Chinese Foreign Direct Investment and Argentina: Unraveling the Path

This article explores the political economy of Chinese outward foreign direct investment (FDI) in Argentina during the reign of Nestor Kirchner and Cristina Fernandez. Among other things, it contemplates possible links between Chinese outward FDI (OFDI) volumes and Argentina’s domestic and foreign policies. It also analyses a mixture of successful and unsuccessful Chinese investment cases in the agricultural, chemical, and banking sectors in order to engage the debate about the drivers of Chinese OFDI (COFDI), with some stressing business and economic factors and others emphasizing the primacy of political factors. In regards to the former, my study shows that Argentine policymakers did not offer special accommodations to Chinese investors despite the pro-China proclivities of Argentine leaders and their country’s economic and political need for China. Moreover, at the local level, Argentine politics actually proved to be an obstacle to successful Chinese deals. As for the latter issue, Chinese companies were not inclined to invest in Argentina because of the China stance of the Argentine government, but rather because they saw opportunities to exploit fertile agricultural soil, special tax regimes for investors, and opportunities to integrate into global value chain. My findings have a number of important theoretical and policy implications.

     

Why invest in North Korea? Chinese foreign direct investment in North Korea and its implications

North Korea has been regarded as the least likely place to attract foreign investors due to its poor infrastructure, policy reversals, and totalitarian regime. However, the recent growth of Chinese direct investment in North Korea has drawn much attention due to its implications for the North Korean economy and regional stability. This research provides an analytical framework by considering two fundamental issues that any foreign investor takes into account when making an investment decision: property rights protection and profitability. It examines how recent changes have influenced these two issues, which, in turn, shaped the incentive structure of Chinese private investors.     

Assessing the (eco)macroeconomic performance index of India: A data envelopment analysis approach

The prime objective of this article is to construct a robust macroeconomic performance (MEP) index of the Indian economy using the data envelopment analysis (DEA) approach. Seven major macro indicators, namely, economic growth, employment rate, terms of trade, inflation rate, fiscal deficit, pollution, and climate change are used to compute MEP and Eco‐MEP indices of the Indian economy from 1980–1981 to 2018–2019. Overall, both the MEP and Eco‐MEP index scores have quite similar best performing years worst performing years, and have also captured the major events that affected adversely the Indian economy during the past decades. The trend in the overall performance of the Indian economy was better in the 1980s and the 1990s but has deteriorated since 2000. The autoregressive distributed lag bounds testing approaches to cointegration methods are used to test the robustness/utility of these indices. The estimated results show that MEP and Eco‐MEP have a positive impact on private investment, foreign investment inflows, foreign direct investment, and a negative effect on the current account deficit. Hence, the suggested composite MEP index is stable, robust and truly captures the economic performance of India. The constructed MEP composite index may be used by foreign investors, rating agencies, private investors, and policymakers for their planning and decision‐making processes.     

It’s not me,it’s you: the functioning of Wall Street during the 2008 economic downturn

Public officials have blamed Wall Street and its complex financial products for causing the 2008 economic downturn. This article addresses three popular claims saying that complex financial markets are at fault and need more regulation. It argues that even in the midst of a major economic downturn, the much-maligned mortgage-backed securities, collateralized debt obligations, credit default swaps, and unregistered hedge funds functioned almost exactly as designed. When macroeconomic conditions worsened, firms and investors that were paid to assume certain risks had to assume them. Those that opted for safer investment vehicles with more levels of private protection faced fewer problems. Although many investment vehicles lost money, one must differentiate between problems that manifested themselves in markets and problems with the market itself. Even though government policies caused many of the problems, public officials always have an incentive to point the finger at Wall Street and to argue for more regulations when their policies negatively affect markets.     

Creating resilience or private sector dependence? Shifting constructions of the farmer in Australian policy discourses

The Australian Government’s Agricultural Competitiveness White Paper aims to create a profitable and resilient Australian agriculture sector. In doing so, the White Paper emphasises farmers’ individual responses to the structural problems which have undermined farmers’ profitability, such as consolidated commodities markets. In particular, the White Paper recommends that farmers shape their farming practice to make their farms more attractive to private investors. This is presented as a normal response to farm profitability concerns. Farms are portrayed as investment targets and securing investment is framed as an essential skill of the modern farmer. To understand how this discursive construction has been made possible, this article develops a genealogical analysis of changing constructions of farmers, farming and of the role of the State. This research reveals the subtle discursive shifts which have helped shift responsibility for farming, from the State, to the self-reliant individual, and most recently, towards the private sector. Whereas the construct of the self-reliant, independent farmer has been used to facilitate deregulation of agricultural industries, this recent shift in power towards the private sector may potentially undermine farmers’ autonomy and increase dependence on private sector investment.     

