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1. Xi Demands Fealty Despite Domestic And Foreign Woes

Author:
Willy Wo-Lap Lam
Publication Date:
01-2024
Content Type:
Journal Article
Journal:
China Brief
Institution:
The Jamestown Foundation
Abstract:
The Politburo held a “democratic life meeting (民主生活会)” on December 21–22, 2023, in which President Xi Jinping gave an internal, unpublished speech. According to accounts provided to the author by three officials at the rank of department head or above, Xi admitted that he had repeatedly postponed the Third Plenum of the 20th Central Committee (which according to Party norms should have taken place in October) because he “could not offer any viable solution for the nation’s problems.” Xi, who is general secretary of the Chinese Communist Party (CCP) and commander-in-chief, went on to blame the other 23 Politburo members and other senior cadres, not only for failing to give him good advice but also for demonstrating signs of disobedience. Reports of Xi’s frank admission of the dire straits of the Party’s leadership were widely circulated on social media. The official Xinhua read-out of the Politburo meeting also cited Xi as demanding “unison of thought” among top-tier officials. This entails adhering closely to the instructions of the “core leadership”—in other words, to Xi himself (Xinhua, December 25, 2023). The supreme leader raised the “two safeguards (两个维护),” a slogan that refers to “safeguarding the authority of comrade Xi Jinping as core of the party” and “safeguarding Xi Jinping Thought on socialism with Chinese characteristics for a new era.” President Xi also admonished his close advisors to “take a firm grip on the internal laws of developments [of issues]; accurately distinguish between events and trends, crises and opportunities, and benefits and harms … and effectively combat risks and take action on the basis of stability” (People’s Daily, December 23, 2023). This instruction tallies with caveats given by Xi throughout the past year, in which he has warned that China faces unprecedented challenges and that the party-state apparatus must ready itself to tackle “black swans and gray rhinos.”
Topic:
Financial Crisis, Leadership, Xi Jinping, Chinese Communist Party (CCP), and Banking
Political Geography:
China and Asia

2. Why can ASEAN Promote Sustainable Development Cooperation?

Author:
Cao Ting and Luo Yongkun
Publication Date:
12-2024
Content Type:
Journal Article
Journal:
Revista Brasileira de Política Internacional (RBPI)
Institution:
Instituto Brasileiro de Relações Internacionais (IBRI)
Abstract:
ASEAN has arguably been one of the most successful regionalisms, which since its inception has undergone several profound challenges, including the 1997 Asian financial crisis. In response to the fierce competition among major powers and the economic and social challenges, ASEAN has concentrated on sustainable development to promote unity and centrality. Sustainable development cooperation aligns with the interests of ASEAN states and helps to promote the construction of the ASEAN community and strike a balance of power on the world stage. Nevertheless, there may be a need for more efforts to resolve the challenges facing sustainable development.
Topic:
International Cooperation, Financial Crisis, Sustainable Development Goals, Regionalism, and ASEAN
Political Geography:
Asia and Southeast Asia

3. The Greek Tragedy: Narratives and Imagined Futures in the Greek Sovereign Debt Crisis

Author:
Jens Beckert and Hans Lukas Richard Arndt
Publication Date:
04-2024
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
Between 2009 and 2015 Greece underwent a profound sovereign debt crisis that led to a serious political crisis in Europe and the restructuring of Greek debt. We argue that the prevalence of negative narratives about the future contributed to the changes in spreads of Greek bonds during the crisis. We support our argument by presenting results from text mining a corpus of 9,435 articles from the Financial Times and the Wall Street Journal. Based on sentiments and a machine learning model predicting future reference, we identify newspaper articles which generate negative and uncertain outlooks for the future in the expert discourse. We provide evidence from time series regression analysis showing that these negative imagined futures have explanatory power in models estimating spread development of Greek vs. German sovereign bonds. We suggest that these findings provide good evidence for the relevance of “imagined futures” for investors’ behavior, and give directions for an innovative contribution of sociology to understanding the microfoundations of financial crises.
Topic:
Debt, Financial Crisis, Financial Markets, Future, Sovereign Debt, Economic Sociology, Sentiment Analysis, and Valuation
Political Geography:
Europe and Greece

