Political Geography: Asia / Topic: Economy

101. The Effects of Free Trade Agreements on SMEs’ Direct and Indirect Exports

Author:: Kyong Hyun Koo
Publication Date:: 03-2021
Content Type:: Policy Brief
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: FTAs have been known to have large positive effects on trade creation between member countries. However, it is relatively unexplored how much small/medium-sized enterprises (SMEs) accounted for in the trade creation due to FTAs compared to large-sized enterprises (LEs). We find that Korean FTA policies have significantly increased SMEs’ direct exports to FTA partner countries between 2005 and 2017, although the effects were as much as a half of those for LEs, which indicates a considerable LEs’ premium in the direct export effects of FTAs. We further find that the FTAs also significantly increased the indirect exports of Korean firms, i.e., the domestic input supplies through in-dustrial input-output linkage, and that SMEs have benefited more from the indirect export effects of FTAs than LEs. Considering the direct and indirect export effects together, the LEs’ premium in the total export effects of FTA is found to become smaller.
Topic:: Treaties and Agreements, Economy, Free Trade, Exports, Trade, and Industry
Political Geography:: Asia and Korea

102. The Determinants and Welfare Implications of Labor Share

Author:: Sungbae An, Minsoo Han, Subin Kim, and Jinhee Lee
Publication Date:: 03-2021
Content Type:: Policy Brief
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: The decline in labor share is recognized as a global phenomenon. Concerns have been raised that this trend will exacerbate the income inequality between business owners as capitalists and households as the labor suppliers, prompting a decline in household income and consumption, which are major driving forces for sustainable growth. Meanwhile, various policy measures have been introduced to raise the labor share, with the aim of correcting inequality and boosting growth. This study explores the determinants of labor share and analyzes the effects of these factors on the economy and social welfare, offering various interpretations and policy alternatives according to economic conditions.
Topic:: Labor Issues, Inequality, Economy, Business, and Welfare
Political Geography:: Asia and Korea

103. China’s FDI in Europe and Europe’s Policy Response

Author:: Pyoung Seob Yang, Cheol-Won Lee, Suyeob Na, Taehyn Oh, Young Sun Kim, Hyung Jun Yoon, and Yoo-Duk Ga
Publication Date:: 04-2021
Content Type:: Policy Brief
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: China’s investment in the European Union (EU) increased significantly during the European financial crisis, but has been on the decline in recent years. The surge of Chinese investment has raised concerns and demands for analysis on the negative effects it could have on the EU companies and industries. In this context, the present study aims to analyze the main characteristics of Chinese investment and M&A in Europe, major policy issues between the two sides, the EU’s policy responses, and prospects of Chinese future investment in Eu-rope, going on to draw important lessons for Korea. To summarize the main characteristics of China's investment in Europe, the study found that the EU's share of China's overseas direct investment has continued to increase until recently. Second, investment in the Central and Eastern European Countries (CEECs) is gradually increasing, although it is still insignificant compared to the top five destinations in the EU: Netherlands, Sweden, Germany, Luxembourg and France. Third, China's investment in the EU is being made in pursuit of innovation in manufacturing and to acquire high-tech technologies. When it comes to China's M&A in Europe, the study found that the proportion of indirect China's M&As (via third countries (e.g. Hong Kong) or Chinese subsidiaries already established in Europe) was relatively higher than direct ones. Empirical factor analysis of investment also shows that China's investment in the EU is strongly motivated by the pursuit of strategic assets. Other factors such as institutional-level and regulatory variables are found to have no significant impact, or have an effect contrary to expectations. This suggests that China's investment in the EU is based on the Chinese government's growth strategy, and accompanies an element of national capitalism Today, It is highly expected that the COVID-19 pandemic will have a reorganizing effect on the global value chain (GVC) and Foreign investment regulation in the high-tech sector motivated by national security is emerging as a global issue as the US and the EU are tightening their control. As Korean companies are not free from the risk of falling under such regulations, a thorough and careful response is required. And for the Korean government, it is necessary to prepare legal and institutional measures regulating foreign investment in reference to the US and the EU.
Topic:: Foreign Direct Investment, Financial Crisis, European Union, Economy, Economic Growth, Global Value Chains, and COVID-19
Political Geography:: China, Europe, Asia, Korea, and United States of America

104. Changing Environment for Opening of Chinese Financial Sector and Implications

Author:: Sangbaek Hyun, Suyeob Na, Young Sun Kim, Koun Cho, and Bongkyo Seo
Publication Date:: 04-2021
Content Type:: Policy Brief
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: The opening of China's financial sector has progressed at a very slow pace, unlike the manufacturing and trade sectors that have pushed for an active opening to the outside world. The Chinese economy has been growing rapidly while serving as a global production base, but since 2012, it has become necessary to modify its approaches to achieve growth as it enters an era of medium-speed growth. Recently, new reform and opening measures have been taken in various fields to improve the quality of the Chinese economy, and the need for reform and opening in the financial sector has also increased. Internally, the financial system centered on China's state-owned commercial banks has focused on indirect financing, which has served as a major obstacle to upgrading China's economy and industry to the next level, further increasing the need for reform and opening of the financial sector. Moreover, externally, the U.S.-China conflict which began in earnest in 2018, is applying strong pressure toward reform and opening in China’s financial sector. The Chinese government began to show a proactive attitude toward financial opening amid such internal needs and external pressure, and an important development was seen in China’s financial opening when President Xi Jinping declared further opening measures at the Boao Forum in April 2018. The Chinese financial authorities have prepared follow-up measures related to financial opening, and the Chinese government’s efforts toward financial opening in the three years from 2018 to 2020 yielded more results than the ten-year opening period since its accession to the WTO. Against this backdrop, this study examines the main contents of China’s financial opening process, which has been accelerating recently, and derives evaluation and implications.
Topic:: Finance, Economy, Economic Growth, and Banks
Political Geography:: China, Asia, and Korea

105. A Comprehensive Evaluation on Korea’s ODA to Rwanda’s Agriculture Sector and Its implications for Strategic Approaches

Author:: Young Ho Park, Minji Jeong, and Soo Hyun Moon
Publication Date:: 01-2021
Content Type:: Policy Brief
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: There has been a growing consensus in the national and international aid architecture that sporadic or scattered aid modality should be avoided. This study conducted a comprehensive cluster evaluation on Korea’s agricultural ODA to Rwanda between 2013 and 2017, with two newly devised indexes: Cluster Performance Index (CPI) and Resource Allocation Index (RAI). Every Korean agricultural ODA project was categorized into five clusters and numerically evaluated against criteria widely used in the evaluation of development projects: relevance, efficiency, effectiveness and sustainability. Our cluster evaluation reveals that projects are mostly planned appropriately, but in some clusters, large amounts of the budget have been invested in poorly planned projects. Regarding efficiency, there was considerable room for improvement in all clusters. Particularly, in the Monitoring and Evaluation (M&E) category, all clusters scored below average. Concerning performance evaluation, all clusters scored relatively high in effectiveness, specifically in goal achievement. Lastly, in terms of sustainability, risk management was found to be relatively inadequate in all clusters. Based on the lessons from the aforementioned observations and analysis results, this study suggests ODA quality can be improved by optimizing budget allocation, improving monitoring efficiency, creating synergistic effects through cluster linkage, and developing agricultural value chain program.
Topic:: Agriculture, Foreign Aid, Economy, and Value Chains
Political Geography:: Africa, Asia, Korea, and Rwanda