Privatization Within the Chinese State

This article suggests that China's public and collective enterprises have contributed to its economic growth and socio-political stability. The efficiency of these enterprises has been improved not through the privatization of the state (transferring public ownership to private hands) but privatization within the state (decentralization, appropriation, and marketization). This article first provides statistics to juxtapose the growth of the Chinese economy to the continued expansion of public and collective enter-prises. I t then explains the causes and benefits of privatization within the Chinese state. A case study of privatization within the state in Shanghai City follows. The article concludes that China's economic reform has been a transformation of socialism, not a transition to capitalism, and that it is a less costly but more effective alternative to the privatization of the state approach. The former communist countries in Europe have painfully followed this latter approach and have suffered from its political, social, and economic consequences.     

Reforming Indian agriculture and the rise of farmer's protest in India: Tracing the discourse and the way ahead

The Indian government unveiled new farm legislation on September 27, 2020, with the goal of empowering the farming community. According to the government, new farm regulations will reduce the reliance of indigenous farmers on the mandi (market yard) system, which is now in place and is quite exploitative and full of middlemen and legal cartels. The regulations made contract farming lawful with the intention of luring private sector investment in bolstering agricultural supply chains and infrastructure to give farmers better pricing. But these rules are referred to as repressive and anti-farmer by the farming community. Farmers believe that eliminating the mandi system will eliminate the minimum support price (MSP) mechanism and that contract farming will ultimately be damaging, enticing major corporations and private investors to bind them to unfair contracts that will result in exploitation. Farmers' demonstrations have begun as a result in the former territory of the green revolution. In order to determine if the new farm regulations introduced by the central government are indeed beneficial to the rural community or not, the article followed the debate among many academics, policy makers, economists, researchers, stakeholders, and politicians (the government's spokesman). The article's main focus is on analysing the farmers' demand for the new farm rules to be repealed and the economic justification for their opposition. Additionally, it contends that new farm rules will encourage capitalistic farming and endanger the viability of farming communities, particularly small and marginal farms (S&M).     

The Third Sector and Residential Care for the Elderly in China's Transitional Welfare Economy

This article examines third‐sector welfare homes for Chinese elderly and argues that four factors affect their survival and development prospects: the extent care establishments meet the needs of their users; how successfully they manage their human resources; whether they ensure their financial sustainability; and whether they satisfy the expectations of their investors. The data reveal that while care homes generally serve their customers well and maintain staff satisfaction, they encounter difficulties in financing and service operation that pose grave challenges to their investors. The resulting problems cast a shadow over the future prospects of old‐age care homes and raise questions concerning the state's non‐profit policy.     

Terrorizing the CPEC: managing transnational militancy in China–Pakistan relations

Despite the continuous risk posed by transnational militancy to Chinese interests in Pakistan, China and Pakistan have improved their cooperation on matters of security and economy in recent years. While transnational militancy in a state dyad is known to increase the potential for conflict, it may also spur interstate cooperation on counter-militancy operations under certain conditions. This article examines the sources of the increase in Sino-Pakistani cooperation in fighting transnational militancy. Pakistan was in the early 2000s the country where the Chinese experienced most militant attacks resulting in the cancellation of Chinese projects in Pakistan despite the dyad’s professed all-weather friendship. More than a decade later, the Chinese are back with a prospected $62 billion in investments in the China–Pakistan economic corridor (CPEC). This overarching incentive has altered the challenge of transnational militancy to their mutual relations from a mostly negative, to a more constructive one requiring costly cooperation. In a quest to secure a continuing relationship in a hazardous landscape, the state dyad is attempting to roll out a concerted security strategy involving the army, navy, paramilitary forces and private security companies. A mix of domestic policies of both states, their foreign policies and the nature of threat posed by the militants facilitates this cooperation.     

Harmonious World and China’s Foreign Economic Policy: Features,Implications, and Challenges

Analysts oddly have neglected the foreign economic implications of China’s harmonious world and harmonious society doctrines. This article specifies the foreign economic policy effects of both, collectively termed harmonious world plus (HWP). It shows that HWP implies China’s continued integration into the global economic system, acceptance of the extant international economic order, and backing for increased cooperation and exchange, provided it is mutually beneficial. It further demonstrates that HWP implies support for global development, self-reliance, and multilateralism. Beyond this, the study reveals that HWP is likely to influence China’s interactions with international economic institutions, foreign investors, and its international resource dealings. Generally speaking, this article shows that China is making progress adhering to most of the tenets of HWP, though there are some areas for concern. It also reveals that convergences and divergences between HWP and China’s actual policies are attributable to national interests, China’s limited capabilities, and domestic politics. Jean-Marc F. Blanchard is associate director of the Center for U.S.-China Policy Studies and associate professor in the Department of International Relations at San Francisco State University (SFSU). He also is a Board Member of and Research Director for the Association of Chinese Political Studies. Dr. Blanchard’s research interests include China’s integration into the global economic system, China’s interactions with multinational corporations, Chinese multinational corporations, Sino-Japanese relations, and Chinese territorial and maritime issues. He is a co-editor of Harmonious World and China’s New Foreign Policy (Lanham: Lexington Books, 2008), a co-editor of and contributor to Power and the Purse: Economic Statecraft, Interdependence, and National Security (London: Frank Cass, 2000), and the author of 20 book chapters and refereed journal articles.     

