204. It is worth emphasizing again that the impetus leading to the European Monetary Union and the euro was geopolitical, not economic. According to economist Martin Feldstein, “European politicians reasoned that the use of a common currency would instill in their publics a greater sense of belonging to a European community and that the shift of responsibility for monetary policy from national capitals to a single central bank in Frankfurt would signal a shift of political power.” Feldstein, “The Failure of the Euro,” Foreign Affairs, January/February 2012.
205. Ernst and Young, “Foreign Investment into Europe Rises despite Eurozone Crisis,” June 2012, http://www.ey.com/GL/en/Newsroom/News-releases/News_Foreign-investment-into-Europe-rises-despite-Eurozone-crisis.
206. Take market economy status, for example. At various points in the eurozone crisis, China has rather explicitly conditioned any purchases of European distressed sovereign debt or other investment meant to ease Europe’s debt crisis on the EU’s willingness to confer market economy status on China. Justin McDonnell, “China-EU Relations: Trade and Beyond,” Diplomat, April 24, 2014; European Parliament Directorate-General for External Policies, “Trade and Economic Relations with China,” Policy Briefing, 2013, 23.
207. Dan Alexander, “The World’s Largest Debtor Governments, 2013,” Forbes, November 8, 2013; Charles Riley, “Even Abenomics Can’t Ignore Japan Debt,” CNN Money, April 23, 2013.
208. According to U.S. Treasury International Capital Survey data covering June 30, 2011, through June 30, 2012, 58.6 percent of all foreign official holdings of U.S. Treasuries will mature in a period of between one and five years. Multiplying this percentage by the stock of foreign official holdings of all treasures for the same period ($3.489 trillion), total foreign official holdings for the one-to-five-year segment of the U.S. Treasury curve equals $2.5 trillion, which amounts to 55.9 percent of the $3.57 trillion in outstanding one-to-five-year Treasury notes as of the end of June 2012. As Keith Bradsher explained the growing spread between 2-year and 10-year Treasuries: “China has been buying more Treasury bills with a maturity of a year or less, [giving] China the option of cashing out its positions in a hurry, by not rolling over its investments into new Treasury bills as they come due should inflation in the United States start rising and make Treasury securities less attractive.” Keith Bradsher, “China Grows More Picky about Debt,” New York Times, May 20, 2009.
209. U.S. Treasury International Capital Survey Data, accessed March 2013, www.treasury.gov/resource-center/data-chart-center/tic/Pages/index.aspx.
210. According to former Treasury secretary Hank Paulson, the Russians made a “top-level approach” to the Chinese “that together they might sell big chunks of their GSE [government-sponsored enterprise] holdings to force the U.S. to use its emergency authorities to prop up these companies.” Hank Paulson, On the Brink (New York: Business Plus, 2010), 161. Paulson declined to offer evidence for his claims; however, coordinated or not, China and Russia did sell off sizeable portions of their GSE debt at the same time. “Nonetheless,” write Benn Steil and Paul Swartz, both economic analysts with the Council on Foreign Relations, “both countries dumped GSE debt that summer. Russia sold $170 billion during 2008, while China sold nearly $50 billion between June 2008, when its holdings peaked, and the end of 2008.” See Swartz and Steil, “The Dangers of Debt: Chinese and Russian GSE Dumping,” CFR Geo-graphics, June 15, 2010.
211. Putin walked this back within a few days. As of March 2013, IMF estimates found that roughly 43 percent of Russia’s €537 billion of foreign exchange reserves were euro-denominated. IMF Global Markets Monitor, March 21, 2013.
212. A withdrawal on this scale is nearly unprecedented; see Matt Phillips, “And Now, It Looks Like Russia May Be Messing with the Fed,” Quartz, March 14, 2014. While these assets were pulled from the U.S. Federal Reserve holdings, they were not necessarily sold; experts suggest that Russia retained its Treasury holdings but relocated them or registered them under a different name (“Financial Mutually Assured Destruction Keeps Bonds Stable in Crimea Standoff,” Moscow Times, March 20, 2014). If the $100 billion in bonds has indeed been relocated, analysts further warn that Russia could sell off to the detriment of U.S. financial markets without interference from U.S. authorities; see Patrice Hill, “Economic Cold War?: Weapons in Russia Standoff More Likely to Shed Treasure than Blood,” Washington Times, March 31, 2014.
213. For detailed descriptions, see Chapter 4.
214. Keith Johnson, “Putin’s Gas Gambit Backfires,” Foreign Policy, December 12, 2013.
215. Jack Farchy, “Russia’s Neighbours: Primary Colours,” Financial Times, June 9, 2014.
216. Rushydro and Inter RAO, the Russian state electricity companies, are both building hydroelectric power plants in Kyrgyzstan.
