplomatic support and coordination with key allies and partners. Against that backdrop, it concludes with some implications for the global defense industry and security architecture.
Topic:
Security, Defense Industry, Armament, and Arms Sales
Political Geography:
Europe, Asia, South Korea, and Poland

6. Tracing the Roots of China’s AI Regulations

Author:
Matt Sheehan
Publication Date:
02-2024
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
In 2021 and 2022, China became the first country to implement detailed, binding regulations on some of the most common applications of artificial intelligence (AI). These rules formed the foundation of China’s emerging AI governance regime, an evolving policy architecture that will affect everything from frontier AI research to the functioning of the world’s second-largest economy, from large language models in Africa to autonomous vehicles in Europe. U.S. political leaders often warn against letting China “write the rules of the road” in AI governance. But if the United States is serious about competing for global leadership in AI governance, then it needs to actually understand what it is competing against. That requires examining the nuts and bolts of both China’s AI regulations and the policy process that shaped them. This paper is the second in a series breaking down China’s AI regulations and pulling back the curtain on the policymaking process shaping them. The Chinese Communist Party (CCP) and the Chinese government started that process with the 2021 rules on recommendation algorithms, an omnipresent use of the technology that is often overlooked in international AI governance discourse. Those rules imposed new obligations on companies to intervene in content recommendations, granted new rights to users being recommended content, and offered protections to gig workers subject to algorithmic scheduling. The Chinese party-state quickly followed up with a new regulation on “deep synthesis,” the use of AI to generate synthetic media such as deepfakes. Those rules required AI providers to watermark AI-generated content and ensure that content does not violate people’s “likeness rights” or harm the “nation’s image.” Together, these two regulations also created and amended China’s algorithm registry, a regulatory tool that would evolve into a cornerstone of the country’s AI governance regime. Contrary to popular conception in the rest of the world, China’s AI governance regime has not been created by top-down edicts from CCP leadership. President Xi Jinping and other top CCP leaders will sometimes give high-level guidance on policy priorities, but they have not been the key players when it comes to shaping China’s AI regulations. Instead, those regulations have been the product of a dynamic and iterative policymaking process driven by a mix of actors from both inside and outside the Chinese party-state. Those actors include mid-level bureaucrats, academics, technologists, journalists, and policy researchers at platform tech companies. Through a mix of public advocacy, intellectual debate, technical workshopping, and bureaucratic wrangling, these actors laid the foundations for China’s present and future AI regulations. This paper traces the progression of these regulations through the “policy funnel” (see figure 1) of Chinese AI governance. For both recommendation algorithms and deep synthesis rules, the initial spark for the regulation came from long-standing CCP concerns about the creation and dissemination of online content. For the former, the rise of the algorithmically driven news app Toutiao threatened the CCP’s ability to set a unified narrative and choose which stories are pushed to readers. In the case of deep synthesis, online face swap videos grabbed the attention of the Chinese public and led government regulators to consider the threat of deepfakes. Over the course of 2017–2020, these concerns made their way through China’s bureaucracy. Regulators took a series of stopgap measures in specific applications, while also tasking policy analysts and government-adjacent technical organizations with exploring different regulatory interventions.
Topic:
Science and Technology, Governance, Regulation, and Artificial Intelligence
Political Geography:
China, East Asia, and Asia

7. Lessons from China's fiscal policy during the COVID-19 pandemic

Author:
Tianlei Huang
Publication Date:
03-2024
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Expansionary fiscal policy helped China's economy grow in 2020, a year in which most economies contracted because of the COVID-19 pandemic. Amid a broader pivot to policy and regulatory tightening, fiscal support was withdrawn in 2021. In 2022, government budget turned expansionary to ensure economic stability ahead of the Communist Party Congress, but the execution fell short and fiscal policy ended up being weaker than planned. A recurrent problem during the pandemic, however, was that local governments did not fully spend their budgets. Aside from the sharp drop in local governments' land sale revenue in 2022, which dragged down their spending, it was also caused by local governments' failure to fully utilize their special bond quotas approved by the central government for capital investment. China's fiscal policy during the COVID-19 pandemic highlights four issues with implications for fiscal policy making. First, the government needs to avoid projecting unrealistically high land sale revenue in its budgets. Second, it needs to reconsider its problematic use of local-government special bond as a major fiscal stimulus instrument. Third, it needs to make sure its deficit, growth, and inflation targets are consistent. Last, Beijing needs to be more tolerant of higher fiscal deficits, at a minimum ensuring that overall fiscal spending grows at least as rapidly as nominal output.
Topic:
Budget, Economic Growth, Fiscal Policy, COVID-19, and Fiscal Deficit
Political Geography:
China and Asia

8. Japanese Economic Security as “Derisking”

Author:
Kazuto Suzuki
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
This paper examines the concept of “derisking” and how the Japanese Economic Security Promotion Act (ESPA) has responded to it within the framework of deterrence theory. It explores how ESPA allows deterrence by denial against economic coercion by other states and is itself a derisking measure. It contends that deterrence by denial, which means reducing dependency and improving resilience, could include stockpiling strategic materials, diversifying sources of supply, developing alternative materials, and developing alternative products. However, this paper argues that there is a need to strengthen the mechanism for collaborative deterrence by denial, such as the “Coordination Platform” presented at the G7 Hiroshima Summit. As for other forms of deterrence, such as institutional deterrence and deterrence by punishment, their effectiveness is insufficient, and they face many implementation problems. Therefore, this paper argues that the most optimal derisking strategy at this point is the combination of ESPA and the “Coordination Platform” to strengthen the capabilities of deterrence by denial.
Topic:
Risk, Deterrence, Economic Security, and Coercion
Political Geography:
Japan and Asia

9. Is Economic Security National Security? Defining South Korea’s Economic Security for Future Industries

Author:
June Park
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
This paper explores how South Korea defines “economic security.” Amidst geopolitical turbulence, the framing of this concept by governments and policy circles around the globe is reflective of the changes in the global economy post-pandemic and the ongoing war in Ukraine, two critical junctures that have revealed the geo-economic impact of weaponized interdependence. While the Biden administration has laid out U.S. policy intent to combine national security with economic security, specifically on future industries of dual-use nature ranging from chips to EVs, batteries, and generative AI, countries that are on the receiving end of policy implementation are formulating their response to the shifting geoeconomics. This paper unravels South Korea’s framing of economic security and policy response by analyzing legislation on future industries that is critical to the country’s economic growth and standing and the concerted efforts by the state bureaucracy and industry in shaping the concept. The paper draws specifically upon semiconductors in addition to other future industries that are central to the South Korean economy and related legislation in the South Korean National Assembly. It argues that South Korea’s policy response and framing of its economic security has more to do with the protection of industries for the future amid geopolitical turbulence and the reshuffling of global supply chains than traditional security issues related to the U.S.-ROK alliance. Moreover, public anxiety on the pressures toward U.S.-driven trilateral cooperation reveals concerns on a possible backlash from China and the lagging potential of Japan in future industries.
Topic:
National Security, Geopolitics, Industry, and Economic Security
Political Geography:
Asia, South Korea, and United States of America

10. China’s Perspective on Economic Security

Author:
Audrye Wong
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
This paper examines how Beijing views economic security as well as other countries’ actions in this realm. Economic security is not a new or foreign concept to Chinese thinkers and policymakers, but the emphases, concerns, and priorities have evolved, due in part to changes in the international environment as well as in China’s own economic and geopolitical situation. This paper examines how Chinese leaders and scholars have approached the definition and scope of economic security, as well as recent and proposed policy responses. It draws on a range of Chinese-language official documents and scholarly writings, as well as broader secondary source analyses. The paper explores that while Chinese discussions of economic security tend to be framed as ensuring economic development and stability, development is implicitly and explicitly linked to national security. Many writings emphasize that economics is the foundation for national strength (including military capabilities). As such, it is more than just economic survival and growth for the economy’s sake; it also has implications for China’s geopolitical position in the international order. In that respect, economic stability and national security may be hard to separate. Indeed, we see a resurgence in today’s rhetoric about the notions of development and security as inextricably linked, along with the need to coordinate the two—and in service of maintaining CCP rule and regime stability. Finally, the paper shows Beijing is taking concrete steps toward increased legalization and institutionalization of economic security measures. This represents a shift, at least in the domain of retaliatory countermeasures, from its usually more “informal” approach to economic coercion, which has afforded more flexibility and minimized political costs for the regime. At the same time, actual implementation has been relatively limited thus far.
Topic:
Foreign Policy, Development, National Security, Trade Wars, and Economic Security
Political Geography:
China and Asia