Do Debt Levels Influence State Borrowing Costs?

This article reports on research into the possible interest cost penalties when state governments impose increasingly high debt levels on their citizens. The potential effect of debt levels on borrowing costs is a material one, given the large amounts of state debt outstanding. At the same time that government borrowing is heavy, the demand for government obligations also appears to be strong. The authors examine state debt levels and borrowing costs over a six‐year period (2001–2006) and find little evidence of such an effect, despite rapidly growing debt burdens. Those concerned about state debt levels, the authors say, must look to sources other than investors for pressure to reduce debt issuance.     

Outsourcing in China: an exploratory assessment

The increasing demands for public services, growing resource externalisation and decentralisation have driven Chinese governments to seek alternative means of service delivery. This article addresses the largely ignored outsourcing practice in China. Lack of awareness of and research on the widespread outsourcing was a result of the conceptual barriers created by China's economic transition and its choice of incremental reform path. By decomposing national fiscal expenditures, the article finds that from 2002 to 2004, outsourcing accounted for about one‐third of the total governmental services expenditures and demonstrated a trend of continuous growth. Such developments effectively transformed the basic landscape of public service delivery and created significant external dependence. Within just three decades, China has quickly shifted from an omnipotent state to an ‘incomplete’ state. The capacity of the administrative hierarchy has become severely constrained. Nonetheless, the political risks of the macro‐level transformation are largely mitigated at the micro‐level by mechanisms of public–private cooperation. These developments are embedded in informal arrangements that, remarkably, maintain the survival of the current power structure. Copyright © 2008 John Wiley & Sons, Ltd.     

FIZZ, FROTH, FLAT: The Challenge of Converting China's SOEs into Shareholding Corporations

China's attempts to convert its state firms into shareholding corporations have failed to alter SOE management behavior. This article examines this failure by looking at the flotation of Tsingtao Brewery shares in Hong Kong. The article argues that for reforms to be meaningful, changes need to be made to economic, political and legal institutions by which SOEs operate. These changes, such as allowing SOE directors managerial autonomy and clarifying areas of the Company Law, create incentives for managers to run their firms as business entities responsive to market forces and responsible to their investors.     

Fiscal consolidation under electoral risk

The European debt crisis has uncovered serious tension between democratic politics and market pressure in contemporary democracies. This tension arises when governments implement unpopular fiscal consolidation packages in order to raise their macroeconomic credibility among financial investors. Nonetheless, the dominant view in current research is that governments should not find it difficult to balance demands from voters and investors because the economic and political costs of fiscal consolidations are low. This would leave governments with sufficient room to promote fiscal consolidation according to their ideological agenda. This article re‐examines this proposition by studying how the risk of governments to be replaced in office affects the probability and timing of fiscal consolidation policies. The results show that governments associate significant electoral risk with consolidations because electorally vulnerable governments strategically avoid consolidations towards the end of the legislative term in order to minimise electoral punishment. Specifically, the predicted probability of consolidation decreases from 40 per cent after an election to 13 per cent towards the end of the term when the government's margin of victory is small. When the electoral margin is large, the probability of consolidation is roughly stable at around 35 per cent. Electoral concerns are the most important political determinant of consolidations, leaving only a minor role for ideological concerns. Governments, hence, find it more difficult to reconcile political and economic pressures on fiscal policy than previous, influential research implies. The results suggest that existing studies under‐estimate the electoral risk associated with consolidations because they ignore the strategic behaviour that is established in this analysis.     

Private Placements and the Cost of Borrowing in the Municipal Debt Market

Private placements continue to be issued in the municipal debt market and remain a topic of interest for municipalities, investors, and regulators. Private placements are often sold without an underwriter to relatively sophisticated investors and are typically “buy‐to‐hold” transactions. Therefore, compared with traditional competitive or negotiated sales, there are fewer financial intermediaries and fewer regulatory disclosure requirements that accompany private placements. Savings on “flotation” costs can be substantial enough to make private placements a less costly method of debt offering. Conditional on selectivity in the method of sale and key market covariates, private placements offer lower arbitrage yields and issuance costs compared to both competitive and negotiated debt offerings.     