217. Chen Kane and Miles A. Pomper, “Russia Becomes the Middle East’s Preferred but Flawed Nuclear Partner,” World Politics Review, April 23, 2015.
218. Ibid. Sources suggest that, at least in the case of the Turkey deal, the Russian firms involved do not expect a profit.
219. Ibid.
220. Farchy, “Russia’s Neighbours.”
221. As China’s ambassador to Kazakhstan put it in a June 2014 interview with the Financial Times, “The cooperation of one or another country with Kazakhstan is not a zero-sum game. No one stole anyone else’s cheese.” Ibid.
222. Authors’ private conversations in the region.
223. Brian Spegele and Wayne Ma, “For China Boss, Deep-Water Rigs Are a ‘Strategic Weapon,’ ” Wall Street Journal, August 29, 2012.
224. “The World in Their Hands: State Capitalism Looks Outward as Well as Inward,” Economist, January 21, 2012.
225. Approximately 84 percent of Japan’s crude oil imports in 2014 came from the Middle East, whereas U.S. imports from the region reached 20 percent. See U.S. Energy Information Administration, “Japan: International Energy Data and Analysis,” last updated January 30, 2015, http://www.eia.gov/beta/international/analysis_includes/countries_long/Japan/japan.pdf; “Oil and Gas Emergency Policy—Japan 2013 Update,” International Energy Agency, 2013; Florence Tan and James Topham, “Japan to Import Less Oil from Middle East as Demand Peaks,” Reuters, August 19, 2013; U.S. Energy Information Administration, “How Much Petroleum Does the United States Import and from Where?,” September 14, 2015, http://www.eia.gov/tools/faqs/faq.cfm?id=727&t=6.
226. For details, see Chapter 4.
227. Jack Fahy, “European Supplies in Jeopardy as Putin Warns of a Shut-Off,” Financial Times, April 11, 2014.
228. Marc Fisher, “Qatar Is Suddenly Investing Heavily in the U.S., Bankrolling D.C.’s City Center, Other Projects,” Washington Post, December 17, 2013.
229. Mohsin Khan, “The Gulf and Geoeconomics,” MENASource blog, Atlantic Council, March 7, 2014.
230. China was one of the few countries not on Washington’s list of exemptions from U.S. sanctions over Iran. Eleven countries—including India, South Korea, Turkey, Taiwan, South Africa, Sri Lanka, Malaysia, and Japan—have received exemptions after the administration determined that each country sufficiently reduced, or agreed to reduce, its consumption of Iranian oil. Tennille Tracy, “7 Buyers of Iran Oil Will Avoid Sanctions,” Wall Street Journal, June 11, 2012; “India and China Ignore U.S. Sanctions against Iran,” OilPrice.com, August 20, 2013.
231. Chapter 4 describes how state-bank assets and foreign exchange reserves become ready financing as part of a “going-out” strategy meant to help Chinese SOEs venture abroad (typically in industries labeled “strategic” by Beijing.
232. In some cases, Chinese SOEs have themselves been forthcoming: in an annual 20-F filing with the SEC, China Southern Airlines acknowledged that the “Company is indirectly majority owned by the Chinese government, which may exert influence in a manner that may conflict with the interests of [shareholders].” Andrew Szamosszegi and Cole Kyle, “An Analysis of State-Owned Enterprises and State Capitalism in China,” U.S.-China Economic and Se
curity Review Commission, October 26, 2011.
233. In the words of Yang Jiechi, “China is a big country and other countries are small countries, and that’s just a fact.” John Pomfret, “U.S. Takes a Tougher Tone with China,” Washington Post, July 30, 2010.
234. For commentary on how the geographies of capital, land, and labor shape Singapore (and neighboring Malaysia and Indonesia), see Matthew Sparke, James D. Sidaway, Tim Bunnell, and Carl Grundy-Warr, “Triangulating the Borderless World: Geographies of Power in the Indonesia-Malaysia-Singapore Growth Triangle,” Transactions of the Institute of British Geographers 29, no. 4 (2004): 485–498. As illustrative commentary touting the geoeconomic prowess of Qatar, see, for instance, press reports surrounding the June 2014 prisoner exchange between the U.S. government and the Taliban, including Mark Mazzetti, Eric Schmitt, David E. Sanger, and Helene Cooper, “Behind P.O.W.’s Release, Urgency and Opportunity: Concern for Health of Bowe Bergdahl Drove Prisoner Exchange,” New York Times, June 4, 2014: “At the same time, much of the fate of the administration’s strategy was now in the hands of Qatar, the tiny wealthy emirate that in recent years has used its riches to amass great influence in the Middle East and Central Asia.”