11. South Korea: Caught in the Crosshairs of U.S.−China Competition Over Semiconductors

Author:
Paul Triolo
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
This paper explores how countries with advanced semiconductor industries are caught in the middle of the growing U.S.-China competition in technology that is focused on advanced computing. Among them, South Korea and its national champions, Samsung and SK Hynix, have arguably incurred some of the most significant pressure. This paper explores how those firms have billions of dollars of sunk investment in China-based facilities producing cutting-edge memory, and the future of these facilities remains in doubt after a series of U.S. export control measures unleashed by the U.S. Commerce Department starting in October 2022. South Korean companies are also players in other parts of the global semiconductor supply chain, including semiconductor manufacturing tools, and China remains an important market for both components and electronic devices. This paper argues that each country caught between the United States and China in technology competition faces difficult trade-offs in determining how best to support its leading companies while navigating changing and often what is viewed as arbitrary decisions coming from Washington that have already significantly disrupted global supply chains. Finally, at the same time as U.S. export controls are having a major impact on the ability of South Korean companies to retain business operations and market access in China, major front-end manufacturers, particularly Samsung, are also looking to expand their operations in the United States and benefit from U.S. CHIPS Act funding. This paper argues that all of the above dynamics put South Korea in one of the more complex positions as the industry faces continued restructuring, buffeted by both export controls and industrial policies.
Topic:
Supply Chains, Economic Security, Semiconductors, and Economic Competition
Political Geography:
China, Asia, South Korea, and United States of America

12. The Raw Materials of Economic Security: South Korea’s Evolving Energy and Critical Minerals Policies in an Era of Disruption

Author:
James Bowen
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
This paper argues that resource security is central to South Korea’s broader economic security and President Yoon Suk-yeol’s Strategy for a Free, Peaceful, and Prosperous Indo-Pacific Region. The paper contends that postwar Korea has maintained an energy and minerals-intensive economy despite domestic resource scarcity and import dependence. Recent disruptions have, however, threatened the resilience of this relationship. These disruptions include COVID-19, Russia’s war in Ukraine, the escalating climate change crisis and energy transition, and the geoeconomic and geopolitical erosion of the liberal order. Korea’s most important energy security priority is diversifying its energy mix towards cleaner energy—what this paper calls “green security.” This will be a difficult task given the intense national dependence on fossil fuels and policymakers’ desire to avoid disrupting Korea’s manufacturing-heavy, export-focused development model. Korea’s idiosyncratic decarbonization pathway, including a strong presence of hydrogen and, under Yoon, a downgrading of renewables in favor of nuclear, could provide additional challenges. Critical minerals are another rising resource security concern for Seoul. The major priority is to accelerate the development and diversification of international supply chains, particularly away from China. A major obstacle to progress is intense competition across the value chain, influenced by disparate economic and strategic priorities. The paper argues that Seoul must find ways to manage its energy and critical minerals security challenges in a way that is consistent with its preferred development model. The alternative is to accept a new equilibrium in which it has less domestic dependence on foreign resources and on resources-intensive economic activity in aggregate.
Topic:
Geopolitics, Strategic Competition, Minerals, Economic Security, and Energy
Political Geography:
Asia and South Korea

13. Economic Security and U.S.-China Competition: The View from North Korea

Author:
Rachel Minyoung Lee
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
This paper argues that while North Korea does not discuss “economic security” in domestic contexts or have an established definition of the term, it thoroughly understands that the economy and national security are inseparable. North Korea is essentially unaffected by the typical economic issues that many major economies are grappling with in relation to economic security, but like other countries, it has closely tracked economic security developments and deepening U.S.-China strategic competition for potential political fallout and what opportunities and challenges that may generate. The paper shows that U.S.-China strategic competition has offered unique opportunities to North Korea, including China’s cover against fresh and existing sanctions against North Korea, and economic assistance. Moreover, deteriorating U.S.-China ties provide Pyongyang extra space to consider and put into motion alternative foreign and economic policy paths, namely, shifting away from its three-decade policy of nonalignment with China and normalization of relations with the United States. Also, China appears to be a factor in North Korea’s shift to a more conservative economic policy. Despite the opportunities presented by the U.S.-China divide, however, North Korea is wary of the risks of dependence on China and has tried to build economic resilience at home, for example by launching a national campaign on domestic production and recycling. North Korea’s somewhat cooler handling of China and its proportionately warm treatment of Russia since the Armistice Day celebrations in July is a clear example of North Korea’s China dilemma. This is where North Korea’s recent strengthening of ties with Russia comes into the picture. The paper contends that it is hard to conclude at this point whether North Korea’s moves are aimed at short-term, tactical gains or are part of a longer-term, strategic calculus, but we can be certain of this: it has just as much to gain or lose as any other country affected by economic security and U.S.-China strategic competition, though not in the same ways as other countries.
Topic:
Foreign Policy, Strategic Competition, and Economic Security
Political Geography:
China, Asia, North Korea, and United States of America

14. Labour market inequality in two Asian giants Indonesia and India compared

Author:
Kunal Sen
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
We examine the nature of labour market inequality in Indonesia and India, using a common conceptual approach drawing from the job ladder framework. In the framework, we differentiate between self-employment and wage-informal and between formal, upper tier informal, and lower tier informal jobs. We find that both countries have a large proportion of workers in lower tier jobs, though the importance of wage-employment is larger in Indonesia. There are more workers in formal wage-employment in Indonesia than India. There are also sharp disparities in the earnings of workers in different tiers of the labour market in Indonesia and India, and there is limited evidence of convergence of the earnings of the lower tier informal workers to that of formal workers, at least for Indonesia. We also find that gender and educational level are important correlates of work status in both countries. Females and less educated workers occupy the lower tiers of the labour markets in the two countries.
Topic:
Employment, Inequality, Economy, Labor Market, and Informal Economy
Political Geography:
South Asia, Indonesia, India, and Asia

15. Faraway, so close: the impact of the Russia–Ukraine war on political violence in Asian countries

Author:
Michele Di Maio, Valerio Leone Sciabolazza, Patricia Justino, and Cecilia Nardi
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
We show that the Russia–Ukraine-war-induced changes in the international price of wheat affected political violence in Asia. Using data from 13 countries and more than four million cell-level observations, we show that a higher wheat price increases political violence in areas that are more suitable to produce that crop. We interpret this evidence as consistent with a rapacity effect being at play: the higher value of agricultural output increases the incentive to violently appropriate it. Our result is robust to a number of falsification and robustness tests. The effect is heterogeneous across countries and cell types: in line with our interpretation of the empirical findings, the effect is larger in countries that are net exporters of wheat and in cells that are rural. We also show that a higher price of wheat increases political violence more in countries that are low-income, fragile, and characterized by the presence of anti-government or terrorist groups, indicating that a higher value of crop production is more likely to fuel violence in areas that are poor or not politically stable.
Topic:
Political Violence, Instability, Russia-Ukraine War, and Wheat
Political Geography:
Asia

16. Unpacking China’s industrial policy and its implications for Europe

Author:
Alicia Garcia-Herrero and Robin Schindowski
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
China is often credited with a successful application of industrial policy. One important particularity of China’s industrial policy is that it aims at levelling the playing field between the state economy and the private economy in access to finance, yet within a framework of strategic goals. This aim is not relevant for market economies, such as those of the European Union, but only for those where state enterprises are clearly privileged. Notwithstanding the difficulties in making valid comparisons, our analysis of how China conducts industrial policy in a variety of sectors points to success in some sectors but not all. More importantly, productivity growth in China has already been declining for two decades. Given the very large resources that China has put into industrial policy, with subsidies being only one part, it is surprising that success is not more evident. This relates partly to factors including cronyism and regional protectionism. While the former might be less relevant for the EU given the different institutional background, the latter certainly is relevant since the EU faces the potential consequences of member country-level industrial policy for its single market. A lesson from China seems to come from the sectoral focus, with a long-term and economic-security mindset. The EU is far from this, but it is in the process of linking economic security to industrial policy. Finally, responding to China’s industrial policy involves diverse investigations and challenges in measuring subsidies accurately. Understanding China’s very diverse and complex approach to helping companies achieve the government’s industrial policy goals is crucial for anticipating the consequences of China’s actions. These could be positive, such as cheaper imports of green technology, or negative, such as Chinese overcapacity spilling over to the EU single market.
Topic:
Industrial Policy, Markets, European Union, and Economy
Political Geography:
China, Europe, and Asia

