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601. The Internationalisation of the Chinese Renminbi and China’s Digital Currency Plans

Author:
Lorenzo Bencivelli and Michele Savini Zangrandi
Publication Date:
04-2023
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
China has made major reforms to boost the international standing of its currency. The global presence of the renminbi remains contained, however. This is due to China’s economic structure (a persistent current account surplus and a partially closed financial account) and the government’s grip on the economy. China is also a Central Bank Digital Currency (CBDC) forerunner. The digital yuan (e-cny) is already active in a large scale trial. Many claim that the e-cny could provide a major boost to the internationalisation of the renminbi. However, the internationalisation of the renminbi would require major economic reforms that cannot be bypassed by the deployment of new technologies. The e-cny is therefore unlikely to boost the renminbi’s international presence. Yet, its underlying technology could be exported to other countries wishing to deploy their own-currency CBDCs. Much like with telecommunication equipment, this scenario would put China in the position of being a provider of a critical infrastructure. In the longer run, the export of e-cny technology might also facilitate the creation alternative payment networks, though this scenario is not very likely.
Topic:
Political Economy, Governance, Finance, Currency, and Digital Policy
Political Geography:
China and Asia

602. Italy’s Pivot to the Indo-Pacific – Towards a Value-driven Foreign Policy?

Author:
Nicola Casarini
Publication Date:
05-2023
Content Type:
Commentary and Analysis
Institution:
Istituto Affari Internazionali
Abstract:
Italy is stepping up its involvement in the Indo-Pacific, both in the economic and security realms. The cabinet led by Giorgia Meloni – a centre-right coalition often portrayed by commentators as right-wing and nationalist – is rebalancing Rome’s policy in the Far East by scaling down ties with Beijing and by effectively lending support to the United States and its Asian allies vis-à-vis an increasingly assertive and self-confident China. Moving away from previous centre-left governments that tended to prioritise commercial relations with Beijing, the conservative coalition in power since September 2022 has been fostering defence-related cooperation with Japan and India and chip-related cooperation and investments with Taiwan. Moreover – and remarkably for a country that has long been absent from Asian security – the Italian government has sent a patrol vessel to the South China Sea and plans to forward the country’s flagship aircraft carrier to the area to conduct joint exercises with the navies of Australia, Japan, the United Kingdom and the United States. The quantity and quality of initiatives being undertaken warrant the label of an Italian ‘pivot’ to the Indo-Pacific. By upgrading its presence in the region, Italy joins the other G7 nations in their efforts to uphold the rules-based order and dissuade Beijing from invading Taiwan. However, to consolidate the western anchorage of this pivot, the Meloni government needs to fully align its policy towards Beijing with that of the Euro-Atlantic allies – which includes deciding whether to continue to lend Italy’s official support to China’s Belt and Road Initiative or not.
Topic:
International Relations, Security, Foreign Policy, Economy, and Belt and Road Initiative (BRI)
Political Geography:
China, Europe, Taiwan, Asia, Italy, and Indo-Pacific

603. Reinventing Soft Power: The Strong Impact of China’s Soft Power “Shortcomings” on the Global South

Author:
Tanina Zappone
Publication Date:
07-2023
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
After being introduced into the Chinese academic debate in the 1990s, the notion of soft power has undergone such a process of “Sinicisation” that some scholars now wonder if the original concept has been gradually “reinvented” in China. Given worsening opinions about the PRC in the US and Europe over the last years, many analysts have stressed the weakness of China’s soft power, pointing to its state-centred approach and lack of an attractive set of values to be emulated as the main shortcomings. However, China’s growing influence in the Global South shows that these analyses have misevaluated the real goals and motivations of China’s soft power. The Russia-Ukraine war provides telling examples of the successful dynamics of China’s “defensive” or “negative” version of soft power and suggests it has significant impact in the least industrialised countries.
Topic:
Foreign Policy, Development, and Soft Power
Political Geography:
Russia, China, Ukraine, Asia, and Global South

604. China and the Global South: Many Initiatives, One Narrative

Author:
Marina Rudyak
Publication Date:
08-2023
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
Since its 2013 launch, the China-led Belt and Road Initiative (BRI) has stirred heated debates. Despite Beijing framing it as win-win cooperation, concerns mounted over BRI’s risks for involved countries, especially in the Global South. China’s narrative merely signals a search for an effective communication strategy and international discourse power, while its understanding of development remains constant. Developing countries play a crucial role in China’s pursuit of global status. Firstly, it positions itself as the advocate for developing nations, promoting “diverse paths to modernisation” and “true multilateralism”. Secondly, China aims to redefine major power by prioritising development and security over liberal democracy.
Topic:
Foreign Policy, Development, Infrastructure, Multilateralism, Belt and Road Initiative (BRI), and Modernization
Political Geography:
China, Asia, and Global South

