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31. China, Europe, and the Pandemic Recession: Beijing’s Investments and Transatlantic Security

Author:
John R. Deni, Chris Alden, Erik Brattberg, Roger Cliff, Mark Duckenfield, R. Evan Ellis, Nicholas Nelson, and Laura Speranza
Publication Date:
05-2022
Content Type:
Special Report
Institution:
The Strategic Studies Institute of the U.S. Army War College
Abstract:
Given the depth and breadth of the pandemic-induced recession in Europe, private companies in need of capital and governments looking to shed state-owned enterprises may be tempted to sell shares, assets, or outright ownership to investors with liquidity to spare. Of greatest concern is the role that China might play in Europe, building Beijing’s soft power, weakening allied geopolitical solidarity, and potentially reprising the role it played in the 2010s, when its investments in Europe expanded dramatically. More specifically, there is concern over China’s investments in infrastructure and sensitive technologies relevant to American and allied military operations and capabilities. Whether Europe is prepared and able to parry Beijing’s economic statecraft is somewhat unclear, given varied attitudes toward China and the patchwork of investment screening mechanisms across the continent. Regardless, the outcomes will have significant implications for US security and for the Defense Department specifically. In support of US European Command (EUCOM) and the Department of Homeland Security (DHS), the U.S. Army War College’s Strategic Studies Institute (SSI) assembled an interdisciplinary team to examine these issues and offer actionable policy recommendations for military leaders and decisionmakers on both sides of the Atlantic.
Topic:
Security, Military Affairs, Economy, Investment, Transatlantic Relations, COVID-19, State-Owned Enterprises, and Recession
Political Geography:
China, Europe, Asia, and United States of America

32. China’s Economy: More Debt than Meets the Eye

Author:
Antonio Graceffo
Publication Date:
11-2022
Content Type:
Journal Article
Journal:
China Brief
Institution:
The Jamestown Foundation
Abstract:
Since the beginning of this year, investment banks and international financial organizations, including the International Monetary Fund and the World Bank, have steadily downgraded their forecasts for the People’s Republic of China’s (PRC) GDP growth in 2022 to around 3.2 percent (Nikkei Asia, October 7). Most analysts agree that Beijing is in a difficult economic position, but the situation has the potential to become far worse due to off-balance sheet liabilities. Such debt risks defaulting, or may otherwise need to be covered by the central government. Another drag on the country’s balance sheet that has yet to fully hit home is the impact of Belt and Road Initiative (BRI) financing. Due to economic problems and debt crises in BRI partner countries, a large percentage of the initiative’s loans may have to be forgive or at least restructured. Before looking at its financing and hidden liabilities, it is necessary to establish an overall picture of the current PRC economy across a broad spectrum of indicators.
Topic:
Debt, Economy, Economic Growth, Belt and Road Initiative (BRI), and Investment
Political Geography:
China and Asia

33. The Enemy of My Friend Remains My Friend: China’s Ukraine Dilemma

Author:
Horia Ciurtin
Publication Date:
06-2022
Content Type:
Journal Article
Journal:
China Brief
Institution:
The Jamestown Foundation
Abstract:
State media in China remains equivocal about the level of destruction and mayhem caused by the Russian invasion of Ukraine. However, the Chinese government has stated it will meet the challenge of overcoming strained global supplies resulting from the conflict, and has emphasized that the nation’s food security will be ensured (People’s Daily, June 2; China News Service, May 27). Nevertheless, given Ukraine’s position as a global agricultural supplier, China has not fully appreciated the scope of the problem. At a broader level, the war is a litmus test for China’s ability to navigate geopolitical troubles along the Belt and Road Initiative (BRI). Thus far, the conflict has underscored the difficulties facing China in moving beyond convenient cordialities to play the role of a benign ‘balancer’ in global politics. In its relationships with Moscow and Kyiv, Beijing is entangled financially with both sides. Furthermore, China is now exposed to secondary sanctions due to its economic entanglement with Russia. At the same time, its investments, construction projects and supply chains that traverse Ukraine risk destruction as the war drags on.
Topic:
Geopolitics, Belt and Road Initiative (BRI), Investment, Supply Chains, and Russia-Ukraine War
Political Geography:
China, Ukraine, Eastern Europe, and Asia