17. Time to say goodbye? The impact of environmental regulation on foreign divestment

Author:
Haiou Mao, Holger Görg, and Guopei Fang
Publication Date:
09-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
We look at divestments by foreign firms – a topic that has received comparatively little attention in the literature – and investigate how changes in the regulatory environment in the host country may impact on such divestment decisions. We use the implementation of China’s Two Control Zone (TCZ) policy as a “quasi-natural experiment”, using detailed firm level combined with city level data for the empirical analysis. Our results show that the implementation of TCZ policy has led to higher probabilities of divestments by foreign firms in targeted TCZ cities and industries. The mechanism behind this seems to be a TCZ-induced increase in discharge fees and efforts to reduce SO2 emissions. Allowing for heterogeneity of effects, we find that the effect is particularly strong for firms from source countries with less stringent environmental regulation, and those using less advanced technology. We furthermore show that firms using intermediates from polluting industries also experience a higher probability of divestment.
Topic:
Climate Change, Environment, Foreign Direct Investment, Regulation, Business, and Divestment
Political Geography:
China and Asia

18. China as an International Lender of Last Resort

Author:
Sebastian Horn, Bradley C. Parks, Carmen M. Reinhart, and Christoph Trebesch
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper shows that China has launched a new global system for cross-border rescue lending to countries in debt distress. We build the first comprehensive dataset on China’s overseas bailouts between 2000 and 2021 and provide new insights into China’s growing role in the global financial system. A key finding is that the global swap line network put in place by the People’s Bank of China is increasingly used as a financial rescue mechanism, with more than USD 170 billion in liquidity support extended to crisis countries, including repeated rollovers of swaps coming due. The swaps bolster gross reserves and are mostly drawn by distressed countries with low liquidity ratios. In addition, we show that Chinese state-owned banks and enterprises have given out an additional USD 70 billion in rescue loans for balance of payments support. Taken together, China’s overseas bailouts correspond to more than 20 percent of total IMF lending over the past decade and bailout amounts are growing fast. However, China’s rescue loans differ from those of established international lenders of last resort in that they (i) are opaque, (ii) carry relatively high interest rates, and (iii) are almost exclusively targeted to debtors of China's Belt and Road Initiative. These findings have implications for the international financial and monetary architecture, which is becoming more multipolar, less institutionalized, and less transparent.
Topic:
Debt, Emerging Markets, International Trade and Finance, Financial Crisis, Belt and Road Initiative (BRI), and Sovereign Debt
Political Geography:
Africa, China, and Asia

19. Enhancing small state preparedness: Risks of foreign ownership, supply disruptions and technological dependencies

Author:
Mikael Mattlin, Shaun Breslin, Elina Sinkkonen, Liisa Kauppila, and Annika Björkdahl
Publication Date:
08-2023
Content Type:
Working Paper
Institution:
Finnish Institute of International Affairs
Abstract:
The post-Cold War liberalist view, according to which interdependences supported a virtuous cycle of mutual gains, has given way to a realist-tinged view that regards economic interdependence as a cause of insecurity and an element in conflicts. In this new environment of increasing great power competition and technological decoupling, all states are not created equal. Major states such as the United States and China can be system shapers, whereas small states tend to be system takers. Unlike smaller states, they have a greater ability to use their investment leverage, supply chain dominance and control of core technologies. For smaller states with open economies, such as Finland and Sweden, these capabilities of major powers create vulnerabilities in the form of security risks of foreign ownership, supply disruptions and critical technological dependencies. The report explores how small states can mitigate such risks. A series of innovative Delphi backcasting exercises in Finland and Sweden brought together 113 sectoral experts and generalists to ponder ways to prevent dystopian scenarios from unfolding. The target years of the scenarios extended from 2027 to 2035, encouraging ideas on both short- and longer-term solutions. Instead of aiming for a consensus of expert views, the process sought to produce a variety of effective means and measures that a small state could choose to adopt. The exercise consisted of nine scenarios, presented as comic art. The narratives on the risks of foreign ownership focused on 1) acquisitions of gaming companies gathering personal data, 2) transfers of real estate ownership in Lapland and 3) venture capital investments in emerging technology start-ups. The scenarios on supply disruptions dealt with 4) discriminatory practices limiting access to antibiotics, 5) political retaliation limiting access to water treatment components and 6) sanctions on wind power materials, components and minerals. As for high technology dependencies, the cases included 7) the maintenance of military technology, 8) the cybersecurity of health technology and 9) the supply of chemicals for research and development activities. According to the report, small states have the least leeway in navigating the risk environments created by technological dependencies, whereas the toolkits to tackle the potential dangers of foreign ownership and supply disruptions are more extensive. Although different issues and insecurities require different bespoke solutions, all the risk categories call for active mitigation efforts. Most of the suggested Finnish and Swedish expert solutions can be clustered into three alternative approaches: protectionist/interventionist, liberal and technologically oriented. Protectionist/interventionist solutions would expand the state’s powers in controlling, guiding and limiting economic activities. Key suggestions included: covering acquisitions and greenfield investments in national foreign direct investment screening screening real estate acquisitions with a wide range of countries of origin imposing country-specific limitations to real estate acquisitions screening venture capital investments in emerging technologies initiating a national security act to limit foreign control rapidly imposing country- and company-specific limitations to bids in critical industries increasing tariffs supporting domestic or EU-level production through subsidies and industrial policy friendshoring the production of critical goods expanding the scope of supply stockpiling in pharmaceuticals and water treatment components The more liberal approach towards national preparedness would focus on solving the challenges primarily through carrots instead of sticks – to avoid limiting entrepreneurial freedoms and interfering with the dynamics of the capitalist market economy. The proposed solutions included: initiating value debates to guide individuals’ choices when accepting investments formulating a national innovation strategy to boost domestic companies’ operating conditions in emerging technology fields teaching “technology literacy” to guide the use of foreign-owned products engaging all stakeholders in making decisions on foreign ownership diversifying the sources of critical goods such as antibiotics enhancing awareness of risks and making “plan Bs” in supply chain management deepening the EU’s single market to offer genuine scalability opportunities for start-ups The third, more technologically oriented approach would rely on new innovations or technical solutions to enhance small state preparedness. Key ideas included: innovating new medicines to replace antibiotics prioritising non-conventional technologies such as small modular reactors (SMRs) enhancing domestic capacity to produce key components with 3D printing researching alternative materials to replace critical chemicals developing the recycling, recovery and transportation of critical chemicals adopting geofencing and coding solutions to enhance cybersecurity designating emerging technologies as focus areas in higher education increasing the adaptability of technical solutions through standardisation These three approaches prioritise different key solutions for enhancing small state preparedness. However, they represent generic policy preferences rather than ready-made policy recommendations. Ideally, states can formulate their own pick-and-mix toolkit by combining elements from the different approaches. The complementary nature of some of the expert views was also suggested by the fact that many – even most – respondents argued for diversification as a solution to various challenges. For example, and regardless of the chosen strategy, tendering rules could be improved by placing quality over price, taking geopolitical risks into account and allowing multiple winners in contrast to the currently dominant winner-takes-it-all logic, which leads to overly concentrated supply chains. Moreover, at least minor legislative tightenings were widely proposed to be made on foreign ownership – especially with regard to that of nationals of authoritarian states. These changes were, however, typically proposed to be complemented with such balancing acts as long-term leases and incentives to develop and acquire domestic products and companies. Ultimately, by highlighting alternative approaches to small state preparedness, this report seeks to encourage democratic discussion on a broader political choice: what type of state and economy do we want in the future? It is not only their identity that guides what states do; adopted policies and means also shape state identities over time.
Topic:
Security, Science and Technology, Supply, and Geoeconomics
Political Geography:
China, Finland, Asia, Sweden, and United States of America

