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911. Responding to Uncertainty: Syndication Partner Choice by Foreign Venture Capital Firms in China.

Author:
Xiao Huang, Martin Kenney, and Donald Patton
Publication Date:
03-2015
Content Type:
Working Paper
Abstract:
Cross-border venture capital investment has grown dramatically. Drawing upon observations about the liability of foreignness, previous research has shown that foreign venture capitalists (VCs) tend to partner with local VCs in order to offset information asymmetry and the liabilities of foreignness. Much of the literature has suggested that local VCs should help reduce operational uncertainty. This paper examines syndication partner choice in China, which today is likely the most uncertain environment in which foreign VCs operate on a large scale. This provides an ideal environment for understanding partner selection under uncertainty. Our results show that foreign investors are more likely to choose Chinese investors in later rounds and in more mature portfolio firms. While foreign firms with more Chinese experience are more likely to co-invest with Chinese VCs, the older foreign VC firms are less likely to do so. Remarkably, having a Chinese office made foreign VCs less likely to coinvest. In seed-stage investments, when uncertainty is the greatest, foreign firms are least likely to co-invest with Chinese VCs, and this was not affected by the maturation of the market, while at the later stage, when uncertainty is lowest, they are most likely to co-invest.
Topic:
Economics, International Trade and Finance, Markets, and Political Economy
Political Geography:
China

912. Overcoming Barriers to U.S.-China Cooperation

Author:
Maral Noori, Daniel Jasper, and Jason Tower
Publication Date:
08-2015
Content Type:
Policy Brief
Institution:
United States Institute of Peace
Abstract:
In 2011, U.S. president Barack Obama announced plans to "pivot" toward Asia. In 2012, Chinese president Xi Jinping expressed his hope for "a new type of relationship" with the United States. A lack of strategic trust between the two countries, however, prevents critically needed productive cooperation. This Peace Brief addresses the misunderstandings behind this mistrust and a possible way to move beyond them.
Topic:
International Relations, Communism, Diplomacy, and Bilateral Relations
Political Geography:
United States and China

913. An Assessment of the Korea-China Free Trade Agreement

Author:
Jeffrey Schott, Eujiin Jung, and Cathleen Cimino-Isaacs
Publication Date:
12-2015
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Of all the free trade agreements (FTAs) concluded by Korea with its major trading partners since the turn of the century, the Korea-China FTA may be the largest in trade terms. It is, however, far from the best in terms of the depth of liberalization and the scope of obligations on trade and investment policies. Korea and China agreed to liberalize a large share of bilateral trade within 20 years, but both sides incorporated extensive exceptions to basic tariff reforms and deferred important market access negotiations on services and investment for several years. Political interests trumped economic objectives, and the negotiated outcome cut too many corners to achieve such a comprehensive result. The limited outcome in the Korea-China talks has two clear implications for economic integration among the northeast Asian countries. First, prospects for the ongoing China-Japan-Korea talks will be limited and unlikely to exceed the Korea-China outcome. Second, Korea and Japan need to strengthen their bilateral leg of the northeast Asian trilateral and the best way is by negotiating a deal in the context of the Trans-Pacific Partnership.
Topic:
Economics, International Trade and Finance, Politics, and Bilateral Relations
Political Geography:
United States, China, Asia, and Korea

914. Estimates of Fundamental Equilibrium Exchange Rates, November 2015

Author:
William R. Cline
Publication Date:
11-2015
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The latest semiannual fundamental equilibrium exchange rate (FEER) estimates find that the US dollar is now overvalued by about 10 percent, comparable to levels in 2008 through early 2010 and again in 2011. Unlike then, the current strong dollar does not reflect a weak renminbi kept undervalued by major exchange rate intervention by China. Instead, China's current account surplus has fallen sharply relative to GDP, and its recent intervention has been to prevent excessive depreciation rather than to prevent appreciation. Additionally, declines in the real effective exchange rates (REERs) for major emerging-market economies and resource-based advanced economies, driven by falling commodity prices in recent months, have strengthened the dollar. Recent increases in the REERs for the euro area and Japan have removed their modest undervaluation identified in the last FEERs estimates in May, and the Chinese renminbi remains consistent with its FEER. The dollar's rise by nearly 15 percent in real effective terms over the past two years could impose a drag of nearly one-half percent annually on US demand growth over the next five years. As the Federal Reserve moves to normalize US monetary policy, it may need to consider a gentler rise in interest rates than it might otherwise have pursued, both to temper possible further strengthening of the dollar in response to higher interest rates and to help offset the demand compression from falling net export
Topic:
Economics, International Trade and Finance, Monetary Policy, and GDP
Political Geography:
United States and China