4. Mitigating the Political Cost of Financial Crisis with Blame Avoidance Discourse: The Case of Turkey

Author:
Büşra Söylemez-karakoç
Publication Date:
08-2024
Content Type:
Journal Article
Journal:
Uluslararasi Iliskiler
Institution:
International Relations Council of Turkey (UİK-IRCT)
Abstract:
How do centralized governments mitigate the political cost of severe financial crises? The economic voting scholarship has established that the clarity of responsibility, i.e., government accountability for economic conditions to the mass public, is a necessity for electoral reward or punishment for economic performance. On the one hand, political centralization, which reduces the number of veto players, may increase the visibility of the role of the executive in policy success or failure. On the other hand, it allows an uncontested blame avoidance discourse, especially when accompanied with democratic backsliding. Furthermore, the recent backlash against globalization has enabled blame shifting to international actors in many countries. Against this theoretical framework, we comparatively analyze the responsibility attribution discourses for the 1994, 2001, and 2018-2022 financial crises in the statements of incumbent presidents, ministers, and parliament members of Turkey. We find that while blame avoidance discursive strategies have been attempted in all three cases, the responsibility attribution for the 1994 and 2001 crises mostly targeted the executive. In contrast, for the ongoing crisis, the responsibility discourse is dominated with blaming international political economy factors, creating ambiguity, and targeting domestic non-governmental actors.
Topic:
Economics, Globalization, Politics, Financial Crisis, Voting, and Democratic Backsliding
Political Geography:
Turkey and Middle East

5. The Motives for Chinese and Western Countries’ Sovereign Lending to Africa

Author:
Eckhardt Bode
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper is one of the first to show systematically that the motives for sovereign lending to African countries differed considerably between China and Western countries during the last two decades. While Chinese lending mainly served its own economic or geopolitical objectives, which is well-known from the existing literature, Western countries’ lending also pursued objectives that appear to be at odds with their self-interests but whose precise nature is not yet well-understood. Using a new, da-taset on loans from China, Western countries and multilateral organizations to African countries, I empirically examine a broad variety of potential motives, aim at separating the motives pursued by the national governments from those pursued by their lending agencies, and employ an estimation strategy with increasingly complex fixed effects that yields additional interesting insights into the specificities of the motives.
Topic:
Economics, Emerging Markets, International Trade and Finance, Financial Crisis, Geopolitics, and Sovereign Lending
Political Geography:
Africa, China, and Global West

6. Sovereign Haircuts: 200 Years of Creditor Losses

Author:
Clemens M. Graf von Luckner, Josefin Meyer, Carmen M. Reinhart, and Christoph Trebesch
Publication Date:
06-2024
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
We study sovereign external debt crises over the past 200 years, with a focus on creditor losses, or "haircuts". Our sample covers 327 sovereign debt restructurings with external private creditors over 205 default spells since 1815. Creditor losses vary widely (from none to 100%), but the statistical distribution has remained remarkably stable over two centuries, with an average haircut of around 45 percent. The data also reveal that “serial restructurings”, meaning two or more debt exchanges in the same default spell, are on the rise. To account for this trend toward serial renegotiation, we introduce the “Bulow-Rogoff haircut” – a cumulative measure that captures the combined creditor loss across all restructurings during a single debt crisis. Using this measure, we show that longer debt crises deliver larger haircuts and that interim restructurings provide limited debt relief. We further examine past predictors of the size of haircuts and identify “rules of thumb” applicable to future defaults. Poorer countries, first-time debt issuers, and those that borrowed heavily from external creditors all record significantly higher haircuts in case of a default. Geopolitical shocks – such as wars, revolutions, or the break-up of empires – deliver the deepest haircuts. Sovereign debt investment disasters are often linked to (geo-)political disasters.
Topic:
Monetary Policy, Financial Crisis, Geopolitics, Credit, Sovereign Debt, Emerging Economies, Debt Restructuring, and Sovereign Default
Political Geography:
Global Focus