20. Peninsula Plus: Enhancing U.S.–South Korea Alliance Cooperation on China, Multilateralism, and Military and Security Technologies

Author:
Jacob Stokes and Joshua Fitt
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
Center for a New American Security (CNAS)
Abstract:
The United States–Republic of Korea (ROK or South Korea) alliance has entered a critical phase. In 2023, the two countries will commemorate the 70th anniversary of signing their bilateral mutual defense treaty. This year also marks the first full year under national leaders President Joe Biden and President Yoon Suk Yeol. After several challenging years in the two countries’ relationship, ties are improving. Better alliance relations have, unfortunately, coincided with a deterioration in the regional and global security environment, specifically due to threats from North Korea, China, and Russia. This report examines the U.S.-ROK alliance as it adapts to the new regional context by exploring how the United States and South Korea can sustain and deepen their relationship in three vital policy areas: coordination on China, alignment in minilateral and multilateral settings, and defense technology collaboration. Perhaps the biggest shift in alliance priorities in recent years has been the growing importance of the China challenge. During Chinese Communist Party General Secretary Xi Jinping’s decade in power, Beijing has adopted a more muscular foreign policy. Both the United States and South Korea have reshaped their approaches toward China in response. ROK concerns about China have grown as Beijing shields Pyongyang and acts aggressively elsewhere in the region, including toward Taiwan. But South Korea’s approach to China will continue to differ from that of the United States. The allies have divergent preferences regarding the speed, manner, and degree of partial decoupling with China. Moreover, South Korea’s deep trade ties with China will continue to make it vulnerable to Chinese political and economic coercion.
Topic:
Security, Science and Technology, Alliance, Multilateralism, Cooperation, and Military
Political Geography:
China, Asia, South Korea, and United States of America

21. Technological Innovation and the Development of the Fuel Cell Electric Vehicle Industry Based on Patent Value Analysis

Author:
Yanfei Li, Jia Zhao, and Jianjun Yan
Publication Date:
06-2023
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
Currently, major economies are competing on the technological and industrial development of fuel cell electric vehicles (FCEVs). This paper discusses the relationship between the patent value of FCEVs and the commercialisation of this technology. First, the patent data of FCEVs are analysed, focusing on data of China, Germany, Japan, the Republic of Korea, and the United States. Then, the paper constructs the FCEV patent value index framework based on the technological value and economic value of patents. Finally, this paper conducts an empirical study to analyse the influence of patent value on the development of the FCEV industry. It is found that, under the current situation, individual patent value can significantly promote the development of the FCEV industry, whilst the gross patent value of a certain country even has a negative impact. In addition, the increase of hydrogen infrastructure, research and development expenditure, and market demand will significantly promote the development of the FCEV industry. The development level of related industries such as the battery electric vehicle industry and the reduction of environmental pollution are also significant drivers of the development of FCEVs.
Topic:
Development, Science and Technology, Innovation, Industry, and Electric Vehicles
Political Geography:
Asia

22. What Japanese Tourism Amenities are Influenced in Terms of Affecting Inbound Tourist Demand?

Author:
Yoko Konishi and Takashi Saito
Publication Date:
08-2023
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
Since 2012, the number of inbound tourists to Japan has increased every year, and new records of tourism-related economic indicators are being updated. On the other hand, the sudden inbound boom has led to a concentration of travel destinations, and over-tourism has become a problem. In this paper, we first statistically observe the concentration of tourists by accommodation type for each country of origin. Second, by identifying tourism amenities that contribute to inbound demand, we gain the knowledge necessary to shift demand from facilities with a high concentration of inbound tourists to facilities with lower occupancy. For the analysis, we utilised establishment data from the Online Travel Agency ‘Accommodation Travel Statistics Survey’ and data on tourism resources by region. The results show that the number of rooms, average price, membership of the hotel in a chain, internet availability, room type, number of World Heritage sites, and number of direct flights positively affect inbound demand. In particular, for ryokan (Japanese-style inns) with low occupancy rates and inbound guest ratios, their independence, internet availability, Western-style room availability, number of World Heritage sites, and hot spring facilities are effective in capturing demand.
Topic:
Economics, Tourism, Hospitality, and Travel
Political Geography:
Japan and Asia

23. The COVID-19 Pandemic and World Machinery Trade Network

Author:
Kozo Kiyota
Publication Date:
08-2023
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
In light of the importance of the machinery trade in global trade, this study examines whether the patterns of machinery exports changed significantly after the COVID-19 pandemic. Frameworks of network analysis and structural break analysis are applied to monthly level bilateral export data from January 2016 to March 2022. The main findings are threefold. First, positive structural change is found in exports in major machinery-exporting countries. Second, negative structural change in centrality is found in Japan and some ASEAN Member States (AMS), which implies a decline in the relative importance of these countries in the global machinery network. Third, the decline in Japanese centrality was not caused by the decline in export values or number of destination countries. Rather, it is attributable to the decline in the centrality of Japan’s export destination countries such as AMS. Noting that Japan has a relatively strong trade relationship with AMS, these results together suggest that the negative shock of the pandemic spread throughout the supply chain, which led to the decline in the relative importance of some countries – such as Japan – in the global machinery trade network.
Topic:
Exports, Trade, ASEAN, and COVID-19
Political Geography:
Japan, Asia, and Southeast Asia

24. The Effects of the United States-China Trade War During the COVID-19 Pandemic on Global Supply Chains: Evidence from Viet Nam

Author:
Duc Anh Dang and Ngoc Anh Tran
Publication Date:
08-2023
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
The trade war between the United States (US) and China has affected their bilateral trade as well as that with other countries. This study investigates how Vietnamese firms performed during the COVID-19 pandemic under the shadow of this trade war. The change in the log of Vietnamese exports to the US from 2017 to 2020 is used to measure the impact of the trade war, and the change in the log of Chinese exports to the US is then used as an instrument for the Vietnamese export change during the same period. It is found that firms that faced more trade war exposure increased their investment, profit, and value added, which may be due to the market exit of unproductive firms. Moreover, the trade war impact is more pronounced for large firms. Foreign-invested firms gained less from trade war exposure. The pandemic weakened the trade war effect on firm performances; however, it exacerbated the trade tension effect on foreign-trade firms.
Topic:
Bilateral Relations, Investment, Trade, and COVID-19
Political Geography:
China, Asia, North America, and United States of America

25. ASEAN Digital Community 2045

Author:
Lili Yan Ing, Yessi Vadila, Ivana Markus, and Livia Feliciani Nazara
Publication Date:
11-2023
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
Over the last decade, the Association of Southeast Asian Nations (ASEAN) has undergone significant development in digitalisation. The rapid digital transformation in ASEAN, however, has brought forth risks and challenges encompassing data security, cybersecurity, competition, and the digital divide. To effectively address these challenges and leverage the potential of the digital realm, ASEAN developed nine frameworks during 2016–2023. Yet, the focus is primarily on digital trade. We suggest that ASEAN embrace digital transformation by establishing the ASEAN Digital Community (ADC) 2045. This vision could provide guidance to Member States, enabling them to overcome regional challenges and unlock their digital potential. It is crucial for ASEAN to nurture digital development across the three key pillars: political-security, economic, and socio-cultural dimensions. The three pillars should be built on four fundamental elements: data governance, value-added enhancement, improved digital connectivity, and digital inclusivity. Through the establishment of ADC 2045, ASEAN could position itself as a significant player in the global digital economy while ensuring that digital transformation aligns with its sustainable and inclusive development agenda.
Topic:
Science and Technology, Investment, Innovation, Trade, ASEAN, Connectivity, and Competition
Political Geography:
East Asia, Asia, and Southeast Asia