106. Fourth Industrial Revolution in Japan: Technology to Address Social Challenges

Author:: Gyupan Kim, Hyongkun Lee, Boram Lee, Jongeun Lee, and Wonju Son
Publication Date:: 01-2021
Content Type:: Policy Brief
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: In Japan, the challenges posed by its low birthrate and aging population expanded rapidly with the collapse of the bubble economy in the early 1990s, and in March 2011, energy and environmental problems such as power supply shortages and nuclear radiation issues occurred in the wake of the Great East Japan Earthquake and Fukushima nuclear accident. Also, with the beginning of the coronavirus pandemic in January 2020, digital transformation has emerged as a social challenge. In particular, Japan's aging population combined with a decrease in the working age population, has caused the government to face fiscal crisis due to the burden of social insurance, and a sense of crisis of labor shortage in the medical, manufacturing and logistics sectors. This is also leading to a sense of crisis at local governments as well, seen with the collapse of the medical service supply system under “Tokyo centralization,” the rapid increase of the vulnerable in transportation due to the super-aging of rural areas, and the risk of extinction of local communities. The analysis on the healthcare and medical care sectors was conducted in chapter 2, and the manufacturing, mobility, and logistics sectors in Chapter 3, and the local revitalization in Chapter 4 respectively. And chapter 5 of conclusion remarks presents policy implications for the Korean government.
Topic:: Demographics, Industrial Policy, Science and Technology, Nuclear Power, and Economy
Political Geography:: Japan and Asia

107. Economic Policies of GCC Countries in the Era of Low Oil Prices and Their Policy Implications for Korea

Author:: Kwon Hyung Lee, Sung Hyun Son, Yun Hee Jang, and Kwang Ho Ryou
Publication Date:: 02-2021
Content Type:: Policy Brief
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: Over the past several decades, the six member countries of the Gulf Cooperation Council (GCC) have implemented economic policies for industrial diversification to lessen severe dependence on the oil industry. Such policy efforts have been driven by their awareness of macro-economic and structural risks from heavy volatilities in international oil markets in terms of fiscal and trade sectors. For instance, the drop in international oil prices reduces export performance in the oil and natural gas sectors, which in turn results in a decline in the stability of fiscal revenue. The recent trends of low oil prices since 2014, as well as high unemployment rates, have strengthened the policy regime for industrial diversification and job creation supported by mid- to long-term economic plans of the GCC countries. This report reviews what has been emphasized in the areas of industrial, employment, trade and investment policies. We then derive implications for Korean companies and policymakers for sustainable cooperation between Korea and the Middle East.
Topic:: Oil, Economy, Diversification, and Trade
Political Geography:: Asia, Korea, and Gulf Nations

108. The Effects of US-China Rivalry on Latin America and Their Implications

Author:: Sungwoo Hong, Yeo Joon Yoon, Jino Kim, Jeewoon Rim, and Jimin Nam
Publication Date:: 02-2021
Content Type:: Policy Brief
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: The conflict between the United States and China may be the issue of most importance as well as interest to the world, prior to COVID-19. This conflict between the two countries is appearing not only in the economic sector, but also in various field such as politics, diplomacy, and military affairs. Such competition between the two countries is likely to escalate further as multilateral systems such as the WTO are threatened and protectionism intensifies in the post-COVID-19 world. Even within Latin America, the competition between the two countries frequently appears in a variety of forms. Conflicts between the United States and China in Latin America tend to occur mainly in the infrastructure sectors. Furthermore, the United States pressured Latin American countries to choose between the United States and China, with the results of this pressure depending on the political orientation of the ruling government. In order to investigate the impact of retaliatory tariffs between the two countries on Latin American countries’ exports and welfare, we employ an event analysis for exports and computational general equilibrium (CGE) model for welfare, with Argentina, Brazil, Mexico, and Chile as the subject of our analysis. Based on the outcome of the event study, Brazil’s exports to the United States moderately increased due to the tariff imposition, and such an effect persisted for short term. Its exports to China rose considerably immediately after the tariff imposition, and then the impact tended to decrease over time. By contrast, it is difficult to conclude that the tariff imposition had a statistically significant and lasting effect on the exports of the remaining three countries to the United States and China. As a result of the analysis using the CGE model, meanwhile, the tariffs imposed between the United States and China trivially increased the welfare of Latin American countries.
Topic:: Foreign Policy, Economy, Tariffs, Exports, Trade, and Rivalry
Political Geography:: China, Asia, South America, Latin America, Korea, and United States of America

109. Korea’s Strategy on Trade Agreements with Developing Countries in Africa and the Pacific Regions

Author:: Meeryung La
Publication Date:: 09-2021
Content Type:: Policy Brief
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: As the US-China trade conflict intensifies, high dependence on US and China has been pointed out as a potential risk to the Korean economy. This calls for trade policies including diversification of trading partners and the establishment of a new model for trade agreements suitable to such diversified partners. Meanwhile, the necessity for such policies grows as protectionism spreads globally and trade order changes after the Covid-19 pandemic. Africa and the Pacific (AP) regions, the main areas of interest in this report, have been excluded from Korea’s FTA network despite their high growth potential and strategic significance. Most countries in the AP regions are geographically distant from Korea and mostly underdeveloped, so we have approached the region only in terms of development cooperation. Currently, trade agreements and systems for trade and investment with AP countries are insufficient, and the size of economic cooperation with these countries remains small. However, Africa has high market potential, owing to various factors such as its high population growth, middle-class growth, and transition to digital economy, while the Pacific island countries have abundant fisheries and marine resources, and wield voting power in international organizations. In this regard, it is necessary to build the foundation for cooperation with AP countries in the mid-to-long term. Against this backdrop, this study seeks mid- to long-term strategies to promote trade cooperation with AP countries. First we consider introducing and expanding nonreciprocal arrangements for developing countries in the AP regions, as currently provided to United Nations-defined least developed countries. Then we consider introducing a reciprocal trade agreement, for example, an FTA. As a result, we found that it is necessary to introduce an FTA model suitable for developing countries in the AP regions instead of introducing further nonreciprocal agreements. Based on the results of the study, this paper proposes strategic directions for trade cooperation with the AP regions, and furthermore, provides policy suggestions that should be included in the agreement with those countries.
Topic:: Markets, Treaties and Agreements, Partnerships, Digital Economy, Economy, and Trade
Political Geography:: Africa, Asia, South Korea, and Asia-Pacific

110. Changes in the Regional Structure of China's Domestic Market and Implications

Author:: Jihyun Jung, Won Seok Choi, Hong Won Kim, and Joohye Kim
Publication Date:: 08-2021
Content Type:: Policy Brief
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: In response to intensifying conflict with the United States and the shock of Covid-19, China reinforced its strategy to expand domestic demand. China's domestic market is an important factor affecting Korea's exports and economic growth. Accordingly, a large body of research has been conducted in Korea on China's expansion policy and changes in its domestic market. However, most studies have analyzed changes in China's consumer market, import market and imported items, limiting the overall understanding of China's domestic economy. In addition, most studies on China's regional domestic market have analyzed the market segmented by region. Recognizing this gap, this study expanded the scope of analysis of the domestic market in China to the entire domestic final demand, and analyzed inter-regional trade relations and other economic relations based on an inter-regional input-output analysis, which has rarely been attempted in analyses of the Chinese domestic market. In addition, the changes in the regional structure of the Chinese import market and Korea's competitiveness were analyzed using Chinese trade statistics. In particular, by synthesizing the changes after the global financial crisis, a turning point in China's economic structure, we project future changes in the regional economic structure of China, which emphasizes the independence of its domestic economy. In addition, in the era of US-China conflict, the study aimed to select regional markets meaningful to Korea, and to present strategic directions toward China focusing on regional cooperation and approaches into the domestic market.
Topic:: Markets, Economy, Regional Economy, and Domestic Market
Political Geography:: China, Asia, and South Korea