Chinese State-owned Enterprise Investments in Uganda: Findings from a Recent Survey of Chinese Firms in Kampala

Within the large body of China-Africa literature, there is a growing body of literature that differentiates between China’s various economic actors, more specifically between its state-owned and private enterprises. This paper intends to contribute to this literature by comparing Chinese state-owned enterprises and hybrid (mixed owned) enterprises with private enterprises in Kampala, the capital of Uganda. An air of mystery often surrounds Chinese companies in Africa, this paper will provide some clarity concerning companies in Kampala. To do this we first look at the governmental assistance given to these companies, then the kind of assistance they potentially receive. Next we investigate what motivated these companies to come to Uganda, and how they established themselves, whether it is after a Chinese aid project or construction job, or some other route. We further investigate the size, employment policy and markets of these Chinese state-owned enterprises in Kampala. Finally we look at the employment of Ugandan labour and management, the problems faced by the enterprises and the environmental challenges, as well as how these are dealt with. We conclude that Chinese SOEs and mixed ownership companies in Uganda are involved in a small range of sectors, often capital-intensive sectors such as oil and construction, and are therefore also larger than the majority of the Chinese private enterprises. SOEs and mixed ownership enterprises tend to have arrived in Uganda earlier than most private enterprises, face slightly different problems, and are more interested in the Ugandan market as whole than their privately owned counterparts. More importantly, they have greater proportions of local employees and are more interested in indigenizing their workforces.     

Share the Wealth: Redistribution Can Increase Economic Efficiency

People frequently face uncertain income and the threat of loss can inhibit economic investments. Government redistribution can insure citizens against economic losses, but its effect on people’s investment decisions depends on how they react to redistributive rules. We apply methods from experimental economics to study how a redistributive institution affects people’s investment decisions. Experiment 1 tests whether redistribution can increase economic efficiency when people face risk problems—investment opportunities that are profitable on average but could result in a loss. In a between-subject design, participants decide whether to make a risky investment either individually or under an institution that redistributes earnings equally among four group members. We find greater investment and profits when participants are required to share their earnings. In Experiment 2, we examine free-riding by comparing an institution that allows non-investors to exploit investors to an assortment institution that matches investors with investors. We find that vulnerability to free-riding suppresses investment, whereas an assortment mechanism increases investment by preventing free-riding and thereby facilitating risk pooling.     

Public–Private Partnerships: Organisational Hybrids as Channels for Local Mobilisation and Participation?1

The article focuses on new forms of governance involving partnerships between public and private actors. As several scholars have noticed, organisational hybrids at the intersection of the public and private sectors play an important part in the implementation of collective action. Local economic development in particular has provided a fertile ground for building coalitions across traditional divisions, and encouraging partnerships. This applies to Norway as well as to other liberal Western democracies.
Obviously, the formation of partnerships reflects efforts to design more efficient and flexible instruments for founding new firms and for supporting local entrepreneurs. The article, however, raises the question of whether these arrangements may entail a far more expanded role and domain, opening up new channels for participation and mobilisation. By expanding their agenda and integrating new segments of the local community, public–private partnerships appear to be an innovation in local democracy.
Analytically, the article utilises elements of regime theory. Although the partnerships studied hardly constitute stable coalitions dominating local politics, they nevertheless illustrate how the building of coalitions including both private and public actors is crucial to coping with the problems and challenges of local restructuring and revitalisation. Case studies carried out in Norwegian municipalities provide the main empirical source. The article does, however, build on experience from other European countries.     

The Impact of Political Connections on Donations to Chinese NGOs

ABSTRACT

In this study, we explore the returns to political connections in non-corporate contexts within China, a country transitioning from a planned to market economy. Using China as an empirical case study, we investigate two separate, but related, hypotheses on the financial benefits of political connections for a sample of 1,435 Chinese foundations from 2005–2011. This extends Western donation determinants literature to a Chinese context and political guanxi (social relationships where individuals or organizations exchange future favors or gifts) research to non-corporate contexts. Our empirical results show that there is no relationship between the presence of state employees on an NGO's staff (a measure of political guanxi) and private donations. However, there is a small but positive relationship between the amount of government funding an NGO receives (a signal of legitimacy) and private donations. These findings suggest that, in post-communist countries such as China, donors may not be seeking future favors from their contributions and instead are interested in developing a robust civil society with legitimate, high-quality NGOs. Additionally, the similarity between Western donation determinants research findings and Chinese donation determinants, in this article, requires future comparative studies of both how and why donors make decisions.