26. Restoring Competitive Politics: Electoral Contestation and the Future in Turkey and India, and Iran and Russia

Author:
Hugh Sandeman
Publication Date:
10-2023
Content Type:
Working Paper
Institution:
LSE IDEAS
Abstract:
The institutions and practices necessary for open and fair competition for political power are eroding across the world. In some countries, such as Turkey and India, the democratic dividend of electoral competition has been steadily undermined by majoritarian autocrats who have proved adept in campaigning for office and winning elections. In others, such as Russia and Iran, political leaders have marginalised or suppressed electoral processes, reducing them to closely managed performances that seek to demonstrate public consent. At least some traces of the mechanisms of electoral competition often remain in place, however, even where genuine public consent has been almost extinguished. This leaves open the possibility that the trend away from competitive electoral politics could be at least partially reversed in future, in the context of political succession or the electoral defeat of incumbents. In June 2023, LSE IDEAS brought together experts from the London School of Economics and Political Science (LSE) and other institutions to examine the potential for restoring the democratic dividend of competitive politics in four major countries. Turkey and India were selected for their timeliness—national parliamentary and presidential elections were held in Turkey in May 2023, and national parliamentary elections are due in India in April 2024—and for their similarities: both political systems are characterised by powerful elected leaders with a strong record of performance in national elections, each backed by large political parties based on an appeal to national and religious identity. Iran and Russia were chosen as examples of two states where competitive electoral politics had been temporarily enabled by significant political change—respectively, an impasse in Iran’s theocracy in the 1990s, and the end of the Soviet Union—only to be undermined by the reassertion of autocratic power. Two assumptions underlay the planning of this discussion on ‘Restoring Competitive Politics: Electoral Contestation and the Future’. The first is that the characterisation of political systems as either democratic or autocratic provides an insufficient basis for explaining many differences in the workings of political institutions, or for guiding policy. The second assumption is that while certain institutions and practices appear to be essential to maintaining open competition for political power—including for example, freedom and diversity of comment in major channels of communication like broadcast television, radio, newspapers, and social media—there is no useful empirical example or theoretical formulation of an ideal or perfect democratic political system. The exclusion from the discussion of countries with longer established forms of competitive politics, such as the United States or the United Kingdom, was not intended to suggest an implicit comparison with ideal types of functioning democracies. On the contrary, there are grounds for concern about the maintenance of open competition for political power in every country professing to be a democracy. As David Runciman has said of the future of democratic practices: ‘The question for the twenty-first century is how long we can persist with institutional arrangements we have grown so used to trusting, that we no longer notice when they have ceased to work.’ He warns that ‘democracy could fail while remaining intact’.
Topic:
Elections, Political stability, Autocracy, and Competition
Political Geography:
Russia, Iran, Eurasia, Turkey, Middle East, India, and Asia

27. China’s Semiconductors Reflections on Sources and Solutions to an Expensive Problem

Author:
Jonathan Liebenau
Publication Date:
11-2023
Content Type:
Working Paper
Institution:
LSE IDEAS
Abstract:
The semiconductor industry has been a renewed topic of political debate for over three years. Due to recent US sanctions on the most advanced semiconductors, the industry has quickly become another flashpoint in the competition between the US and China to dominate the 21st century’s strategic technologies. In this Strategic Update, Dr Jonathan Liebenau explains the development of the semiconductor industry in the context of China’s rise to become an increasingly capable technology power. China’s sustained efforts in industrial policy to cultivate a domestic innovation system coincided with Western firms’ offshoring strategies since the 1990s, transforming China into a large producer and consumer of semiconductors. While Taiwan and the West retained cutting edge chip design capabilities, Chinese firms such as Huawei and Hikvision have become competitive providers of mobile phones, surveillance equipment and related infrastructure services. Despite Washington and its partners’ conviction to constrain in China’s technological prowess, industrial policy initiatives such as the CHIPS Act will face an uphill battle when it comes to bringing manufacturing capacity back to Western economies. In this context, the UK must combine short term incentives with a longer-term strategic vision to remain competitive in one of the 21st century’s key strategic arenas.
Topic:
Science and Technology, Sanctions, Strategic Competition, Production, and Semiconductors
Political Geography:
China, Asia, North America, and United States of America

28. China’s smart cities and the future of geopolitics

Author:
Valentin Weber
Publication Date:
05-2023
Content Type:
Working Paper
Institution:
LSE IDEAS
Abstract:
In this latest Strategic Update, Valentin Weber explores Chinese scientific research and industry application of smart cities, with ‘city brains’. The geostrategic implications for these complex Chinese smart city construction projects outside of China – particularly surrounding surveillance and artificial intelligence – and a potential future ‘world digital brain’ must be considered by policymakers, even if we are far away from an eventual bifurcation of the global internet.
Topic:
Science and Technology, Geopolitics, Surveillance, Artificial Intelligence, and Smart Cities
Political Geography:
China and Asia

29. Countering United Front Work: Taiwan’s Political Warfare System

Author:
Mariah Thornton
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
LSE IDEAS
Abstract:
This strategic update introduces the challenges posed by China’s united front work, which has significantly expanded due to unprecedented institutional elevation and support under Xi Jinping. Mariah argues that Taiwan—a country that has effectively resisted China’s united front activities for several decades—can serve as an instructive case for other democratic countries in institutionalising counter-interference operations. The briefing initially explores the origins of Taiwan’s political warfare system, its evolution from the martial law era to democratisation in the 1990s, and how this history informs the institution’s modern structure and operations. The information presented in this report was compiled during a period of fieldwork in Taiwan from late September to early November 2022, in which she interviewed dozens of political warfare officers as well as Taiwanese defence and security experts–a majority of whom have chosen to remain anonymous. In the conclusion, Mariah offers broad policy recommendations based on these findings that may be applicable to other countries experiencing united front work activities and or seeking to institutionalise counter-interference operations.
Topic:
Security, Defense Policy, Politics, Public Opinion, Propaganda, and Regional Security
Political Geography:
China, Taiwan, and Asia

30. China’s Global Strategy as Science Fiction

Author:
William A. Callahan
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
LSE IDEAS
Abstract:
Xi Jinping is leading China in a new direction, but how are we to understand his global strategy? For most countries, to understand domestic and international politics we would analyse authoritative sources – leaders’ speeches, official documents and statistics, elite interviews and essays, and public opinion surveys. In the 2000s these methods worked well to probe Chinese politics. But since civil society and independent thought have been severely restricted under Xi, it’s necessary to go beyond such “factual” sources. To understand China’s global strategy, it’s best to read fiction, especially Chinese science fiction. This essay critically analyses Liu Cixin’s novels, The Wandering Earth and the Three Body Problem trilogy, to probe how Chinese sci-fi pushes us to think creatively about key topics: the relation of humans and technology, the relation of science and politics, and the relations between political communities, i.e. are we doomed to existential struggle, or can we engage with difference in creative and productive ways?
Topic:
Foreign Policy, Science and Technology, Grand Strategy, Novels, and Science Fiction
Political Geography:
China and Asia

31. China’s Provinces as Global Actors: Evidence from China-Africa Relations

Author:
Charlotte Lenz
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
LSE IDEAS
Abstract:
With the launch in the early 2000s of China’s ‘Going Global’ Strategy, Chinese provinces became one group of actors participating in China’s South-South relations. In this Strategic Update, Charlotte Lenz investigates the role of Chinese provinces as foreign policy actors and explains their internationalisation strategies, challenging the prevalent perception of China as a unitary actor on the world stage. Drawing on evidence from Africa-China relations, the report identifies two strategies employed by Chinese provinces in pursuit of their foreign policy interests: (1) Formal and informal “twinning” as a collaborative model between central and local actors, wherein central actors design policies and provincial governments execute projects; (2) and “clustering” according to a sectoral logic of investment and diplomacy in which a certain Chinese province engages a certain foreign country. Despite ongoing bureaucratic centralisation under Xi Jinping, provinces continue to pursue their own internationalisation strategies to help meet local economic and employment targets. Understanding their agency, interests and limitations is thus key to deriving a better understanding of China’s evolving global presence.
Topic:
Foreign Policy, Diplomacy, Bilateral Relations, Investment, and Internationalization
Political Geography:
Africa, China, and Asia

32. China Becoming Globally More Active in the Security Sphere

Author:
Marcin Przychodniak
Publication Date:
05-2023
Content Type:
Working Paper
Institution:
The Polish Institute of International Affairs
Abstract:
China is expanding its potential to project power abroad. It includes legal changes, expansion of military infrastructure in other countries, and cooperation with partners in the Pacific. An example of their activity in the field of security is the operations of Chinese security companies, mainly in the Middle East and Africa. This should encourage NATO to further deepen cooperation with its members and partners, including with Pacific countries, as well as to strengthen the coordination of EU and U.S. policy towards developing countries.
Topic:
Security, NATO, Infrastructure, and Partnerships
Political Geography:
Africa, China, Middle East, Asia, and Asia-Pacific