111. ASEAN Economic Integration on Services: An Analysis of Economic Impacts and Implications

Author:: Meeryung La
Publication Date:: 06-2021
Content Type:: Policy Brief
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: ASEAN continues its efforts to liberalize services trade in the region as part of the process of establishing the ASEAN Economic Community (AEC). ASEAN has been increasing the level of regional liberalization through package negotiations of the ASEAN Framework Agreement on Services (AFAS). After signing the 10th AFAS package, the package negotiations were replaced by the ASEAN Trade in Services Agreement (ATISA), which takes a negative list approach and includes regulatory cooperation between member states. Upon this backdrop, this paper attempts to examine the progress of service market integration within ASEAN and analyze the impact of service liberalization pursued by ASEAN. Based on the analysis results, we also present policy implications to enhance cooperation with ASEAN in the service sectors.
Topic:: Economy, Services, ASEAN, Economic Integration, and Regional Economy
Political Geography:: Asia

112. How China and Pakistan Negotiate

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

113. The Local Roots of Chinese Engagement in Pakistan

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

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

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

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

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

116. Economic Cracks in the Great Wall of China: Is China's Current Economic Model Sustainable?

Author:: Thomas J. Duesterberg
Publication Date:: 12-2021
Content Type:: Special Report
Institution:: Hudson Institute
Abstract:: Since Deng Xiaoping changed the trajectory of Chinese economic policy in 1978, the People’s Republic of China (PRC) has amassed an impressive record of economic growth. Many economists and political analysts, however, have come to question whether the top-down, mercantilist economic system in the PRC is sustainable in the medium to long term. This report explores the long-term structural and short-term economic problems in contemporary China, and in particular considers whether the Xi Jinping regime can avoid a financial crisis and effectively manage a transition to a stable new equilibrium. Structural issues include a looming downturn in the population and in the workforce; associated problems with an underdeveloped and underfinanced social safety and welfare net; income and regional inequality; environmental degradation; and domestic shortages of raw materials, agricultural production, and energy resources. The acute economic problems analyzed in the paper are a real estate bubble, the accumulation of dangerous levels of debt, dependence on external markets and financing, a difficult transition to a more consumer-oriented and less investment-driven economy, a crackdown on dynamic digital and financial sectors, a return to dominance of low-productivity state-owned enterprises and manufacturing firms, and weak governance from an increasingly authoritarian and unaccountable regime. Many of these acute issues result from Xi’s changes in policy since 2013. Xi’s turn toward greater economic self-reliance while maintaining mercantilist trade relations signals an effective decoupling from the US and allied economies. Some historical examples of bubble economies and financial crises are discussed as possible analogies to the current situation in China. One conclusion is that the Middle Kingdom will see a much slower-growing economy, which makes addressing the structural issues much more difficult. Inability or lack of determination to address the large array of issues may also undermine the political legitimacy of the current regime, which has been buttressed since 1978 by a rapid growth model based on debt, real estate, and investment, including infrastructure. The concluding section of this report offers policy tools that the United States and its allies could deploy to induce China to be a more responsible stakeholder in the world economy and a more reliable contributor to global sustainability. The tools considered in the study include trade policy and export controls, expanded oversight of foreign investment (both direct and portfolio investment), cooperation with allies on China policy, and defense-related sanctions. The paper also suggests that deployment of these tools could be a factor in weakening China’s economy as well as a means to convince its leadership to pursue less mercantilist and authoritarian global strategies, which are harmful to the US economy and to global stability.
Topic:: Foreign Policy, International Trade and Finance, Finance, Economy, and Economic Growth
Political Geography:: China and Asia

117. The pandemic’s long reach: South Korea’s fiscal and fertility outlook

Author:: Jacob Funk Kirkegaard
Publication Date:: 06-2021
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: South Korea was one of the first countries affected by the COVID-19 pandemic in early 2020. A combination of high societal discipline and competent and prompt government actions on mass testing capacity and technologically enabled tracing and quarantines enabled South Korea to quickly control the pandemic. Consequently, South Korea did not need to enter into full economic lockdown in early 2020 and needed only much smaller fiscal stimulus than most other advanced economies. The limited fiscal impact of COVID-19 is fortuitous for South Korea, as the pandemic coincided with the country’s dramatic demographic transition to a future of rapidly shrinking working-age population and accelerating overall aging. South Korea recorded the lowest total fertility rate of any advanced economy in 2020. Unless fertility rates rise, the country will not escape large and negative economic effects from what will be a rapidly declining total and working-age population. Kirkegaard proposes several policy reforms for South Korea, while arguing that the direct role of government action in increasing the South Korean fertility levels is likely to be modest.
Topic:: Demographics, Economy, Fiscal Policy, COVID-19, and Fertility
Political Geography:: Asia and South Korea

118. Collateral benefits? South Korean exports to the United States and the US-China trade war

Author:: Mary Lovely, David Xu, and Yinhan Zhang
Publication Date:: 07-2021
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: This Policy Brief assesses the extent to which the United States increased its imports from South Korea after the US imposition of tariffs on Chinese exports. Korea benefited from this shift in US imports, although the increase was relatively small in most sectors. The authors use highly disaggregated US import and tariff data to examine adjustments in US purchases of manufactured goods from its trade partners. Their analysis indicates that Korea made a small gain in the US market following the levying of US tariffs on Chinese exports, with Korea’s share of overall US manufacturing imports rising 0.9 percent and its share of US manufacturing imports subject to trade war tariffs rising 1.0 percent. Gains were spread across a variety of manufacturing sectors—such as wood products, textiles and apparel, and machinery—reflecting both the choices made by US officials regarding which Chinese exports to tax and the nature of preexisting trade relationships between South Korea and the United States.
Topic:: Markets, Economy, Trade Wars, and Exports
Political Geography:: China, Asia, South Korea, and United States of America

119. The Pandemic as a Geopolitical Game Changer in the Indo-Pacific: The View from Japan

Author:: Glen S. Fukushima
Publication Date:: 07-2021
Content Type:: Journal Article
Journal:: Joint U.S.-Korea Academic Studies
Institution:: Korea Economic Institute of America (KEI)
Abstract:: The coronavirus pandemic that struck in late 2019 has affected the world profoundly, and Japan is no exception. But the direct impact on Japan has been relatively small considering the number of cases of infections and deaths relative to the size of Japan’s population, particularly considering its elderly population and high density. For instance, among the G7 countries, Japan has had the fewest cases of infections (4,690 per million population as of May 2, 2021) compared to 32,276 in Canada, 40,620 in Germany, 64,804 in the United Kingdom, 66,828 in Italy, 86,283 in France, and 99,652 in the United States. Similarly, among the G7 countries, Japan has had by far the fewest number of deaths (81 per million population as of May 2, 2021) compared to 638 in Canada, 996 in Germany, 1,601 in France, 1,776 in the United States, 1,870 in the United Kingdom, and 2,004 in Italy. This chapter argues that although the direct disruptions to Japan resulting from the pandemic have been less than to the other G7 countries, the effect of the pandemic on other nations with strong geopolitical importance to Japan—in particular, the United States and China—coupled with changes in Japan’s domestic political and economic environment have accelerated changes in geopolitical posture and direction that were already in progress in Japan. The fundamental geopolitical challenge facing Japan is how to ensure its military security, political independence, and economic prosperity in the face of a less reliable and less predictable United States and a more powerful and more assertive China. For Japan, the ideal resolution of this challenge is to maintain positive and constructive relations with both countries, while recognizing the reality that even as economic ties with China—whether in trade, investment, finance, tourism, or the exchange of people—are growing relative to ties with the United States, political and security ties (and the sharing of common values) with the United States remain the centerpiece of Japan’s foreign policy. Given this context, it is only natural that Japan would seek to diversify and strengthen its relationships with other countries, regions, economic arrangements, and international organizations and institutions. This diversification, which could be seen since the end of the Cold War in the early 1990s, has gained momentum in recent years, and the pandemic has served only to accelerate it. The analysis proceeds through the examination of the following: 1) pandemic chronology; 2) Japan’s domestic politics; 3) relations with the United States; 4) relations with China; 5) Japan’s diversification strategy; and 6) conclusions.
Topic:: International Relations, Security, Geopolitics, and Economy
Political Geography:: Japan and Asia