235. Devadas Krishnadas, “Sovereign Wealth Funds as Tools of National Strategy: Singapore’s Approach,” CIWAG Case Study on Irregular Warfare and Armed Groups, U.S. Naval War College, 2013; Jeremy Grant, “Singapore Leads the Pack in Sovereign Wealth Deals,” Financial Times, November 3, 2014; Jon Grevatt, “Singapore Announces SGD12.56 Billion Defense Budget,” HIS Jane’s 360, February 24, 2014; Dhara Ranasinghe, “Singapore, the Tiny State with Military Clout,” CNBC, February 9, 2014.
236. Qatar was an early supporter of Morsi and the Muslim Brotherhood, providing $8 billion in grants and loans to the short-lived Morsi government in Egypt. See, e.g., Khan, “The Gulf and Geoeconomics.”
237. Selina Williams, “BP Says North America Shale Oil Boom Will Pressure OPEC,” Wall Street Journal, January 16, 2013; Clifford Krauss, “OPEC Split as Oil Prices Fall Sharply,” New York Times, October 13, 2014; “The Future of OPEC,” Forbes, December 5, 2013.
238. As new financial hubs emerge, financial centers are becoming capable of transacting large-scale deals without requiring dollars or touching U.S. banks. Mike Bird, “Putin’s Revenge: Russia and China Try to End the Dominance of the Dollar,” Business Insider, November 10, 2014; Paoala Subachi and Helena Huang, “The Connecting Dots of China’s Renminbi Strategy: London and Hong Kong,” Briefing Paper, Chatham House and RUSI, September 2012.
239. “International Finance System and Development, Report of the Secretary-General,” United Nations General Assembly, July 2014, www.un.org/esa/ffd/documents/69GA_SGR_IFSD_AUV_250714.pdf.
240. See Scott Snyder, “Sony Hack: North Korea’s Toughest Counteraction to Obama’s Proportional Response,” Asia Unbound blog, Council on Foreign Relations, December 24, 2014.
241. David A. Baldwin, Economic Statecraft (Princeton, N.J.: Princeton University Press, 1985), 63.
242. Harvard professor and former NSC official Meghan O’Sullivan makes this point aptly with respect to sanctions, cautioning that “sanctions regimes should have different structures to them depending on what objectives they’re meant to address. If you want to bring about a change in behavior by a government, you should have a sanctions regime that creates a flexible framework for working through a set of issues and where incremental progress can be acknowledged by the lifting of partial sanctions. If you want to contain a regime, your premium will be on getting multilateral support for your efforts in order to maximize the economic impact of the sanctions regime. “The Limits of New Iran Sanctions,” interview with Meghan L. O’Sullivan, Council on Foreign Relations, July 8, 2010, www.cfr.org/iran/limits-new-iran-sanctions/p22607?cid=rss-iran-the_limits_of_new_iran_sanctio-070810.
4. Geoeconomics in Chinese Foreign Policy
1. James Reilly, “China’s Economic Statecraft: Turning Wealth into Power,” Lowy Institute, November 2013. For a look at how the United States should rethink its strategy toward China, also see Robert D. Blackwill and Ashley J. Tellis, “Revising U.S. Grand Strategy toward China,” Council on Foreign Relations Special Report, April 2015.
2. Leslie Gelb, “GDP Now Matters More than Force,” Foreign Affairs, November/December 2010.
3. People’s Republic of China, “The One-China Principle and the Taiwan Issue,” Taiwan Affairs Office and Information Office of the State Council, February 21, 2000.
4. Bruce Gilley, “Not So Dire Straits: How the Finlandization of Taiwan Benefits U.S. Security,” Foreign Affairs, January/February 2010.
5. Ibid.
6. Reilly, “China’s Economic Statecraft.”
7. Ross Anthony, Sven Grimm, and Yejoo Kim, “South Africa’s Relations with China and Taiwan: Economic Realism and the ‘One China’ Doctrine,” Centre for Chinese Studies, Stellenbosch University, November 2013.
8. Chris Barker, “What Implications Does Rising Chinese Influence Have for Latin America?,” E-International Relations Studies, August 13, 2013.
9. “Diplomatic Allies,” Ministry of Foreign Affairs, Republic of China (Taiwan), http://www.mofa.gov.tw/en/AlliesIndex.aspx?n=DF6F8F246049F8D6&sms=A76B7230ADF29736.
10. “China Threatens U.S. Firms with Sanctions over Taiwan Arms,” Ria Novosti, January 30, 2010; Keith Bradsher, “U.S. Deal with Taiwan Has China Retaliating,” New York Times, January 30, 2010; Andrew Browne and Jay Solomon, “China Threatens U.S. Sanctions over Arms Sale to Taiwan,” Wall Street Journal, January 31, 2010; James Reilly, “China’s Unilateral Sanctions,” Washington Quarterly, Fall 2012.