33. Building a Coalition - the U.S. Faces Down Competition with China in the Chip Sector

Author:
Damian Wnukowski
Publication Date:
04-2023
Content Type:
Working Paper
Institution:
The Polish Institute of International Affairs
Abstract:
In recent months, the U.S. has intensified its international efforts to limit China’s ability to produce the most advanced chips. The result includes the introduction by Japan and the Netherlands of restrictions on the export of modern machines for chip production. In response, China is trying to attract foreign investment and develop its own potential in this sector. The U.S. actions may significantly slow the pace of China’s technological development and economic growth and limit its potential to further strengthen its military capabilities. This may make it difficult for China to support Russia with dual-use products and render possible offensive actions against Taiwan harder.
Topic:
Economy, Production, Semiconductors, and Competition
Political Geography:
China, Asia, North America, and United States of America

34. China Adapts Policy in Response to Russia's Aggression Against Ukraine

Author:
Marcin Przychodniak
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
The Polish Institute of International Affairs
Abstract:
China perceives the Russian aggression against Ukraine as an expression of resistance to the U.S. and NATO hegemony and an important element of building a new international order that marginalises the West. Based on this, China is strengthening strategic cooperation with Russia, striving to weaken the international position of the U.S., the EU, and their partners, while testing reactions to a possible escalation of Chinese actions towards Taiwan, for example. President Xi Jinping expressed this policy course during his March visit to Russia. At the same time, China is trying to gain support from the countries of the Global South. This approach means a continuation of China’s assertive policy towards the European Union, among others.
Topic:
Foreign Policy, NATO, European Union, and Russia-Ukraine War
Political Geography:
Russia, China, Europe, Ukraine, and Asia

35. Evolution, not Revolution: Japan Revises Security Policy

Author:
Oskar Pietrewicz
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
The Polish Institute of International Affairs
Abstract:
In December last year, the government of Kishida Fumio adopted three documents adapting Japan’s security policy to the deteriorating international situation. Its security and national defence strategies highlight challenges from China, Russia, and North Korea, as well as an increase in non-military threats. A third document specifies the need for a record increase in defence spending. Japan’s readiness to deepen cooperation with the U.S. and European countries and its criticism in its assessment of Russia’s aggression against Ukraine create the conditions for the further development of Japan’s cooperation with NATO and the Polish-Japanese dialogue on security.
Topic:
Security, Foreign Policy, Defense Policy, Regional Politics, and Russia-Ukraine War
Political Geography:
Russia, Japan, China, Asia, and North Korea

36. China’s quest for innovation: progress and bottlenecks

Author:
Alicia Garcia-Herrero and Robin Schindowski
Publication Date:
06-2023
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
As the Chinese economy continues to decelerate, the central government is investing heavily in innovation, doubling down on research and development (R&D) spending and STEM-oriented human capital. In this paper, we assess China’s progress so far, looking at the inputs to innovation (R&D and human capital) as well as intermediate targets, such as scientific research and patents. We then evaluate how China has fared with respect to the ultimate goal of commercialising this progress, by looking at the value-added of Chinese exports and the overall productivity of the economy. We identify three potential bottlenecks that might be hindering the translation of China’s innovation efforts into productivity growth.
Topic:
Industrial Policy, European Union, Economic Growth, Innovation, and COVID-19
Political Geography:
China, Europe, and Asia

37. Global trends in countries‘ perceptions of the Belt and Road Initiative

Author:
Alicia Garcia-Herrero and Robin Schindowski
Publication Date:
04-2023
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
Drawing on global media reports, we conduct a sentiment analysis of the image of China’s Belt and Road Initiative (BRI) and the evolution of its image over time. Our main finding is that perceptions of the initiative deteriorated significantly in many geographies from 2017 to 2022. The notable exception is in sub-Saharan Africa where the BRI’s image remains positive, even if slightly less so than in the past. This is notwithstanding increases in debt levels with China, much of which now face potential restructuring. Furthermore, we find significant inter- and intra-regional differences in the average sentiment towards China’s landmark project, as well as a much worse image of the initiative in countries which, until today, are not part of the BRI. Finally, we focus on the European Union, Africa and China’s immediate neighbourhood to better understand the complexities behind the perceived benefits and challenges associated with China’s Belt and Road Initiative.
Topic:
Bilateral Relations, European Union, Geopolitics, Economy, and Trade
Political Geography:
China, Europe, and Asia

38. China's Political-Economy, Foreign and Security Policy: 2023

Author:
Center for China Analysis
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
Asia Society
Abstract:
It has now been three months since the 20th Party Congress convened in Beijing on October 15. While the Congress set Xi Jinping’s ideological, strategic, and economic direction for the next five years, much has happened since then that the Chinese leadership did not anticipate. Principal among these surprises was the spontaneous eruption in late November of public protests across multiple Chinese cities against the economic and social impact of the Chinese Communist Party’s “dynamic zero-COVID” policy. These protests resulted in an unprecedented U-turn on December 8 from China’s relentless pursuit of its three-year-long national pandemic containment strategy to the Party now seeking desperately to restore economic growth and social calm. This shift has in turn generated major public pressures on the Chinese health system as hospitals struggle to cope with surging caseloads and mortalities. All of these developments stand in stark contrast to the political, ideological, and nationalist self-confidence on display at the 20th Party Congress. In October, Xi Jinping swept the board by removing any would-be opponents from the Politburo and replacing them with long-standing personal loyalists. Xi also proclaimed China’s total victory over COVID-19, contrasting the Party’s success with the disarray its propaganda apparatus had depicted across the United States and the collective West. Despite faltering economic growth, Xi had doubled down in his embrace of a new, more Marxist approach to economic policy which prioritized planning over the market, national self-sufficiency over global economic integration, the centrality of the public sector over private enterprise, and a new approach to wealth distribution under the rubric of the Common Prosperity doctrine. At the same time, Xi’s 2022 Work Report, delivered at the Congress, abandoned Deng Xiaoping’s long-standing foreign policy framework that “peace and development are the principal themes of the time” and instead warned of growing strategic threats and the need for the military to be prepared for war. As part of a continuing series on China’s evolving political economy and foreign policy, this paper’s purpose is threefold: to examine the political and economic implications of this dramatic change in China’s COVID-19 strategy; to analyze what, if any, impact it may have on China’s current international posture; and to assess whether this represents a significant departure from the Party’s strategic direction set at the 20th Party Congress last October. The paper concludes that the Party changed course on COVID-19 for two reasons: (1) it feared that not doing so would threaten its unofficial social contract with the Chinese people based on long-term improvements in jobs and living standards; and (2) that a structural slowdown in growth could also undermine China’s long-term strategic competition against the United States. This paper also concludes that the stark nature of the December 8 policy backflip, together with the Chinese health system’s lack of preparedness for it, has dented Xi Jinping’s political armor for the medium term. This setback comes on top of internal criticism of Xi’s broader ideological assault on the Deng-Jiang-Hu historical economic growth formula that Xi has prosecuted since 2017, as well as Xi’s departure from Deng’s less confrontational foreign policy posture that characterized previous decades. Nonetheless, these policy errors remain manageable within Chinese elite politics, where Xi still controls the hard levers of power. Furthermore, many of these changes on both the economy and external policy are more likely to be short-to-medium term and therefore tactical in nature, rather than representing a strategic departure from the deep ideological direction laid out for the long-term in Xi’s October 2022 Work Report. While these changes to current economic and foreign policy settings are significant in their own right, there is no evidence to date that Xi Jinping’s ideological fundamentals have changed.
Topic:
Security, Foreign Policy, Political Economy, and COVID-19
Political Geography:
China and Asia

39. The Pathway to an Effective ETS and Power Market Interaction: The Case of the Korean ETS

Author:
Alistair Ritchie
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
Asia Society
Abstract:
The power sector is one of the most important areas to cover in any emissions trading system (ETS), due to the scale and abatement potential of greenhouse gas (GHG) emissions in that sector. However, some critical challenges need to be overcome before an ETS can fulfil its emissions-reduction potential by driving fuel switching away from coal and toward renewables and low-carbon fuels. This is one of the most important topics for ETS development in Asia given the tight controls on power markets. The case of the Korean ETS (K-ETS) provides valuable insights for the pathway to an effective interaction between an ETS and the power market to support power sector decarbonization, based on recent developments and potential next steps. The Pathway to an Effective ETS and Power Market Interaction: The Case of the Korean ETS describes the details of recent developments in Korea's power market and the emission trading system to address insufficient emission reductions in the power sector, key future developments required, and learning points for ETSs in other Asian jurisdictions.
Topic:
Energy Policy, Markets, Carbon Emissions, and Decarbonization
Political Geography:
Asia and South Korea