34. The China-Pakistan Economic Corridor Hits Bottom in Balochistan

Author:
Kiyya Baloch and Akbar Notezai
Publication Date:
01-2022
Content Type:
Journal Article
Journal:
China Brief
Institution:
The Jamestown Foundation
Abstract:
In early January, several hours of heavy rain exposed poor infrastructure and exaggerated claims of massive development in Gwadar. The largely deserted port city sits on the Iranian border in Pakistan’s southwestern Balochistan province, which is wracked by poverty, militancy, and violence. Despite its challenging location, Gwadar has long been touted as the crown jewel of the much heralded China-Pakistan Economic Corridor (CPEC), the $62 billion megaproject connecting western China with the Arabian sea (China Brief, January 17, 2020). On January 4, heavy rains disrupted routine activities, forcing schools, restaurants, and shops to shut down. The town’s main streets and roads, as well as its tiny airport, were flooded (Twitter/KiyyaBaloch, January 4). Cars floated down roads and people used small wooden dhows to navigate flooded streets. Local reports claimed that in the remote southern parts of Gwadar, thousands of people fled their homes (Dawn, January 5). In the city center, which is about three miles from the seaport where the China Overseas Port Holding Company (COPHC) is building a $250 million coastal port, officials from the Pakistan Disaster Management Authority (PDMA) said floodwaters had reached heights of four to six feet (ARY News, January 4; Balochistan Times, January 4). As Gwadar has fallen on hard times, residents have blamed Beijing and Islamabad for ignoring them in their CPEC megaproject plans. The governments of both China and Pakistan claim that they are modernizing Gwadar by building a well-equipped hospital, parks, technical colleges, modern roads, an industrial park, and a seaport. For years, Chinese and Pakistani officials have claimed that this coastal backwater would soon compete with Dubai, Singapore, and Shenzhen to attract huge foreign investment. However, the currently poor state of Gwadar’s infrastructure underscores that this narrative remains illusory. The rain and flooding have wreaked havoc in Gwadar as it grapples with huge protests demanding better civic facilities and an end to economic injustices. Some have called the recent protests a struggle for civil rights, while others have labeled the movement — the “Baloch Spring” (Dawn, January 2). In December, the protests, which lasted for more than a month, became a heated topic of discussion on Pakistani social media. However, the protests attracted only modest international media attention, and were officially called off on December 16. While it is too early to determine the full impact of the protests, Pakistan Prime Minister Imran Khan and the Chief Minister of Balochistan province have formed a committee to address protesters’ concerns.
Topic:
Infrastructure, Economy, and Investment
Political Geography:
Pakistan, China, South Asia, and Asia

35. Investors beware: Europe’s top firms are highly exposed to China

Author:
Ties Dams and Xiaoxue Martin
Publication Date:
04-2022
Content Type:
Special Report
Institution:
Clingendael Netherlands Institute of International Relations
Abstract:
Europe’s top firms are highly exposed to China, and therefore to China-related geopolitical risk. This risk is only set to increase in the coming years, as geopolitical tensions between China, the US and the EU are not expected to decrease. Moreover, case studies of LVMH, HSBC, ASML and BMW show that some of Europe’s biggest listed firms could and should offer investors more transparency on their risk-management strategies. Intelligence on China and geopolitical risk exposure is key for investors, and investors that get ahead of the curve may have the edge in the long term. This report is aimed at investors in Europe’s biggest listed firms. It argues that investors have a growing need for transparency amongst European biggest companies with regard to their strategies in dealing with China-related geopolitical risk. Even investors without direct interests in China are or will be affected by China-related geopolitical risk due to the various forms of exposure of companies in the European home market. This means that investors may be increasingly exposed to the risks linked to great power competition, without having the knowledge necessary to anticipate geopolitical changes. As geopolitical tensions between China, the US and the EU are not expected to decrease, investors would be wise to seek greater transparency about European companies’ exposure to the Chinese market – and indeed get ahead of the curve and gain a competitive advantage by investing in those firms that have forward-looking geopolitical strategies in place. This report aims to put this point on investors’ strategic agenda by making the following three points: Europe’s top firms are highly exposed to China. China-related geopolitical risk is spreading. Case studies suggest that Europe’s top firms may not be sufficiently transparent about geopolitical risk management.
Topic:
Geopolitics, Business, Investment, and Risk
Political Geography:
China and Europe

36. Will the Partnership for Global Infrastructure and Investment be a Game-changer in the Indo-Pacific?

Author:
Don McLain Gill
Publication Date:
07-2022
Content Type:
Special Report
Institution:
East-West Center
Abstract:
Mr. Don McLain Gill, Philippines-based geopolitical analyst and author, explains that the G7 launched the Partnership for Global Infrastructure and Investment (PGII) at an opportune time as the COVID-19 pandemic has significantly derailed China’s Belt and Road Initiative’s (BRI) momentum and Beijing’s questionable lending practices have come under greater scrutiny.
Topic:
Infrastructure, Partnerships, Belt and Road Initiative (BRI), Investment, and COVID-19
Political Geography:
China and Indo-Pacific