120. How the rest of the world responds to the US-China split

Author:: Hung Tran
Publication Date:: 01-2021
Content Type:: Policy Brief
Institution:: Atlantic Council
Abstract:: The election of Joe Biden as the forty-sixth US president is not expected to change the list of substantive issues dividing the United States and China, such as trade, investment, technology, geopolitical competition, national security, and human rights—except that the priority among them may change, with human rights concerns moving more to the forefront. However, the tone and modality of the unfolding of the US-China competition will change from Donald Trump’s unilateralism to Biden’s efforts to build alliances with “likeminded” countries in Europe, Asia, and elsewhere to deal with the challenges China has posed. In a way, Biden’s alliance-building approach may intensify pressure on the rest of the world to take sides. How countries respond to this challenge, unwelcome by most, depends on whether they see themselves as competitors to China, or as “price takers” in the international economic system.
Topic:: Global Markets, Regulation, Finance, Economy, Trade, and Digital Policy
Political Geography:: China, Europe, Asia, North America, United States of America, and Indo-Pacific

121. Enhancing US-Japan cooperation on global supply chains

Author:: Miyeon Oh and James Hildebrand
Publication Date:: 05-2021
Content Type:: Special Report
Institution:: Atlantic Council
Abstract:: Mounting US-China tensions and the COVID-19 pandemic have led to growing calls in the United States and among its allies and partners, including Japan, to address the vulnerabilities in global supply chains critical to national security and economic competitiveness. Strategic uncertainty has led stakeholders to pose the following questions. What role should government play, and to what extent can, or should, governments require firms to operate more in line with national security interests? How can firms manage short-term and long-term risks to balance national security requirements and commercial interests? How should trusted partners be defined, and what is a desirable allied and multilateral approach to enhancing security and resilience of global high-tech supply chains? With new administrations in both the United States and Japan, the two countries have an opportunity to consider these questions and rethink coordination of their efforts to establish secure and resilient supply chains. This issue brief analyzes recent developments in US and Japanese supply-chain policy, explores the importance of closer coordination through case studies of the semiconductor and rare-earth minerals industries, and provides a set of recommendations for the Joseph R. Biden Jr. and Yoshihide Suga administrations to enhance US-Japan cooperation in the years ahead. These recommendations include actions to operationalize the April 2021 US-Japan Joint Leaders’ Statement by creating a bilateral interagency Supply Chain Steering Committee that includes sector-specific working groups to enhance public-private-partnerships in high-technology industries, and by expanding bilateral supply-chain cooperation into multilateral efforts through flexible and informal frameworks.
Topic:: Science and Technology, Bilateral Relations, Economy, Innovation, Trade, Defense Industry, and Supply Chains
Political Geography:: Japan, Asia, North America, and United States of America

122. A strategic framework for countering China’s human-rights violations in Xinjiang

Author:: Jeffrey Cimmino
Publication Date:: 07-2021
Content Type:: Policy Brief
Institution:: Atlantic Council
Abstract:: China is engaged in a systematic campaign of repression against predominantly Muslim ethnic minorities in Xinjiang Uyghur Autonomous Region (XUAR) in northwest China. Through a combination of detention camps, mass surveillance, birth suppression, and other means, China is responsible for gross human-rights violations. In recent years, the international community has devoted an increasing amount of attention to China’s actions in Xinjiang. Earlier this year, the United States declared that Beijing’s behavior constituted genocide. More recently, the United States and several key partners announced multilateral sanctions on Chinese officials facilitating repression in the region. To build on these developments, the United States and its allies and partners should adopt a more strategic approach to addressing China’s human-rights abuses. This Issue Brief proposes a framework for such a strategy, articulating a multilateral approach for dealing with China’s repressive actions in Xinjiang. This Issue Brief argues that addressing China’s abuses in Xinjiang is of strategic importance. Ultimately, the goal of this strategy is to achieve an end state in which China has ceased its repressive activities; however, even if achieving this objective proves elusive, imposing costs on Beijing’s actions in Xinjiang can still serve broader strategic ends vis-a-vis China. China has chosen an assertive path to attaining global power and influence, and decades of economic growth and incorporation in the global economic system have not been enough to transform Beijing into a responsible stakeholder in a rules-based international system. The United States and its allies and partners will need to impose costs on Chinese behavior that violates international norms. Imposing costs on China’s human-rights violations in Xinjiang is a critical element of a broader strategy to dissuade Chinese Communist Party (CCP) behavior that undermines international norms and to push Beijing toward becoming a cooperative member of a rules-based international system.
Topic:: Human Rights, International Organization, Politics, Sanctions, Economy, and Uyghurs
Political Geography:: China, Asia, and Xinjiang

123. Japan's Foreign Policy Under Kishida

Author:: Oskar Pietrewicz
Publication Date:: 12-2021
Content Type:: Special Report
Institution:: The Polish Institute of International Affairs
Abstract:: The government of Prime Minister Kishida Fumio, formed on 10 November, will continue the foreign policy of his predecessors Abe Shinzō and Suga Yoshihide. In response to China’s regional policy, Japan intends to develop its military potential and deepen cooperation with the U.S. and other partners, including European, in the Indo-Pacific. At the same time, Kishida will strive for stable relations with China and trade liberalisation in the region out of Japan’s own economic interest. The new government’s focus on the country’s internal socioeconomic problems will be conducive to maintaining the current course in foreign policy.
Topic:: Foreign Policy, Government, Economy, and Domestic Policy
Political Geography:: Japan and Asia

124. China After Covid-19: Economic Revival and Challenges to the World

Author:: Alessia Amighini
Publication Date:: 06-2021
Content Type:: Special Report
Institution:: Italian Institute for International Political Studies (ISPI)
Abstract:: The coronavirus pandemic that has rocked China since December 2019 has posed a gruelling test for the resilience of the country’s national economy. Now, as China emerges from its Covid-induced "recession", it feels like the worst is behind it. How did China manage to come out almost unscathed from the worst crisis in over a century? This Report examines how China designed and implemented its post-Covid recovery strategy, focussing on both the internal and external challenges the country had to face over the short- and medium-run. The book offers a comprehensive argument suggesting that, despite China having lost economic and political capital during the crisis, Beijing seems to have been strengthened by the “pandemic test”, thus becoming an even more challenging “partner, competitor and rival” for Western countries.
Topic:: Economy, Strategic Competition, COVID-19, and Economic Recovery
Political Geography:: China and Asia

125. Does China Really Dominate Global Innovation? The Impact of China’s Subsidized Patent Application System

Author:: Jonathan Putnam, Hieu Luu, and Ngoc Ngo
Publication Date:: 03-2021
Content Type:: Special Report
Institution:: Hudson Institute
Abstract:: Over the past two decades, China’s economy has grown impressively, while its patented innovations have grown at an even higher rate. But this patent application trend should not simply be accepted at face value. The Chinese government has subsidized patent applications as part of its overall domestic industrial policy agenda, which underlies China’s claim to have “won” the global innovation race, especially in next-generation technologies like 5G or AI. Our study shows that high rates of patenting do not necessarily mean dominance, or even leadership, among the world’s innovation economies. China’s recent announcement that it plans to end subsidies for patent applications by 2025 perhaps acknowledges that its policy is no longer necessary or desirable. In any case, uncritical reports of China’s innovation dominance, overall or in prominent high-tech sectors, should be viewed skeptically, especially by policymakers.
Topic:: Intellectual Property/Copyright, Law, Economy, and Innovation
Political Geography:: China and Asia