40. Taiwan Strait Crises: Island Seizure Contingencies

Author:
Andrew Chubb
Publication Date:
02-2023
Content Type:
Working Paper
Institution:
Asia Society
Abstract:
Conflict across the Taiwan Strait could disrupt East Asia’s extensive trade links, sever global production chains, generate serious shocks to regional economies, upend Asia’s security architecture, and, potentially, escalate into a catastrophic superpower war. Many regional states — including U.S. allies — are beginning to seriously consider how they would respond to a potential use of force by the People’s Republic of China (PRC). But analytic attention has focused overwhelmingly on the worst-case scenario of a PRC invasion, largely ignoring more likely contingencies calculated to stay below the threshold of lethal force. It is in this “gray zone” that the PRC has made strategic advances in the East and South China Seas in recent years. This paper argues that, compared with an invasion or blockade of Taiwan’s main island, an operation to capture one or more offshore islands currently controlled by the Republic of China (ROC or Taiwan) would offer Beijing considerable advantages. In an immediate tactical sense, it would offer Beijing greater flexibility and escalation control, lower risk of civilian casualties, and less likelihood of sparking a strong Taiwanese response or U.S. intervention. Strategically, such an operation could open up an array of options for further probes, faits accomplis, information gathering, and coercive pressure on ROC forces—and, in the case of the Penghu (Pescadores) Islands, substantial opportunities for enhanced surveillance, reconnaissance, and logistical support for a future invasion of the main island. Domestically, in contrast with a bloody and potentially catastrophic all-out invasion or a blockade that would risk conflict with the United States, outlying island seizure could offer Beijing a low-risk yet highly symbolic rallying point in a period of likely economic struggles and rising social dissatisfaction. Policymakers and strategists on all sides of politics in Taiwan, the United States and elsewhere need to carefully consider how they would respond to such contingencies, in order to enable an effective international response.
Topic:
Foreign Policy, Territorial Disputes, Geopolitics, and Regional Politics
Political Geography:
China, Taiwan, and Asia

41. The Transition From an Intensity to an Absolute Emissions Cap in China’s National Emissions Trading System

Author:
Duan Maosheng
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
Asia Society
Abstract:
The unique characteristics of China's economic development and electricity marketization have resulted in the implementation of a bottom-up intensity-based emissions cap in China’s national emissions trading system (ETS) in its early stages. However, the efficacy of the bottom-up cap-setting approach remains controversial, particularly with regard to achieving emission reduction goals and cost-effectiveness. In response to China's "dual carbon" targets and updated Nationally Determined Contributions (NDC), China’s national ETS shall gradually shift towards a real cap-and-trade system, with a transition period when a hybrid system, which has an absolute control cap beside the intensity cap, is implemented. The Transition from an Intensity to an Absolute Emissions Cap in China’s National Emissions Trading System examines the cap-setting approaches used in ETSs in China, the underlying reasons for choosing intensity caps in China, and major issues related to the transition from an intensity cap to an absolute cap in China’s national ETS.
Topic:
Climate Change, Economy, Trade, and Carbon Emissions
Political Geography:
China and Asia

42. Economic and Environmental Impacts of China’s New Nationwide CO2 Emissions Trading System

Author:
Lawrence Goulder, Xianling Long, Chenfei Qu, and Da Zhang
Publication Date:
05-2023
Content Type:
Working Paper
Institution:
Asia Society
Abstract:
China’s National Emissions Trading System (ETS) has already become the world’s largest ETS and is expected to contribute substantially toward meeting China’s pledge to peak its carbon emissions before 2030 and achieve carbon neutrality before 2060. The new system is based on a tradable performance standard (TPS), a rate-based system under which each covered facility receives from the government in each compliance period a certain number of emissions allowances based on its output and the government’s assigned “benchmark” ratio of emissions per unit of output. Economic and Environmental Impacts of China’s New Nationwide CO2 Emissions Trading System describes the results from a multi-sector multi-period general equilibrium model designed to assess the potential economic, energy mix, and emissions impacts of different future policy options under China’s National ETS over the period 2020–2035, by sector and province and in the aggregate
Topic:
Environment, Economy, Trade, and Carbon Emissions
Political Geography:
China and Asia

43. China, climate change and the energy transition

Author:
Professor Xu Yi-Chong
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
Australian Strategic Policy Institute (ASPI)
Abstract:
This report surveys China’s enormous energy transition to renewables. It begins by sketching the energy challenges China faces and its climate-change-related energy policies, in the context of the global geopolitics of the energy transformation. Next the report focuses on conventional energy sources (oil and natural gas), followed by electricity, and energy technologies. Although the report is intended primarily to survey developments to date, it concludes with some brief observations about the considerable energy challenges China faces in the years ahead.
Topic:
Security, Climate Change, Development, Energy Policy, and Energy Transition
Political Geography:
China and Asia

44. NATO’s 2022 Strategic Concept. Analysis and implications for Austria

Author:
Loïc Simonet
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
Austrian Institute for International Affairs (OIIP)
Abstract:
Adopted at the Madrid Summit in June 2022, the long-overdue NATO’s new Strategic Concept provides a clear set of guidelines for the Atlantic Alliance in a mid-term perspective. The war in Ukraine has provided the Allies with a powerful catalyst to reconsider NATO’s identity, core missions, as well as their vision of Russia and China. NATO’s new deterrence and defence-centric approach has already entailed a major shift in our security architecture, especially on Europe’s eastern flank. Without undermining its historical neutrality, Austria might reinterpret it in light of NATO’s “reset” and use this opportunity to reinvigorate its partnership with the Alliance.
Topic:
Security, Defense Policy, NATO, Partnerships, and Deterrence
Political Geography:
Russia, China, Asia, and Balkans

45. Digital China: The Strategy and Its Geopolitical Implications

Author:
David Dorman and John Hemmings
Publication Date:
02-2023
Content Type:
Working Paper
Institution:
Pacific Forum
Abstract:
Over the past few years, there has been growing concern inside the United States, Europe, and in the Indo-Pacific on the strategic direction behind China’s technology policies. Beginning with the debate over 5G and Huawei, this debate has covered Artificial Intelligence (AI), quantum teachnology, and semi-conductors – a foundational technology. And despite a large number of policies in place – Made in China: 2025, Cyber Super Power, and the New Generation AI Development Plan – few in the West have known China’s overall digital grand strategy. In the first installment of a three-part research project, Dr. Dorman and Dr. Hemmings lay out the rise of China’s overall digital grand strategy, Xi’s role in it, and how it has been organized to fulfil Party objectives. The report tracks the rise of the strategy over the past 10 years, the acceleration of that rise during the Covid-19 pandemic, and the current state of the strategy. In particular, it finds Digital China has been supported and designed by General Secretary Xi Jinping himself, and is a bid to make China more competitive vis a vis the West through the digital transformation of rules, institutions, and infrastructure at the national level. Over the past few years, the strategy has risen to become the “overall” strategy for digital development in the eyes of the Chinese Communist Party leadership, bigger than the Digital Silk Road, deeper than the Belt and Road Initiative, more far reaching than 5G or AI, more important than Made in China: 2025, and wider than Cyber Great Power. A renewed Digital China seeks to challenge a hegemonic global system anchored to a previous age. A successful Digital China has profound implications for China’s developmental path, great power competition, and for the norms that will undergird the international system for decades to come. The Party leadership has re-written Marxist economic theory in its bid to incorporate “data” as the basis of its digital economy and in order to foster a Chinese “Digital Marxism”. Digital China seeks to whet the “sharp weapon” of innovation to facilitate its great power rise and challenge to the West. Beijing is testing whether innovative thinking can be created through the digital transformation of tools, talent, and learning. The US and its allies have begun to effect strategic counter-effect to the myriad of PRC technology policies, there is almost zero understanding or public discussion of this digital grand strategy. Whether inattention, mistranslation, or obfuscation, Digital China has been mostly missed by the West over the past decade.
Topic:
Science and Technology, Cybersecurity, Innovation, and Artificial Intelligence
Political Geography:
China, Asia, and Indo-Pacific