605. China’s Changing COVID-19 Policies: Market and Public Health

Author:
Zhun Xu
Publication Date:
05-2023
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
After the outbreak of COVID-19 in early 2020, China took fast and decisive measures to successfully contain the spread of the virus within its borders. While the rest of the world saw huge human and social costs in the pandemic, the Chinese mainland for about two years was largely free from COVID. The zero-COVID model, however, met great challenges by early 2022. Despite some efforts to save the zero-COVID model, in November 2022, the Chinese government abruptly abandoned its signature COVID controls during the pandemic and switched to the opposite. This article reviews the evolution of the Chinese COVID policies and places the dramatic turns in the context of the changing Chinese political economy. The findings show that the shifting class interests and actions were an important force behind China’s retreat from zero- COVID.
Topic:
Markets, Political Economy, Public Health, and COVID-19
Political Geography:
China and Asia

606. Chinese Firms and Adherence to Global Environmental, Social and Governance (ESG) Standards in Developing Countries: Is there Potential to Create Common Ground?

Author:
Mike Morris
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
German Institute of Development and Sustainability (IDOS)
Abstract:
This paper focuses on analysing how Chinese firms operate in Latin America, Asia and Africa in regard to ESG (environmental, social and governance) standards and sustainability issues. How do they respond to the increasing global value chain requirement to incorporate and maintain ESG standards? Is their space for an alignment between Western development cooperation ESG policies, frameworks, strategies and practices and Chinese political and economic stakeholders in the developing world? The paper uses a variety of case studies covering Chinese firms (disaggregated into SOEs (state-owned enterprises) and large, medium and small private sector firms) operating in various sectors in countries across the developing world. It uses a three dimensional framework to analyse different types of Chinese firms in terms of value chain operations covering many of the ESG standards they are required to meet: 1. Supply chain relations (i.e. approach to supporting upgrading of local suppliers); 2. Internal firm processes (i.e. approach to local labour, training and upskilling); 3. Social licence to operate (i.e. approach to meaningfully engaging with local communities taking account of their social and economic needs).
Topic:
Development, Environment, Governance, Business, and Supply Chains
Political Geography:
Africa, China, Asia, and Latin America

607. Between inflation and growth: for an ECB at the service of European power and strategic autonomy

Author:
Nicolas Goetzmann
Publication Date:
09-2023
Content Type:
Working Paper
Institution:
Robert Schuman Foundation (RSF)
Abstract:
The succession of shocks that have hit the global economy since the beginning of 2020 highlights the strengths and vulnerabilities of the different growth models of the major global blocs, namely the United States, China and the European Union[1]. While the United States can still count on domestic consumption, which is the unsinkable foundation of the country's development, China faces the necessary evolution of a model considered obsolete by its authorities[2]. From growth guided by a level of investment that will be difficult to sustain over the long term and a trade balance that is largely in surplus, Xi Jinping's China is under increasing pressure to support its domestic demand as a means of correcting its imbalances. Situated at the centre of this Sino-American competition, the European Union - and more precisely its heartland, the euro area - finds itself weakened by sluggish domestic demand and development based largely on foreign trade, the structure of which has been geopolitically undermined over the last three years. However, the shortcomings of the European growth model came to light in the aftermath of the great financial crisis, which pushed the GDP trajectory onto a path of stagnation, the first consequence of which was that it fell behind the United States, before being overtaken by the Chinese economy in 2021.
Topic:
European Union, Economic Growth, Inflation, and Strategic Autonomy
Political Geography:
United States, China, and Europe