126. Taking the Helm: A National Technology Strategy to Meet the China Challenge

Author:: Martijn Rasser and Megan Lamberth
Publication Date:: 01-2021
Content Type:: Special Report
Institution:: Center for a New American Security (CNAS)
Abstract:: The United States faces a challenge like no other in its history: a strategic competition with a highly capable and increasingly resourceful opponent whose worldview and economic and political models are at odds with the interests and values of the world’s democratic states. A rising China poses a fundamental challenge to the economic vitality and national security of the United States and its allies and the currency of liberal democratic values around the world. Technology—a key enabler for economic, political, and military power—is front and center in this competition. Technological leadership—how a country invents, innovates, and deploys technologies to compete economically and to secure its interests—will shape the coming years to a remarkable degree. The United States has maintained such leadership for decades. Today, that leadership is at risk. The United States is failing to rise to the occasion—its policies inadequate and disconnected and its response reactive and disjointed. The country needs a new approach to regain the initiative. The stakes are high and the window for action is closing. The U.S. government must craft a national technology strategy for an era of sustained competition with a highly capable contender: a comprehensive framework to plan, execute, and update its technology policies. The strategy is a whole-of-nation approach—including human capital, infrastructure, investments, tax and regulatory policies, and institutional and bureaucratic processes—to preserve its current advantages and to create new ones. To be effective, creating and executing the strategy must involve stakeholders from federal and state governments, private industry, academia, and civil society. The overarching goal is to maintain the United States’ standing as the world’s premier technology power so that it can empower its citizens, compete economically, and secure its national interests without having to compromise its values or sovereignty. The purpose of this report is to provide the intellectual framing for what a national technology strategy is and why the United States needs one. It does not offer a list of prioritized technology areas. Rather, it provides guidelines for how to think about such prioritization and what qualities should inform the resulting policy decisions.
Topic:: Politics, Science and Technology, and Economy
Political Geography:: China, Asia, and United States of America

127. Navigating the Deepening Russia-China Partnership

Author:: Andrea Kendall-Taylor and David Shullman
Publication Date:: 01-2021
Content Type:: Special Report
Institution:: Center for a New American Security (CNAS)
Abstract:: Ties between China and Russia have grown. In virtually every dimension of their relationship—from the diplomatic to defense and economic to informational realms—cooperation between Beijing and Moscow has increased. Political observers in Washington and beyond have noted their alignment, yet they remain divided over what these growing ties portend. Perhaps the most concerning—and least understood—aspect of the Russia-China partnership is the synergy their actions will generate. Analysts understand well the challenges that Russia and China each pose to the United States. But little thought has been given to how their actions will combine, amplifying the impact of both actors. As this report highlights, the impact of Russia-China alignment is likely to be far greater than the sum of its parts, putting U.S. interests at risk globally. The synergy between Russia and China will be most problematic in the way that it increases the challenge that China poses to the United States. Already, Beijing is working with Moscow to fill gaps in its military capabilities, accelerate its technological innovation, and complement its efforts to undermine U.S. global leadership. Simply put, Russia is amplifying America’s China challenge.
Topic:: Diplomacy, Partnerships, Economy, and Strategic Interests
Political Geography:: Russia, China, Eurasia, Asia, and United States of America

128. How Is the Asian Economy Recovering from the COVID-19 Pandemic? Evidence from the Emissions of Air Pollutants

Author:: Kazunobu Hayakawa
Publication Date:: 03-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This study empirically examines how economic and social activities in Asia were affected by the COVID-19 pandemic by using the emissions amounts of various air pollutants to represent those activities. Review of the emissions data suggests that from 2019 to 2020, the amount of emitted air pollutants decreased in most subnational regions in Asia. Data also show how economic and social activities have restarted in some regions; regression analyses are used to uncover the regions that restarted early. Regional characteristics are identified by employing a remotely sensed land cover dataset (i.e. ESALC) and OpenStreetMap. Results reveal that for Association of Southeast Asian Nations (ASEAN) members, economic and social activities in cropland, industrial estates, accommodations, restaurants, education, and public services still have not returned to normal.
Topic:: Environment, Economy, Pandemic, COVID-19, Air Pollution, and Economic Recovery
Political Geography:: Asia and Southeast Asia

129. COVID-19 Tourism Recovery in the ASEAN and East Asia Region: Asymmetric Patterns and Implications

Author:: Stathis Polyzos, Anestis Fotiadis, and Aristedidis Samitas
Publication Date:: 06-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: The aim of this paper is to produce forecasts for tourism flows and tourism revenue for ASEAN and East Asian countries after the end of the COVID-19 pandemic. By implementing two different machine-learning methodologies (the Long Short Term Memory neural network and the Generalised Additive Model) and using different training data sets, we aim to forecast the recovery patterns for these data series for the first 12 months after the end of crisis. We thus produce a baseline forecast, based on the averages of our different models, as well as a worst- and best-case scenario. We show that recovery is asymmetric across the group of countries in the ASEAN and East Asian region and that recovery in tourism revenue is generally slower than in tourist arrivals. We show significant losses of approximately 48%, persistent after 12 months, for some countries, while others display increases of approximately 40% when compared to pre-crisis levels. Our work aims to quantify the projected drop in tourist arrivals and tourism revenue for ASEAN and East Asian countries over the coming months. The results of the proposed research can be used by policymakers as they determine recovery plans, where tourism will undoubtedly play a very important role.
Topic:: Tourism, Economy, Public Health, Pandemic, and COVID-19
Political Geography:: Asia and Southeast Asia

130. Tracking the Ups and Downs in Indonesia’s Economic Activity During COVID-19 Using Mobility Index: Evidence from Provinces in Java and Bali

Author:: Yose Rizal Damuri, Prabaning Tyas, Haryo Aswicahyono, Lionel Priyadi, Stella Kusumawardhani, and Ega Kurnia Yazid
Publication Date:: 07-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: A timely and reliable prediction of economic activities is crucial in policymaking, especially in the current COVID-19 pandemic situation, which requires real-time decisions. However, making frequent predictions is challenging due to the substantial delays in releasing aggregate economic data. This study aims to nowcast Indonesia’s economic activities during the COVID-19 pandemic using the novel high-frequency Facebook Mobility Index as a predictor. Employing mixed-frequency, mixed-data sampling, and benchmark least-squares models, we expanded the mobility index and used it to track the growth dynamics of the gross regional domestic product of provinces in Java and Bali and performed a bottom-up approach to estimate the aggregated economic growth of the provinces altogether. Our results suggested that the daily Facebook Mobility Index was a considerably reliable predictor for projecting economic activities on time. All models almost consistently produced reliable directional predictions. Notably, we found the mixed data sampling-autoregressive model to be slightly superior to the other models in terms of overall precision and directional predictive accuracy across observations.
Topic:: GDP, Economy, Mobility, Pandemic, and COVID-19
Political Geography:: Indonesia, Asia, and Southeast Asia

131. Economic and Emission Impact of Australia–China Trade Disruption: Implication for Regional Economic Integration

Author:: Xunpeng Shi, Tsun Se Cheong, and Michael Zhou
Publication Date:: 07-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This study examines the debates on supply chain resilience and the economic and emissions impact of supply chain rerouting using Australia and China trade as an example. The estimations demonstrate that, in both export and import cases, a trade embargo between Australia and China, despite being compensated by alternative supply chains, will cause gross domestic product loss and emissions increases for both countries. Moreover, even if all other countries gain from the markets left by China, many of them suffer from overall gross domestic product loss and emissions increase. The findings that ASEAN and China may also suffer from an Australia–China trade embargo, despite a gain in trade volume, suggests that no country should add fuel to the fire. The results suggest that countries need to defend rules-based trading regimes and continuously promote regional economic integration.
Topic:: Regional Cooperation, Economy, Global Value Chains, Carbon Emissions, and Economic Integration
Political Geography:: China, Asia, Australia, and Southeast Asia

132. Policy Strategies to Strengthen the Travel and Tourism Sectors from the COVID-19 Pandemic Shocks: A Computable General Equilibrium Model for the Indonesian Economy

