Mincing Words on Chinese FDI

China Invests (Somewhat) More in the World
Derek M. Scissors
American Enterprise Institute 
January 2014

In a deep-dive based on the data produced by the American Enterprise Institute and Heritage Foundation in their China Global Investment Tracker, Derek Scissors shows us how large China’s foreign direct investment effort has become and how fast it is growing. By the end of 2015, if all things go as expected, China will surpass $100 billion per year in funds invested overseas.

The numbers are large, but when measured against other capital flows in the past, not yet at a level which should concern average Americans. Indeed, there are significant benefits from such investments. Nonetheless, Scissors suggests, we should not assume all Chinese FDI is a good thing. He joins a growing chorus of voids suggesting that national security, the growing role of China’s state-owned enterprises, and genuine reciprocity should guide policymaker approaches to Chinese FDI as much as economic benefit.

Scissors does a superb job at laying out the key issues, and I especially liked his nuanced approach to SOEs. Disappointingly, he stops short of suggesting a framework that would allow us to distinguish Chinese investments that should be welcomed, and those that should be rejected. Reading between the lines (and in keeping with AEI’s economic approach), Scissors is more concerned about debating the laissez-faire end of the business community who would prefer that government simply got out of the business of regulating Chinese foreign investment.

A worthy roundup of the issue.

Measuring the Monsoon

“India Advances in Naval Arms Race With China”
Micha’el Tanchum
The Begin Sadat Center for Strategic Studies
January 14, 2014

Media in the west has been focused on China’s increasing assertiveness in the East China Sea and the South China Sea. Less visible in the west – but plainly evident to New Delhi – China has been moving to enhance its naval and maritime presence in the Indian Ocean for some time, being careful not to raise the stakes too quickly.

In this brief paper, Micha’el Tanchum offers a sobering, pithy explanation of how China is moving toward provoking a face-off in the IO, as the response from the subcontinent shifts from the diplomatic to the unequivocal.

India now sees China’s moves as zero-sum, as each step China makes in the region is perceived as undermining New Delhi’s strategic position in its own back yard. India does not yet seem ready for a showdown, but Tanchum’s paper leaves a concern that India is not prepared to allow China’s growing influence to continue unchecked for much longer.

 

Whither China’s Nukes

China’s Strategic Capabilities and Intent,” Rebeccah Heinrichs, Issue Brief, No. 4111, The Heritage Foundation, December 18, 2013. Heinrichs summarizes the changes taking place in China’s nuclear defense posture, noting that rather than engage in bursts of effort and spending, China has been slowly and steadily improving its offensive nuclear capabilities for years now. She also lays out a policy program that responds to these developments and reminds us that the US has ignored its own strategic forces for far too long.

India Looks at Xi

“Taking Stock of Chinese Leader Xi Jinping’s One Year Rule,” R.S. Kalha, IDSA Comment, December 20, 2013. Kalha, of the Institute of Defense Studies and Analysis in India, takes a look at the first year of Xi Jinping’s rule from a security policy perspective. His takeaway: by focusing on Japan, Xi picked the right nemesis, managing to demonstrate the real limits to the US commitment to the security of its allies in the region. More adventurism can be expected as a result.

North Korea: When Hope for Reform Died

“North Korean Regime Change”
Ralph A. Cossa
PacNet, #90
Pacific Forum CSIS
December 16, 2013

In a thought-provoking article, Ralph Cossa, who is president of the Pacific Forum at the Center for Strategic and International Studies and a noted Korea expert, comes up with a whopper of a revelation for those of us who don’t follow North Korean politics on a daily basis.

Apparently, when Kim Jong-un had his uncle eliminated in a gruesome execution last December, he was doing more than settling a family score. Korea watchers had pegged Jang Song-thack as North Korea’s best hope for a transition away from poverty-stricken kleptocracy to a functional, modern state. Chinese observers were even suggesting that Jang was Korea’s Deng Xiaoping.

Cossa’s conclusion is chilling and makes the entire report worth a read. “Imagine China’s fate if the Gang of Four had prevailed. This may have been what just happened in Pyongyang.”

To Fix China, Fix Her Cities

“The Urbanization Solution”
Lu Mai
Government Designed for New Times
McKinsey & Co.

2012

China is on the back end of the largest and most rapid urbanization in the history of mankind. In the past 30 years, the nation’s population has gone from being 80% rural to over 60% urban. Lu Mai, Secretary General of the China Development Research Foundation and an expert on rural affairs, pens a forthright essay saying that China should stay the course: the more people you move to the cities, the more manageable China’s problems will be.

At the same time, Lu doesn’t want forced relocations. The market is the best mechanism to drive the process, he says. The appropriate role for the government is to serve as an enabler, making the process of integration into the cities as smooth as possible, and ensuring that migrants are provided the necessary services and statuses to make their shift from the countryside as smooth as possible.

Lu is wise enough not to call for the outright elimination of China’s hukou household registration system. Doing so would touch politically sensitive nerves, come across as slightly wild-eyed, and anyway would miss the point. Lu’s focus is on outcomes: get people into the cities, and anticipate and address the challenges this is going to create for municipal governments and the migrants themselves.

A quick read, but a good one.

Is China a Revisionist Power?

“Understanding Chinese Revisionism in International Affairs”
Matthew Stinson
April 2, 2014

Whenever I start to think I know something about international relations (my major in school three decades ago, and my predilection ever since), I need only read something by Matthew Stinson to send me, humbled and chastened, back to the library.

Stinson, who is on the faculty at Tianjin Polytechnic University in China, is not a paid political scientist, but he writes like one, albeit rather more clearly than most. It pains me to note that much of his output is in the form of Facebook posts, a fine way to engage his friends, but not so much to give him the profile he deserves.

The most recent entry in his blog Like Cooking a Small Fish is a happy exception. In an wide-ranging and highly erudite article, Stinson explains in detail how China is changing the rules of international relations simply by refusing to play by those established by the U.S. and European powers over the last two centuries. He concludes:

In 1996, the popular Chinese nationalist book China Can Say No advanced the concept that China should no longer follow America’s lead in world affairs. Roughly twenty years later, we may be reaching a point where, thanks to Chinese power, authoritarian regimes of the Global South can also “say no” to the West and pay no penalties for it.

Thought-provoking, and for those of us who place value in the international system as it currently stands. What Stinson suggests that we face is not a future of bad actors, but one in which we will have two systems operating by separate rulesets operating side-by-side. It is the perfect recipe for global conflict.