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| 1 |
ID:
185556
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| Summary/Abstract |
This paper examines the political-economy of capital controls in China. We argue that the global policy context influences domestic political debates over capital controls, which, in turn, can shape public attitudes toward the subject. Policy entrepreneurs on each side of the capital controls debate can point to capital account policies in other countries as evidence for the desirability of their position. This issue framing strategy, in turn, influences domestic preferences on capital controls. We present qualitative evidence showing that the international policy context features heavily in domestic political debates about capital controls in China. Next, using original survey data, we show that information about other countries’ policy choices influences mass public attitudes about capital controls in China. The evidence indicates that growing global use of capital controls can strengthen public support for this policy. More broadly, these findings suggest that a complete understanding of policy diffusion requires greater attention to the role played by domestic policy entrepreneurs.
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| 2 |
ID:
146199
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| Summary/Abstract |
This study identifies 37 central banks that added China’s renminbi (RMB) to their reserve portfolio since 2010. Why do some states diversify into new reserve currencies at an early stage while most continue to take a wait-and-see approach? We argue that state preferences regarding international order influence decisions to invest in RMB. While some states support the liberal, US-led status quo, others prefer an emerging Chinese alternative order. We contend that as state preferences for international order move away from the US model (and toward China), the likelihood of diversifying reserves into RMB should increase. Thus, the decision to invest in RMB is not simply an economic choice. It is also a political act that signals and symbolizes a state’s preferences for a diminution of American global influence and support for a revised order. Employing new United Nations General Assembly (UNGA) ideal points data, we find that states with larger (smaller) ideal point distance with the United States (China) are more likely to adopt RMB as a reserve currency. Furthermore, political consideration—rather than economic concerns about transaction needs, optimal portfolio considerations, or instrumental calculations—best explains emergent demand for the RMB as a reserve currency.
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| 3 |
ID:
141841
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For several years now, China has implemented policies to promote the international use of its national currency, the Renminbi (RMB). As part of these efforts, the People's Bank of China (PBC) has negotiated 25 bilateral currency swap agreements (BSAs) with foreign central banks. These make it easier for firms in both China and its partner countries to settle cross-border trade and direct investment in RMB. We seek to explain why China and these countries cooperate via BSAs. We theorize that trade and direct investment interdependence relate to dyadic BSA cooperation via two mechanisms: financing insulation from international liquidity shocks and reduced transaction costs of cross-border exchange for local firms. Additionally, we expect the presence of preferential trade agreements (PTAs) and bilateral investment treaties (BITs) will increase the probability of dyadic BSA cooperation. BSAs are natural extensions of these existing agreements. They represent an additional layer of state-level formal cooperation that further reduces barriers to cross-border trade and direct investment. Our empirical analysis finds that both de facto trade interdependence and de jure economic integration via PTAs and BITs increase the probability of BSA cooperation between China and partners.
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| 4 |
ID:
156256
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| Summary/Abstract |
Will China’s currency, the renminbi (RMB), become a major international reserve currency that rivals the US dollar in the next decade? This article argues that this is unlikely for domestic political and economic reasons. China has some important systemic advantages that other recent challengers to the dollar have lacked, such as a large economy, a major role in the international trading system and substantial military capabilities. However, China’s domestic political system poses an important barrier to the internationalization of its currency. Chinese political institutions and financial policies reduce the attractiveness of the RMB as a reserve currency. Strong opposition to financial reform from Chinese interest groups has blocked reforms that would enhance the RMB’s attractiveness, and is likely to prevent substantial liberalizing reform in the future. Moreover, changes in China’s political economy during the Xi Jinping era (2012–present) have exacerbated these domestic deficiencies. Due to these various domestic political obstacles, the RMB is unlikely to emerge as a top reserve currency in the next ten years.
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