Author:: Irlan Adiyatma Rum
Publication Date:: 09-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: The travel and tourism sectors have become the most vulnerable sectors to the COVID-19 pandemic. Studies have shown that most tourist-destination countries will experience economic shocks due to the pandemic. This study analyses the impact of the COVID-19 pandemic shock and the implications of policies taken by the government to strengthen the travel and tourism sectors. As the largest travel and tourism economy in ASEAN, this study uses Indonesia as a case study. It uses a computable general equilibrium (CGE) model using a detailed national input–output table for the creative sectors. The study develops baseline scenarios (low and lower-middle recovery), general policy scenarios (moderate and highly effective support) and specific policy scenarios for the travel and tourism sectors. Through changes in export demand, the impact of the pandemic depends on the existing conditions and policy interventions. The pandemic causes the nominal gross domestic product at the national level to decline by an interval of [–1.99%, –2.97%] and for tourism and travel sectors by [–6.81%, –10.38%] depending on the recovery period. If the recovery is low (all annual inbound tourism expenditure is removed), the Indonesian macroeconomy will be worse than under the lower-middle recovery, given the same government intervention. Thus, effectiveness becomes an important factor for creating a better impact. Adding capital stimulus into the tourism sector helps to further reduce output decline in the travel and tourism sectors, but it is not enough to help the economy recover from the pandemic. The best policy strategy is to make sure that the mitigation plan will be implemented effectively.
Topic:: Tourism, Economy, Public Health, Pandemic, COVID-19, and Travel
Political Geography:: Indonesia and Asia

133. India’s Networking Response to the Chinese Threat

Author:: Rajesh Basrur
Publication Date:: 06-2021
Content Type:: Special Report
Institution:: East-West Center
Abstract:: India has experienced rising tensions with China in recent years, as demonstrated by two border crises in 2017 and 2020-21. The second event saw the death of some 20 Indian troops, and at least 4 Chinese soldiers, in hand-to-hand combat – the first fatalities in nearly half a century of periodic border face-offs. New Delhi’s policy response has spanned both internal and external balancing. The former has involved augmenting India’s capacity to engage in limited combat of the type that nuclear-armed states have occasionally fought, as did the Soviet Union and China in 1969 and India and Pakistan in 1999. The Indian military has bolstered its border by deploying combat troops, cruise missiles, and advanced combat aircraft. However, China has done much the same, putting pressure on India to upscale its military capabilities. Simultaneously, India has tried to reduce its dependence on the Chinese economy, a more complicated task. Despite a 10 percent decline in bilateral trade owing to the Covid-19 pandemic and border tensions, China was India’s largest trading partner ($77.7 billion) in 2020. The Narendra Modi government sharply cut Chinese investment when the 2020 border confrontation in Ladakh broke out, expelling major Chinese companies like TikTok, WeChat, and UC Browser. Despite these measures, India’s ability to shut China out of its economy is limited. The Indian market depends heavily on Chinese electronic components (70 percent in value terms), pharmaceutical ingredients (70 percent), and consumer durables (45 percent).
Topic:: Conflict Prevention, Bilateral Relations, Economy, and Trade
Political Geography:: China, South Asia, India, and Asia

134. More Harm than Good: Why Chinese Sanctions over THAAD have Backfired

Author:: Daniel Mitchum
Publication Date:: 12-2021
Content Type:: Special Report
Institution:: Pacific Forum
Abstract:: In 2017 South Korean Moon Jae-in, in response to North Korean ballistics testing, adopted a resolution to implement the THAAD missile interceptor system. Beijing had long been opposed to the system and as a result initiated a series of unofficial, punitive economic sanctions against South Korea which covered a range of industries. However, Beijing’s actions did little to alter Seoul’s decisions and have instead damaged China-South Korea relations. A similar paradigm has since appeared within China-Australia relations. How nations respond and adapt to such tactics in the future is a question of critical importance.
Topic:: International Relations, Sanctions, Weapons, and Economy
Political Geography:: China, Asia, South Korea, and North Korea

135. The Opportunity is There: South Koreans’ Views of China and the Future of the US-ROK Alliance

Author:: John Lee
Publication Date:: 04-2021
Content Type:: Special Report
Institution:: Pacific Forum
Abstract:: Officially, relations between the Republic of Korea and the People’s Republic of China remain cordial. Because of China’s economic heft and South Korea’s reliance on unmolested trade with the former for its continued economic development, South Korea takes great pains to be as neutral as possible between the United States and China despite its formal alliance with the US. As such, many pejoratively refer to South Korea as “the weak link” in America’s Northeast Asia alliance system. However, on a civil society level, an overwhelming majority of the South Korean public has a negative view of China—a view that has steadily gotten worse over time. Being a democracy that reflects voters’ popular will, growing anti-Chinese sentiment among voters means South Korea’s current policy of placating China will not be sustainable indefinitely. Meanwhile, the Trump administration largely neglected the alliance between South Korea and the United States. That neglect notwithstanding, an overwhelming majority of South Koreans either strongly or somewhat support the alliance with the United States. Conditions are perfect for the Biden administration to seek to repair and strengthen relations with South Korea to empower the alliance to serve as a credible bulwark against Chinese expansionism—this paper offers solutions on how to do so.
Topic:: International Relations, Foreign Policy, Economy, Alliance, and Trade
Political Geography:: China, Asia, and South Korea

136. South Korea’s Demographic Advantage is Over: The Regional Context and the Economic and Security Implications

Author:: Tom Byrne and Jonathan Corrado
Publication Date:: 07-2021
Content Type:: Special Report
Institution:: Pacific Forum
Abstract:: South Korea has the lowest birth rate in the world, its population—especially its working-age population—has declined, and the pronatalist polices of the past 20 years have not been successful at reversing this trend. Over time, this threatens the country’s economic and fiscal position, as well as its military position as the number of conscripts declines. While more advanced technology can help, over the long term it is no substitute for people, especially in the security realm. Overcoming this will require Korea to either shift to a new economic paradigm or else achieve a second Miracle on the Han River—this time demographic rather than economic.
Topic:: Security, Demographics, Economy, and Aging
Political Geography:: Asia and South Korea

137. China’s Foreign Policy and Strategic Stability towards South Asia: An Analysis

Author:: Muhammad Muzaffar and Imran Khan
Publication Date:: 07-2021
Content Type:: Journal Article
Journal:: South Asian Studies
Institution:: Department of Political Science, University of the Punjab
Abstract:: This study analyzes the China‟s foreign policy towards South Asia with the phenomena of strategic stability. South Asia has emerged as progressively vibrant interest to China‟s foreign policy. Chinese administration has showed consent to continue its harmonized policies towards regional states like India and Pakistan. Following the realistic approach, it is quite possible that China may not prove helpful in resolving the chronic regional territorial disputes however; it will be cooperative in bringing peace and stability in this region along with economic boom. The outcome of discussion reflects that the imperatives of regional security added new dimensions such as China‟s peaceful rise under Xi Jinping and China‟s role of strategic balance between India and Pakistan. Due to diverse Chinese interests in this region, it is expected that Beijing will pay more attention towards South Asian affairs in future and will play a role of more responsible stakeholder.
Topic:: Security, Foreign Policy, Nuclear Weapons, Economy, and Strategic Stability
Political Geography:: China, South Asia, and Asia

138. China-Pakistan Economic Corridor: Integrating China with the Persian Gulf and East Africa

Author:: Adam Saud and Shabir Amhad Khan
Publication Date:: 07-2021
Content Type:: Journal Article
Journal:: South Asian Studies
Institution:: Department of Political Science, University of the Punjab
Abstract:: China by launching the multi-trillion dollar Belt and Road Initiative (BRI) has possibly initiated the transformation of the prevailing global political system. The success of the BRI heavily depends upon the neighboring regions of China, as they will provide China with routes to integrate the international markets. In this regard, the China-Pakistan Economic Corridor (CPEC) is the key route; thus, also repeatedly termed as the flagship project of the BRI. The importance of CPEC is crucial for China as Beijing not only needs markets but imports of hydrocarbons from Persian Gulf and Africa. This paper aims to analyze the importance of the CPEC and Gwadar Port vis-à-vis securing China‟s national interests; securing multiple trade routes and attaining the much desired status of Great Power. Furthermore, the paper will shed light on the possible challenges China may face in this regard. The central question of this research is how the CPEC would help China integrate with the Persian Gulf and East-Africa? The nature of this research is critical and analytical; based on primary and secondary sources. The research is supported by theories of Neofunctionalism and Complex Interdependence.
Topic:: Foreign Policy, Infrastructure, Economy, Regional Integration, Belt and Road Initiative (BRI), and Strategic Interests
Political Geography:: Pakistan, Africa, China, South Asia, Asia, and Persian Gulf