37. China’s increased presence in Latin America: Win-win relations or a new dependency? A state of the art

Author:
Daniel Agramont Lechín
Publication Date:
01-2022
Content Type:
Working Paper
Institution:
Postgraduate Program on Sustainable Development and Social Inequalities in the Andean Region (trAndeS)
Abstract:
The rise of the Popular Republic of China (PRC) is one of the most significant events in contemporary international relations. However, at the global level, the “reemergence of China as a major global power has led to a considerable debate over the likely consequences for the rest of the world” (Jenkins, 2010: 810). China’s growing power raises questions as to the meaning of its superpower status as a nation, and the impact of its newfound influence in not only the Asia-Pacific region, but also the Global South (Dessein, 2015). In the specific case of Latin America and the Caribbean (LAC), the debate centers on the potential disadvantages that China’s vast supply of financial resources might bring for the region. Accordingly, the current paper is intended to examine the debate that has arisen in recent literature around the impact of China’s increased economic presence on Latin America –with win-win relations on the one hand and new dependency on the other.
Topic:
International Relations, Economics, Investment, and Dependency
Political Geography:
China, Asia, and Latin America

38. Treading Lightly: China’s Footprint in a Taliban-led Afghanistan

Author:
Jiayi Zhou, Fei Su, and Jingdong Yuan
Publication Date:
11-2022
Content Type:
Commentary and Analysis
Institution:
Stockholm International Peace Research Institute (SIPRI)
Abstract:
This SIPRI Insights Paper provides a preliminary assessment of China’s attitudes to and policies on Afghanistan since the August 2021 Taliban takeover. It examines the scope of China’s security, economic and humanitarian interests, and the depth of its engagement so far. It finds that China’s footprint has been minimal due not only to China’s non-interference policy but also to a range of broader challenges: the militant extremist groups that continue to operate on Afghan soil, the risks of investing in a country where the government remains unrecognized by any member of the international community and a fragile stability that is far from conducive to long-term planning. While there may be prospects and opportunities for China to contribute to Afghan peace and development, particularly from a broader regional perspective, current realities mean that China’s overall approach to Afghanistan will remain cautious, pragmatic and limited.
Topic:
Security, Foreign Policy, Development, Taliban, and Investment
Political Geography:
Afghanistan, China, and South Asia

39. How difficult is China’s business environment for European and American companies?

Author:
Uri Dadush and Pauline Weil
Publication Date:
05-2021
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Despite tensions over China’s discriminatory business practices, China’s trade continues to thrive, and the country has taken over from the United States as the first destination for foreign investment. American and European businesses continue to be engaged in China’s large and growing market, even amid a trade war between China and the United States. Drawing on surveys of companies and international comparisons, we show that – contrary to the prevailing narrative – China’s business practices have improved significantly in recent years. China’s business environment is today generally more favourable than that in other large countries at similar levels of development and, in some though certainly not all aspects, is in line with the Organisation for Economic Co-operation and Development average. Differences over geopolitics and human rights must be addressed, but it is clear that trade and investment agreements conditioned on accelerated reforms in China would yield substantial dividends. The benefits of such deals would accrue not only to foreign investors in China and exporters to China, but also to consumers and importers in the European Union and, especially, in the US, where punitive tariffs on China remain in effect. Critical aspects in the negotiations would include better access for American and European investors to China’s market for services and improved enforcement of rules and regulations in China. As in many middle-income countries, uneven enforcement of the law (rather than the law itself) remains a critical problem in China.
Topic:
Development, Bilateral Relations, European Union, Business, and Investment
Political Geography:
China, Europe, Asia, North America, and United States of America

40. Is the European Union’s investment agreement with China underrated?

Author:
Uri Dadush and André Sapir
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
The European Union is very open to foreign direct investment. By comparison, despite considerable liberalisation in the past two decades, foreign investors in China’s markets still face significant restrictions, especially in services sectors. Given this imbalance, the EU has long sought to improve the situation for its companies operating or wanting to operate in China. After eight years of negotiations, the EU and China concluded in December 2020 a bilateral Comprehensive Agreement on Investment (CAI). The text awaiting ratification aims to give foreign investors greater market access, enforceable via state-to-state dispute settlement. It does not yet, however, cover investor protection (such as against expropriation). Meanwhile, investor protection is covered by bilateral investment treaties between EU countries and China, which remain in force. The CAI has been met in some quarters with scepticism on economic and geopolitical grounds. The main criticism is that it provides little new market access in China, and that this small economic gain for the EU comes at the price of breaking ranks with its main political ally, the United States. Our assessment, which focuses on the economic implications, is different. It is true the CAI provides only modest new market access in China, but this is because China has already made progress in recent years in liberalising its foreign investment regulations unilaterally. The CAI binds this progress under an international treaty, marking an improvement for EU firms insofar as their market access rights can be effectively enforced. Most important, the CAI includes new rules on subsidies, state-owned enterprises, technology transfer and transparency, which will improve effective market access for EU firms operating in China. These bilateral new rules could also pave the way for reform of the multilateral rules under the World Trade Organisation, with the aim of better integrating China into the international trading and investment system – a goal shared by the EU, the United States and other like-minded countries. From an economic viewpoint therefore, the CAI is an important agreement, and one worth having. However, its ratification by the European Parliament is unlikely while China continues to apply sanctions against some members of the European Parliament and other critics of China’s human rights record.
Topic:
Science and Technology, Bilateral Relations, European Union, Investment, and Liberalization
Political Geography:
China and Europe