608. A comparative look at antitrust regulation of the digital economy in Europe and China

Author:
Aifang Ma
Publication Date:
12-2023
Content Type:
Working Paper
Institution:
Robert Schuman Foundation (RSF)
Abstract:
Influenced by the Matthew effect[1], the digital economy tends to be a hyper-concentrated market. Large platforms with well-developed business models have far less difficulties in attracting customers and accumulating data than smaller ones. Market concentration is accentuated by certain explicitly monopolistic practices of large firms. It is not uncommon for them to deliberately design their products in such a way that they are incompatible with the devices or services offered by their competitors. The iPhone charger, for example, is not compatible with smartphones made by Samsung or Xiaomi, as this could affect the longevity of the battery. In China, consumers can only pay for their purchases on Taobao, a C2C platform of Alibaba, by using Alipay, not WeChat Pay, even though these two online payment tools work in the same way. To eliminate their competitors, established companies have embarked on aggressive mergers and acquisitions (M&A), incorporating many innovative start-ups in the process. It is estimated that Google merged 257 entities between 2006 and 2022. At the same time, Facebook acquired 94 companies between 2005 and 2021. The trajectory followed by other digital firms is similar. The boundaries of the behemoths are constantly expanding to cover a wide range of activities: social networks, entertainment, e-commerce, artificial intelligence, content sharing, etc... Cartels, abuse of the dominant position on the market, and M&A by digital giants destabilise the market. They kill the enthusiasm of small businesses for technological innovation, reduce the number of choices available to consumers, and most importantly, turn the economic power of big businesses into political power. One simply can read The Age of Surveillance Capitalism[2] to understand the close links forged between the digital empires of Silicon Valley and the American government. The latter relies on high-tech companies to develop surveillance technologies. The companies recruit former politicians to improve their chances of obtaining favourable deals. One important mission of the American association Numerama is to oversee the relations between political and economic actors. According to the association, between 2005 and 2016, Google recruited sixty-five employees from European administrations, including senior civil servants, to make its voice heard in Brussels. At the same time, fifteen employees of Google joined European administrations at various levels[3]. The unequal capacity of companies to reach key decision-makers further strengthens the position of the large to the detriment of the small. The European Union is currently the most active in the antitrust regulation of the digital economy. On the one hand, with the Digital Markets Act (DMA), the EU is the first political entity to have established specific legislations on antitrust issues in the digital economy. Furthermore, compared with their counterparts in other countries, European regulators are the most intransigent in the fight against anti-competitive practices. Record-high fines imposed on major platforms come from Europe, a subject that will be discussed later in this article. Following in its footsteps, China, which has long been laxist in this area, has been taking active measures since the end of 2020 to regulate the activities of its national champions. In July 2021, Tencent was punished six times for its illegal M&A, which led to market concentration. In October 2021, Meituan Dianping, one of the largest e-commerce platforms, was penalized for abusing its dominant position in the meal delivery market. The company was accused of forcing retailers to sign exclusive agreements with it. The Chinese regulator imposed a fine of 3.442 billion yuan (€441.8 million) to Meituan Dianping. New provisions have been proclaimed and the amendment to the anti-monopoly law was approved by the Chinese legislature on 24 June 2022. Nevertheless, challenges persist in the Middle Kingdom. The delimitation of the relevant market, an essential procedure for judging whether a firm occupies a dominant position, is difficult to apply to the digital economy. The reason is simple: most digital platforms offer products to the consumers located in different parts of China, rather than in a precise geographical area. This study examines how the European Union and China regulate anti-competitive practices in their respective digital economies. The European Union and China are chosen as the subject of study because they are currently the most active and the most advanced in institutionalizing the antitrust regulatory framework for the digital economy. They have different political systems: while the twenty-seven Member States of the EU are democracies, China is an authoritarian state. This raises many questions. For example, do China and the EU face the same challenges in legislating the antitrust-related issues? Do they fight unfair competition in the same way? This is where the originality of this article lies: by analysing the antitrust regulations of countries where the state-market power relations differs, this article can clarify on the future development of the antitrust regulation in the world’s major digital economies. Among other things, it asks whether countries with different political regimes are likely to fight unfair competition in the same way. If so, the similarity of regulatory objectives could provide a solid basis for building an international regulatory framework of the digital economy.
Topic:
Regulation, Digital Economy, and Antitrust Law
Political Geography:
China and Europe

609. Russia’s Relations with China Amidst US-China-Russia Strategic Competition

Author:
Joungho Park, Boogyun Kang, Seung-soo Hyun, and Sunghoon Jeh
Publication Date:
06-2023
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
This study comprehensively examines the development of Russia's strategic relationship with China amidst intensifying strategic competition among the United States, China, and Russia. Specifically, we analyze the fundamental meaning and direction of Russia's strategy toward China in the process of shaping a new global order, and the key features and characteristics of cooperation between the two countries in a wide range of fields spanning politics, diplomacy, security, military, economy, society, and culture. Accordingly, this research aims to draw valuable policy insights for Korea based on evaluation of the direction and level of Russia-China cooperation from the Russian perspective. In this respect, this study is composed of the following four parts. Part II examines Russia's perception of China and its policy direction, as well as evaluates the prospects of Russia-China relations. Part III conducts an in-depth analysis of the opportunities and constraints associated with Russia-China cooperation in the fields of advanced technology, energy, and finance, which are key strategic areas for strengthening Russia's economic security amidst intense Western sanctions against its economy. In Part IV, we explore the current status and characteristics of cooperation in the fields of education and research, culture and arts, mass media, tourism, etc. Part V presents policy implications for Korea, particularly suggesting promising directions and tasks for the Northern Policy given the major turning point in the changing external environment.
Topic:
Geopolitics, Strategic Competition, and International Order
Political Geography:
Russia, China, and United States of America

610. Economic Cooperation Policies of China, Japan and India towards South Asia and Their Implications for Korea

Author:
Jeong Gon Kim
Publication Date:
10-2023
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
With the Indo-Pacific region increasingly gaining recognition for its strategic importance, countries such as China, Japan, and India are seeking close economic cooperation with South Asian countries. This report analyses these countries’ strategic perspectives and cooperation policies towards South Asia (Pakistan, Bangladesh, Sri Lanka) under the rapidly changing international political and economic environment, and examines Korea’s future economic cooperation strategies and policies. Korea’s economic cooperation with South Asian countries has mainly focused on ODA. Although trade and investment have been centered on some manufacturing industries, they have recently shown a shrinking trend. While competition among major countries in South Asia is in full swing, it is necessary to establish a new direction for economic cooperation and promote policies towards South Asia from a strategic perspective.
Topic:
Economics, Regional Integration, Economic Cooperation, and Competition
Political Geography:
Japan, China, South Asia, India, Asia, and South Korea