139. Lithuania, China and EU lawfare to counter economic coercion

Author:: Steven Blockmans
Publication Date:: 12-2021
Content Type:: Policy Brief
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: Without any formal notification, China recently declined customs clearances for shipments from Lithuanian firms in the pharmaceutical, electronics, and food sectors, and warned multinationals of secondary sanctions if they did not sever their ties with Lithuania. These covert actions were taken in response to Lithuania’s invitation to Taiwan, which the People’s Republic of China (PRC) claims as its own territory, to open a ‘representative office’ in Vilnius. No other country has ever found itself at the receiving end of such intense and politically motivated Chinese economic pressure. These actions on the part of the PRC are politically explosive because it raises serious questions about the international conduct of the Chinese Communist Party (CCP). If it can simply wipe a country off its trade book, a state belonging to the EU’s customs territory no less, then what does it mean to be a member of the WTO, or a signatory to any other number of international agreements? And, given the lamentable state the WTO is in: could the European Commission’s newly proposed anti-coercion instrument bring any solace to Lithuania and the EU?
Topic:: Law, European Union, Economy, Trade, and Coercion
Political Geography:: China, Europe, Asia, and Lithuania

140. Analysis of the Turkish Services Industry and Korea-Turkey Cooperation

Author:: Cheol-Won Lee, Hyun Jean Lee, Mahmut Tekçe, and Burcu Düzgün Öncel
Publication Date:: 04-2020
Content Type:: Policy Brief
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: The Agreement on Trade in Services and the Agreement on Investment between Korea and Turkey came into effect in August 2018. This article focuses on the construction sector and the cultural contents sector to seek possible cooperative measures between the two countries.
Topic:: International Cooperation, Treaties and Agreements, Culture, Economy, Investment, and Industry
Political Geography:: Turkey, Middle East, Asia, and South Korea

141. The Economic Effects of Multinational Corporation Withdrawal and Policy Implications

Author:: Minsoo Han, Hyuk-Hwang Kim, Hyelin Choi, Danbee Park, and Jisu Kim
Publication Date:: 03-2020
Content Type:: Policy Brief
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: The shutdown of the GM Koreas Gunsan plant in May 2018 heightened social interest in the withdrawal of mutlinational corporations (MNCs). Against this backdrop, the forthcoming research The economic effects of multinational corporation withdrawal and policy responses studies the previous cases of MNC withdrawal, estimates the effects on labor market., and provides policy directions to address to the withdrawal. This note summarizes some of its important results.
Topic:: International Trade and Finance, Economy, Multinational Corporations, and Economic Policy
Political Geography:: Asia and Korea

142. North Korea’s Trade System and Implications for Inter-Korean CEPA

Author:: Jang Ho Choi and Yoojeong Choi
Publication Date:: 02-2020
Content Type:: Policy Brief
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: This study examines changes in trade-related legal systems in North Korea and ac-tual trade transactions, and analyzes them in accordance with international standards (the WTO regulatory framework). Through this process, we will draw up measures to im-prove North Koreas trade system to open up the external economy as well as signing of a Comprehensive Economic Partnership Ar-rangement (CEPA). The results of this study will contribute to understanding the main characteristics of trade-related laws and sys-tems within North Korea and suggest promis-ing directions for their improvement.
Topic:: Bilateral Relations, Partnerships, Economy, and Trade
Political Geography:: Asia, South Korea, and North Korea

143. An Analysis of Service Trade Regulation in ASEAN and Its Implications

Author:: Meeryung La
Publication Date:: 02-2020
Content Type:: Policy Brief
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: The Korean government has been pursuing a New Southern Policy (NSP) focusing on the “3P” areas of cooperation ‒ People, Prosperity, and Peace. The NSP puts people at a center of policy, and emphasizes the enhancement of cultural conversation and people-to-people exchange between Korea and ASEAN. The majority of services trade, an area with a low level of cooperation between Korea and ASEAN, is inherently based on the exchange of people. Promoting services trade flows between Korea and ASEAN could contribute to achieving the vision of a People-centered community in the region. Also, when taking into account the fact that services are integral to the working of GVC, the government should pursue policies to promote services trade and to enhance cooperation with ASEAN in the services sector. To this end, we aim to identify the current status of service trade and service trade barriers between ASEAN and Korea. This report briefly covers ASEAN’s trade in services and the restrictiveness of service trade regulations in ASEAN, and then suggests policy recommendations based on the results.
Topic:: International Cooperation, Regulation, Economy, Economic Policy, and Trade
Political Geography:: Asia and South Korea

144. A Peace Regime for the Korean Peninsula

Author:: Frank Aum, Jacob Stokes, Patricia M. Kim, Atman M. Trivedi, Rachel Vandenbrink, Jennifer Staats, and Joseph Yun
Publication Date:: 02-2020
Content Type:: Policy Brief
Institution:: United States Institute of Peace
Abstract:: A joint statement by the United States and North Korea in June 2018 declared that the two countries were committed to building “a lasting and stable peace regime on the Korean Peninsula.” Such a peace regime will ultimately require the engagement and cooperation of not just North Korea and the United States, but also South Korea, China, Russia, and Japan. This report outlines the perspectives and interests of each of these countries as well as the diplomatic, security, and economic components necessary for a comprehensive peace.
Topic:: Conflict Resolution, Security, Diplomacy, Economy, and Peace
Political Geography:: Russia, Japan, China, Asia, South Korea, North Korea, Korean Peninsula, and United States of America

145. Nine Months of COVID-19: The Impact on South Asia

Author:: Aparna Pande and Husain Haqqani
Publication Date:: 11-2020
Content Type:: Special Report
Institution:: Hudson Institute
Abstract:: Since February of 2020, the eight countries of South Asia have been contending with the devastating effects of the coronavirus pandemic. The region has seen the third-highest death rate in the world from the virus, which originated in Wuhan, China, and brought long-term health impacts the medical community is only beginning to recognize. The economic consequences of COVID-19 on South Asia are proving to be even greater than the healthcare challenges in the region. Different South Asian countries have dealt with the pandemic in various ways, but the economic costs overall seem to be higher than the healthcare consequences. A lot has happened in the world’s most populous region since the “Crisis from Kolkata to Kabul: COVID-19’s Impact on South Asia” report was published in May 2020. This document serves as an update on the progression of the pandemic in South Asia.
Topic:: Economy, COVID-19, and Health Crisis
Political Geography:: South Asia and Asia

146. Towards an Even Stronger Japan-US Alliance

Author:: Taro Hayashi
Publication Date:: 11-2020
Content Type:: Policy Brief
Institution:: Hudson Institute
Abstract:: Sixty years ago, Japan and the United States signed the Treaty of Mutual Cooperation and Security marking the beginning of the Japan-US Alliance as we know it today. The two countries have made a commitment to core values such as democracy, respect for human rights, and a rules-based international order. The Alliance has played an integral role in ensuring the peace and security of the two countries as well as realizing their shared vision of a free and open Indo-Pacific through security cooperation.
Topic:: Bilateral Relations, Economy, Alliance, and COVID-19
Political Geography:: Japan, Asia, North America, and United States of America