7. The Egyptian Financial Crisis: Implications for the region, and for Israel too

Author:
Eran Lerman
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
Jerusalem Institute for Strategy and Security (JISS)
Abstract:
Egypt continues to play an active role in regional affairs, including the Aqaba emergency meeting on the Palestinian situation (February 26) and the ongoing effort to prevent escalation in Gaza. At the same time, Cairo is in the middle of a significant financial crisis. The effects of the war in Ukraine – specifically, grain shortages – brought the Egyptian pound to more than 30 to the dollar, up from 20 in November and 15 in early 2022, facilitated by deliberate government action in response to demands by the IMF. Inflation still soars, and so does youth unemployment. All this could destabilize a nation of 105 million on our border, with dire consequences.
Topic:
Financial Crisis, Conflict, Fiscal Policy, and Financial Stability
Political Geography:
Africa, Middle East, Israel, Egypt, and MENA

8. China as an International Lender of Last Resort

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

9. Global Value Chain Disruptions and Firm Survival During COVID-19: An Empirical Investigation

Author:
Sasidaran Gopalan and Ketan Reddy
Publication Date:
08-2023
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
Despite the rapid acceleration of countries participating in global value chains (GVCs) over the last three decades, global GVC participation rates have plateaued since the global financial crisis (GFC) and worsened with the onset of the coronavirus disease (COVID-19) pandemic. The massive supply chain disruptions induced by the pandemic not only appeared to expose the vulnerabilities of GVCs, largely because of concentration risks, but also contributed to a dramatic decline in trade flows globally. As countries around the world emerge from the shadows of the pandemic, there is growing academic and policy interest in deciphering how countries should build effective strategies that facilitate firm survival, especially viewed from the lens of resilience and robustness. Considering this background, in this paper, we propose to make a twofold contribution to this literature. First, we undertake a comprehensive firm-level investigation (in a cross-country setting) to ascertain whether firms engaged in GVCs relative to non-GVC firms exhibited better survival instincts during the COVID-19 pandemic. Second, we uncover the heterogeneity of the shock across sectors and industries, considering the varied sectoral/industrial exposure to the COVID-19 pandemic. We document that GVC firms showcased greater robustness and resilience during the pandemic phase compared with other firms. Our results also show that the degree of resilience and robustness varies significantly by industry.
Topic:
Financial Crisis, Trade, Global Value Chains, and COVID-19
Political Geography:
Global Focus

10. Cash Cabal: How Hezbollah Profits from Lebanon's Financial Crisis

Author:
Samara Azzi and Hanin Ghaddar
Publication Date:
06-2023
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
In March 2020, Lebanon opted for a “hard default” on $32 billion in sovereign debt, allowing the government to avoid negotiating with its Eurobond holders and investors. Beirut thereafter showed little interest in addressing the consequences of default, and the country’s economic meltdown worsened. As usual, the Lebanese people were the casualties, suffering amid what the World Bank has called a “deliberate depression.” This official negligence has cleared the way for a proliferating cash economy—which in turn has spawned a currency exchange scheme involving the central bank, foreign exchange agents, and Lebanese politicians. Hezbollah specifically has profited in areas ranging from real estate to solar energy, pharmaceuticals, and the illicit Captagon trade. In this Policy Note, authors Samara Azzi and Hanin Ghaddar—a venture capitalist and a former Lebanese journalist—skillfully diagram the corrupt status quo and explain why entrenched actors want to avoid systemic change. But as the study makes clear, the future health of the Lebanese economy requires an overhaul, and the international community must now press for deep reforms and personal accountability.
Topic:
Politics, Non State Actors, Financial Crisis, Economy, Hezbollah, and Shia Islam
Political Geography:
Middle East and Lebanon