915. Russia's Pivot to Asia: Myths and Realities

Author:
Daniele Fattibene
Publication Date:
11-2015
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
Russia’s “pivot to Asia” has come to the fore in the wake of the crisis over Ukraine. Growing tensions with the West over the common neighbourhood, coupled with economic sanctions, have accelerated this trend, with China gaining in strength as both an economic and military partner to Moscow. The Kremlin’s propaganda has sought to convince the broader public that Russia’s strategies in Eastern Europe, Central Asia and the Arctic region are a complement to China’s new Silk Road Economic Belt. Nonetheless, behind the headlines huge potential problems jeopardise the emergence of a durable Sino-Russian consensus in Eurasia. Against this backdrop, the EU should opt for “strategic patience.” This would be a far more effective policy choice than finger pointing, which only deepens the mutual ideological clash between the EU and Russia.
Topic:
Diplomacy, Economics, International Trade and Finance, Bilateral Relations, and Sanctions
Political Geography:
Russia, China, and Asia
Publication Identifier:
978-88-98650-69-9
Publication Identifier Type:
DOI

916. Is Europe to Benefit from China's Belt and Road Initiative?

Author:
Nicola Casarini
Publication Date:
10-2015
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
With the One Belt One Road (OBOR), arguably Beijing’s major diplomatic outreach in decades, a process towards greater Sino-European connectivity has been put in place. The implementation of the OBOR in Europe has focused so far on financing infrastructure projects, in particular railways in Southeast Europe and ports in the Mediterranean Sea. This has been complemented by growing monetary linkages between the People’s Bank of China and European central banks through the establishment of currency swap agreements and yuan bank clearing – so-called “offshore renminbi hubs” – with the aim of lowering transaction costs of Chinese investment and bolstering the use of the Chinese currency. While there are undoubtedly great economic opportunities, China’s OBOR initiative also presents the EU with a major political challenge. There is the risk, in fact, that a scramble for Chinese money could further divide EU member states and make it difficult for Brussels to fashion a common position vis-à-vis Beijing. Furthermore, China’s economic penetration into Europe may lead – if not properly managed – to a populist backlash as well as a strain in relations with Washington. All these elements should be taken into consideration by EU policymakers, as China’s OBOR makes inroads into the Old Continent.
Topic:
Development, International Trade and Finance, Bilateral Relations, and Infrastructure
Political Geography:
China and Europe
Publication Identifier:
978-88-98650-64-4
Publication Identifier Type:
DOI

917. Maintaining Financial Stability in the People's Republic of China during Financial Liberalization

Author:
Nicholas Borst and Nicolas R. Lardy
Publication Date:
08-2015
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
China's banking system is now the largest in the world, and its capital markets are rapidly approaching the size of those in the advanced economies. Borst and Lardy trace the evolution of China's financial system away from a traditional bank-dominated and state-directed financial system toward a more complex, market-based system. They analyze and outline the optimal sequence of financial reforms needed to manage the new risks accompanying this evolution.
Topic:
Economics, Markets, Financial Crisis, and Reform
Political Geography:
China

918. Why China Won't Abandon Its Nuclear Strategy of Assured Retaliation

Author:
Fiona S. Cunningham and M. Taylor Fravel
Publication Date:
12-2015
Content Type:
Policy Brief
Institution:
Belfer Center for Science and International Affairs, Harvard University
Abstract:
Whether China will abandon its long-standing nuclear strategy of assured retaliation for a first-use posture will be a critical factor in U.S.-China strategic stability. In recent years, the United States has been developing strategic capabilities such as missile defenses and conventional long-range strike capabilities that could reduce the effectiveness of China's deterrent. Writings by Chinese strategists and analysts, however, indicate that China is unlikely to abandon its current nuclear strategy.
Topic:
Arms Control and Proliferation, Nuclear Weapons, Weapons of Mass Destruction, Military Strategy, and Bilateral Relations
Political Geography:
United States, China, and East Asia

919. Much Ado about Nothing? The RMB's Inclusion in the SDR Basket

Author:
Hongying Wang
Publication Date:
12-2015
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation
Abstract:
The International Monetary Fund recently concluded its quinquennial review of the composition of the Special Drawing Right (SDR), accepting the Chinese currency into the SDR basket alongside four major international currencies — the US dollar, the euro, the British pound and the Japanese yen. The Chinese government has spent a great deal of energy and political capital to achieve this outcome. This policy paper explains China’s interest in this seemingly exotic and technical pursuit, identifying the political and economic motivations underlying this initiative.
Topic:
Economics, Politics, International Monetary Fund, and Monetary Policy
Political Geography:
China

920. G20 Monitor: G20 outreach to society in 2015

Author:
Tristram Sainsbury
Publication Date:
10-2015
Content Type:
Working Paper
Institution:
Lowy Institute for International Policy
Abstract:
The G20 engagement groups represent a cross-section of society at the G20. They have an important role in publicly holding the G20 to account, assessing the forum’s performance, and contributing to the G20 agenda. The groups have differing agendas and vastly different priorities ahead of the Antalya Leaders’ Summit in November. However, there are some areas of overlap, such as calls from several groups for G20 leaders to respond to the Syrian refugee crisis and be more active in addressing gender inequality. Open and effective outreach to broader society should be an important priority of the 2016 Chinese G20 Presidency. China should look to improve the efficiency of the engagement processes in 2016, so that engagement groups are more focused on recommending fewer, but more pragmatic and high-impact policy solutions.
Topic:
Foreign Policy, Diplomacy, International Cooperation, International Organization, and International Trade and Finance
Political Geography:
China