147. America’s Use of Coercive Economic Statecraft

Author:: Elizabeth Rosenberg, Peter Harrell, Paula J. Dobriansky, and Adam Szubin
Publication Date:: 12-2020
Content Type:: Special Report
Institution:: Center for a New American Security (CNAS)
Abstract:: U.S. policymakers will continue to intensively use a growing array of coercive economic tools, including tariffs, sanctions, trade controls, and investment restrictions. The growing use reflects a desire by policymakers to use coercive economic tools in support of a growing range of policy objectives. Diplomacy around these tools has long been challenging and can require hard choices. To use these tools effectively, policymakers should focus on articulating clear objectives and measuring effectiveness and costs. U.S.-China competition raises the stakes for getting the use of coercive economic statecraft right. Policymakers in the next presidential administration and Congress would be well-served to spend at least as much effort focusing on the positive tools of statecraft. These include domestic economic renewal, international finance and development incentives, and positive trade measures, among others.
Topic:: Development, Diplomacy, Sanctions, and Economy
Political Geography:: China, Asia, North America, and United States of America

148. A New Arsenal for Competition: Coercive Economic Measures in the U.S.-China Relationship

Author:: Elizabeth Rosenberg, Peter Harrell, and Ashley Feng
Publication Date:: 04-2020
Content Type:: Special Report
Institution:: Center for a New American Security (CNAS)
Abstract:: The United States and China have long used coercive economic measures to advance both economic and foreign policy objectives. In recent years, however, both countries have turned to coercive economic measures as mainstream instruments of foreign policy and national security policy, and increasingly have deployed coercive economic measures against each other. For the United States, China’s economic scale and global interconnections make it a fundamentally different type of target for coercive economic measures than the comparatively smaller and less sophisticated economies that have been primary targets of U.S. economic coercion in the past. The United States cannot simply isolate China from the global economy. Instead, it must adopt a more strategic focus on limiting Chinese actions in areas significant to U.S. national security and shoring up economic and technology arenas where the United States maintains lasting leverage. Over the past several years, the United States has deployed an array of coercive economic measures against China. The most prominent of these have been the tariffs on approximately two-thirds of U.S. imports from China. The tariffs remain largely in place despite implementation of the Phase One trade deal that the United States and China signed in January 2020. But the United States also has developed and deployed an increasingly sophisticated set of other coercive economic tools that will play a prominent role in U.S.-China relations over the years ahead, regardless of whether the United States and China fully implement the Phase One deal and reach a broader Phase Two trade agreement. Those other coercive economic tools include export controls, restrictions on U.S. imports to secure U.S. supply chains, heightened scrutiny of Chinese investment in the United States, sanctions, and stepped-up law enforcement measures against Chinese intellectual property (IP) theft and other Chinese activities in the United States. This expanding set of measures serves a broadening array of U.S. policy goals, including economic objectives, foreign policy goals, and the maintenance of America’s technological edge. The U.S. record of success in the use of these coercive economic measures has been mixed. While tariffs and other measures have succeeded in putting some macroeconomic pressure on China, they have not extracted fundamental concessions from Beijing. Targeted sanctions and law enforcement measures similarly have had economic impacts on some Chinese companies, but other Chinese companies have demonstrated an ability to weather U.S. economic coercion. To be effective in translating economic coercion into policy change by China, the United States needs to better integrate its coercive measures with each other and with other policies, better signal intentions and escalation, more rigorously assess impacts and costs, and galvanize allied support and coordinated action. For its part, China appears to recognize a balancing act between limiting economic ties with foreign partners in some domains and maintaining them in others. China has sought to distance certain Chinese economic sectors, particularly high-tech manufacturing, from the United States in some areas, investing heavily in domestic capacity development. In other areas where China must rely on foreign partners for technology, IP, or manufacturing, or where China does not appear to see a clear interest in severing trade, Beijing has sought to keep trade and investment flows moving in an unencumbered fashion. As for the United States, this is a dynamic policy environment.
Topic:: Security, Bilateral Relations, Economy, and Strategic Competition
Political Geography:: China, Asia, North America, and United States of America

149. Forging an Alliance Innovation Base

Author:: Daniel Kliman, Ben Fitzgerald, Kristine Lee, and Joshua Fitt
Publication Date:: 03-2020
Content Type:: Special Report
Institution:: Center for a New American Security (CNAS)
Abstract:: This report presents a blueprint for a community of technology innovation and protection anchored by America and its allies. Unless the United States builds this community—an “alliance innovation base”—it will steadily lose ground in the contest with China to ascend the commanding technological heights of the 21st century. Given that technology will increasingly determine future military advantage, underpin economic prosperity, and function as a tool for promoting liberal and illiberal visions of domestic governance, the stakes could not be higher. To compete, China is leveraging its formidable scale—whether measured in terms of research and development (R&D) expenditures, data sets, scientists and engineers, venture capital, or the reach of its leading technology companies. The only way for the United States to tip the scale back in its favor is to deepen cooperation with allies. The global diffusion of innovation also places a premium on aligning U.S. and ally efforts to protect technology. Unless coordinated with allies, tougher U.S. investment screening and export control policies, for example, will feature major seams that Beijing can exploit. America’s current approach to allies on technology innovation and protection remains a work in progress. In recent years, animated by concerns about China, the United States has made a concerted effort to step up engagement with allies in both areas. Existing mechanisms for deepening innovation with allies include technology scouting programs, multilateral cooperative frameworks, rapid innovation initiatives, and bilateral projects. However, these mechanisms at times lack sufficient resourcing, move too slowly, or feature rigid constraints on participation. U.S. instruments for working with allies on technology protection also contain major points of weakness. Multilateral export control regimes, though inclusive, are ponderous. The extraterritorial reach of U.S. export control laws can generate unintended obstacles to technology collaboration with allies. Bilateral and minilateral consultations on protection lack positive incentives to motivate allies to incur immediate costs such as forgoing technology sector investments from China.
Topic:: Science and Technology, Governance, Economy, and Alliance
Political Geography:: China, Asia, North America, and United States of America

150. Total Competition: China’s Challenge in the South China Sea

Author:: Patrick M. Cronin and Ryan Neuhard
Publication Date:: 01-2020
Content Type:: Special Report
Institution:: Center for a New American Security (CNAS)
Abstract:: China’s bid for ascendancy remains anchored in the South China Sea and surrounding Southeast Asian countries. The Chinese Communist Party (CCP) deems it economically and militarily vital to dominate the resources and sea lines of communication of a body of water twice the size of Alaska. Achieving this goal requires tethering neighboring countries into Beijing’s ambit while making the existing ruleset more favorable to China and displacing the dominant power behind the existing regional order. Some may find comfort in describing the scenario underway as a return to a “China-centered” rather than “Sino-centric” region.1 However, an authoritarian China’s coercive attempts to wield hegemonic control of the South China Sea threatens the sovereignty of Southeast Asian states and international freedom of the seas, both of which are of fundamental national interest to the United States. Yet the South China Sea and Southeast remain the least defended and most bountiful region susceptible to Chinese predations and inducements. The CCP leadership is obsessed with the idea that outside forces intend to contain China’s development, foment internal unrest, and prevent it from retaking what it considers to be its rightful place center stage in regional and global affairs. In partial response to deep-seated insecurities and renewed great-power ambitions, Xi Jinping and the CCP are in the process of attempting to exercise control over the entire nine-dash line claim covering the vast majority of the South China Sea and to turn Southeast Asia into a latter-day tributary system. CCP propaganda casts China’s quest for control over maritime Asia as an inexorable outcome of China’s rise and America’s decline. Curiously, the only government speaking seriously about “stopping” China is Beijing, suggesting that its policies are influenced more by subjective internal fears than by objective external realities. China wants nothing to stop it from consolidating its maximalist historic claims, from denying the United States the ability to intervene in regional conflicts, and from dismantling America’s postwar alliance system.
Topic:: Leadership, Economy, and Strategic Competition
Political Geography:: China, Asia, and South China Sea

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COLUMBIA UNIVERSITY PRESS