11. Reilly, “China’s Unilateral Sanctions,” 125.
12. Business in Taiwan’s IT sector notably slowed around this time, and China opted not to send a delegation to the 2004 Computex IT fair in Taipei. See Murray Scot Tanner, Chinese Economic Coercion against Taiwan: A Tricky Weapon to Use (Santa Monica, Calif.: RAND Corporation, 2007), 17. See also Austin Ramzy, “Concession Offered, Taiwan Group to End Protests,” New York Times, April 7, 2014.
13. Tanner, Chinese Economic Coercion against Taiwan, xiv; Jason Dean, “Wikileaks: Singapore’s Lee Rates China’s Leaders,” Wall Street Journal, November 30, 2010.
14. Kastner, Political Conflict and Economic Interdependence across the Taiwan Strait and Beyond, 79.
15. “Prepared Testimony of David N. Laux, President, USA-ROC Economic Council, before the House Banking and Financial Service Committee,” Federal News Service, March 20, 1996; Eric Gartzke and Quan Li, “How Globalization Can Reduce International Conflict,” in Globalization and Armed Conflict, eds. Nils Petter Gleditsch, Gerald Schneider, and Katherine Barbieri (New York: Rowman & Littlefield, 2003), 123–140.
16. “NT$1.5 Trillion Wiped off Stock Market in Past Week,” Taiwan Economic News, July 19, 1999; “Cash-Rich State Funds Strive to Staunch Market Decline,” Taiwan Economic News, July 20, 1999; “Political Uncertainties Cloud Taiwan’s Stock Market,” Taiwan Economic News, July 26, 1999.
17. Lien Chan, “Government Work Report to the Legislative Yuan,” Taipei, September 1996.
18. Mark Landler, “Taiwan Lifts Restrictions on Investment in China,” New York Times, November 8, 2001.
19. Ibid. See also Lin Chieh-yu, “Chen Wants to Lift Direct Links Ban,” Taipei Times, September 17, 2000.
20. Xin Ming, “Pros and Cons of ‘Three Direct Links’ between Mainland China and Taiwan,” Epoch Times (English edition), December 27, 2008; “China’s Policy on ‘Three Direct Links’ across the Taiwan Straits,” Xinhua News Agency, December 17, 2003.
21. Reilly, “China’s Economic Statecraft.”
22. Cindy Sui, “Taiwan at Crossroads in Relationship with China,” BBC News, May 21, 2010; “Chinese Mainland, Taiwan Sign Landmark Economic Pact,” Xinhua, June 29, 2010.
23. Only in the LED and solar battery manufacturing industries are Chinese companies prohibited from holding controlling power. All other Taiwanese sectors ar
e fair game for mainland investment. See J. Michael Cole, “No Missiles Required: How China Is Buying Taiwan’s ‘Re-Unification,’ ” Diplomat, August 23, 2013.
24. William Wan, “Taiwan’s President, Ma Ying-jeou, Plans to Expand Relations with China,” Washington Post, October 24, 2013.
25. “Full Transcript: Interview with Taiwanese President Ma Ying-jeou,” Washington Post, October 24, 2013.
26. “Taiwan Economic and Political Background Note,” U.S. Department of State, Bureau of East Asian and Pacific Affairs, February 8, 2012; Reilly, “China’s Economic Statecraft.”
27. Rachel Rosenthal, “The Burden of Taiwan’s Stalled Trade Deal with China,” Wall Street Journal, May 8, 2015.
28. Ibid.
29. Jean-Pierre Cabestan and Jacques deLisle, Political Changes in Taiwan under Ma Ying-jeou: Partisan Conflict, Policy Choices, External Constraints and Security Challenges (New York: Routledge, 2014), 86.
30. “The Name-Change Fever,” China Post, February 11, 2007.
31. Cheng Chih-yu, Chi-yuan Liang, and Chu-chia Lin, “An Evaluation of Taiwan’s Economic Performance after 2000,” Taiwan Development Perspectives 2003 (Taipei: National Policy Foundation, 2003), 73–91.
32. “Taiwan Gov’t Halves Daily Slide Limit to Stabilize Stock Market,” Taiwan Economic News, March 27, 2000.
33. Kastner, Political Conflict and Economic Interdependence across the Taiwan Strait and Beyond, 84. Commentary from People’s Daily verbally attacked “green” (pro-independence) Taiwanese businessmen, calling Chi Mei founder Hsu Wenlung a “shameless” anti-Chinese bigot, for instance. Tanner, Chinese Economic Coercion, 127–129.
34. Tanner, Chinese Economic Coercion, 127–129.
35. “China Attacks Chi Mei over ‘Ideology,’ ” Taipei Times, June 1, 2004.
36. “Back to the Kowtow,” Wall Street Journal, June 2, 2004; “Pro-Independence Investors Not Welcome,” China Daily, June 22, 2004.
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