46. South China Sea, East China Sea, and the Emerging US-Japan-Philippines Trilateral

Author:
Jeffrey Ordaniel
Publication Date:
04-2023
Content Type:
Working Paper
Institution:
Pacific Forum
Abstract:
The U.S.-Japan-Philippines Trilateral Maritime Security Dialogue conducted in December 2022 confirmed that there is very little difference in threat perceptions regarding the East and South China Seas. The three countries view China’s increasingly assertive claims to the territories and maritime zones in the two bodies of water as antithetical to their shared vision of a free, open, and rules-based Indo-Pacific. China’s rapid military expansion, including unprecedented nuclear weapons and missile buildup, reinforces the urgency of the threat. Japanese and Philippine interlocutors worry that as China approaches nuclear parity with the United States, the region’s strategic environment will worsen. American participants emphasized greater and tangible demonstration of alliance commitments and agreed that some risk-taking is required to push back against Chinese coercion. There was a consensus about the challenge of addressing Beijing’s gray zone activities that have so far succeeded in seizing territories and maritime areas in the South China Sea and establishing regular intrusions into Japanese waters in the East China Sea. Participants struggled to find a strategy to blunt China’s salami-slicing tactics while avoiding escalation and armed conflict.
Topic:
Foreign Policy, Multilateral Relations, Maritime, and Regional Security
Political Geography:
Japan, Asia, Philippines, East China, United States of America, and South China Sea

47. The United States & Japan: Allied Against Disinformation

Author:
Akira Igata, Morihiro Ogasahara, and Christopher Paul
Publication Date:
07-2023
Content Type:
Working Paper
Institution:
Pacific Forum
Abstract:
In our 21st century information age security does not start with weapons or with the armed forces who wield them. A range of non-traditional security issues has arisen to test even the oldest and closest of alliances—including that of the United States and Japan. Disinformation is among these issues, and this paper series, carried out with the generous support of the US Embassy Tokyo, highlights the specific challenges that disinformation presents. The good news is that Japan, at least so far, is not demonstrating exceptionally high difficulties with disinformation so far. However, as the paper by Prof. Morihiro Ogasahara demonstrates, there are specific demographics and specific types of news consumers in the country who are vulnerable, and Dr. Christopher Paul’s findings indicate that Japan could very well find itself under a more sustained attack by adversaries wishing to weaken its relationship with the US in the future. We at Pacific Forum hope that these papers serve as a wakeup call for policymakers, and lead to proactive solutions not only for this alliance, but which may be modeled for US relationships throughout the region.
Topic:
Security, Alliance, Disinformation, and Information Warfare
Political Geography:
Japan, Asia, North America, and United States of America

48. Understanding Alignment Decisions in Southeast Asia: A Review of U.S.-China Competition in the Philippines

Author:
William Piekos
Publication Date:
08-2023
Content Type:
Working Paper
Institution:
Pacific Forum
Abstract:
The United States and China are engaged in an ongoing struggle for the alignment commitments of Southeast Asian governments, employing a variety of measures to entice, cajole, and threaten states to alter their policy behavior. Caught between this competition, countries in Southeast Asia weigh their alignment options in search of the strategy viewed by the ruling regime as most likely to ameliorate risk and increase its prospects for survival. While nonalignment through hedging is a sought-after option, most often smaller states align with the major power that offers inducements (over coercion), as the material and diplomatic benefits bolster regimes’ claim to performance-based legitimacy and its domestic stability and security. A review of the Philippines’ geopolitical positioning during the Benigno Aquino III (2010–2016) and Rodrigo Duterte (2016–2022) administrations reveals that inducements and coercion have played a significant role in the country’s alignment decisions. During the Aquino administration, coercive measures taken by China in the South China Sea and continued security and diplomatic inducements from the United States underscore the respective approaches of Beijing and Washington. The candidacy and election of Duterte, however, switched this dynamic, and the new president courted and received promises of Chinese economic assistance to support his domestic growth strategy and downplayed U.S. ties in pursuit of a more independent foreign policy. In the end, continued Chinese provocations in the South China Sea and domestic security challenges led Duterte to call upon U.S. assistance once again, and Duterte was unable to initiate a full reconsideration of Manila’s position. Still, his strategic flirtation with China underscores the importance of performance-based legitimacy and the impact of inducements and coercion in shaping the foreign policy choices of smaller states. The findings of this study suggest that Washington’s focus on great power competition and sanctions handicaps U.S. foreign policy in Southeast Asia and beyond. The Philippines’ leaders focused on securing their domestic political prospects and legitimacy; criticism and coercive measures were largely ineffective for the United States or China in gaining influence over policy decisions. Washington should more often consider the promise and provision of inducements—while remaining sensitive to human rights concerns, governance issues, and liberal norms—to support the needs of Southeast Asian states, incentivize more transparent behavior, and increase the likelihood that these states will support U.S. interests in the future.
Topic:
Foreign Policy, Geopolitics, Strategic Competition, and Regional Politics
Political Geography:
China, Asia, Philippines, North America, Southeast Asia, and United States of America

49. Fighting Against Internal and External Threats Simultaneously: China’s Police and Satellite Cooperation with Autocratic Countries

Author:
Chisako T. Masuo
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
What direction will the Xi Jinping administration’s foreign policy take over the coming years, and how will that affect the existing international order? The Chinese Communist Party harbours a strong sense of crisis about the internal and external threats colliding to supposedly destabilise its regime, and thus aims to strengthen cooperation with developing countries in order to prevent such danger. The Xi administration is consequently strengthening police and law-enforcement cooperation inside the Shanghai Cooperation Organisation, which includes Russia. Besides, China has launched a new initiative of collaborating with Moscow on satellite systems to monitor the entire Earth, in order to accumulate big data on various issues. The current Chinese foreign policy, which pursues a cultivation of deeper relations with autocratic countries by providing them with surveillance technologies, is likely to deepen the global divide with liberal democracies.
Topic:
Security, Foreign Policy, International Order, and Satellite
Political Geography:
Russia, China, Eurasia, and Asia

50. Moving on Up: Multilevel Monitoring and Advocacy for Health Rights

Author:
Abrehet Gebremedhin
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
Accountability Research Center (ARC), American University
Abstract:
Multilevel approaches to monitoring and advocacy are often used by international development practitioners, particularly in civil society, in efforts to hold governments—from the national to the local—to account for policy implementation. However, such approaches are not yet well understood or identified by many scholars in the social accountability field. This evidence review addresses this gap through a cross-case comparison of multilevel approaches in ten health rights programs across Africa, Asia, and Latin America. It draws on published evaluations, working papers, and peer-reviewed journal articles, as well as insights shared by implementers and researchers. Cases were selected to illustrate health rights initiatives that included monitoring or advocacy activity at a minimum of two different levels: local health facility, district, regional, provincial or national. Four significant findings emerge from this review of evidence: Vertical integration is a relatively common feature of multilevel monitoring and advocacy in these ten cases and is most likely to take place at the lower ends of the health system. However, it is largely implicit, and often not articulated in project design or theories of change. Horizontal organizing—the coordination of civil society action across districts or geographies—is a less visible feature of multilevel approaches to health rights programming than vertical integration. Despite the multilevel nature of health monitoring and advocacy in these ten cases, less than half reported working at the regional or provincial level, indicating a ‘missing middle’ between local and national activity. Escalation—the process by which citizens’ unaddressed claims move upwards to those with greater decision- making powers—is an important mechanism for accountability and one way in which vertical integration can happen. However, escalation is not clearly articulated in much of the gray literature, and therefore merits further research. The findings from this evidence review have implications for strategy, including: the importance of explicitly identifying multilevel tactics for monitoring and advocacy; theorizing the process by which unaddressed claims can be addressed, particularly moving up beyond the local level; emphasizing the importance of the ‘middle’ and ensuring regional and provincial decision-making is leveraged; and looking to link vertical integration with opportunities for horizontal organizing.
Topic:
Civil Society, Health, Accountability, Advocacy, and Monitoring
Political Geography:
Africa, Asia, and Latin America