Popular Nationalist Discourse and China's Campaign to Internationalize the Renminbi
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University of Denver Digital Commons @ DU Electronic Theses and Dissertations Graduate Studies 1-1-2018 Great Powers Have Great Currencies: Popular Nationalist Discourse and China's Campaign to Internationalize the Renminbi Michael Stephen Bartee University of Denver Follow this and additional works at: https://digitalcommons.du.edu/etd Part of the Chinese Studies Commons, International Economics Commons, and the International Relations Commons Recommended Citation Bartee, Michael Stephen, "Great Powers Have Great Currencies: Popular Nationalist Discourse and China's Campaign to Internationalize the Renminbi" (2018). Electronic Theses and Dissertations. 1424. https://digitalcommons.du.edu/etd/1424 This Dissertation is brought to you for free and open access by the Graduate Studies at Digital Commons @ DU. It has been accepted for inclusion in Electronic Theses and Dissertations by an authorized administrator of Digital Commons @ DU. For more information, please contact [email protected],[email protected]. GREAT POWERS HAVE GREAT CURRENCIES: POPULAR NATIONALIST DISCOURSE AND CHINA’S CAMPAIGN TO INTERNATIONALIZE THE RENMINBI A Dissertation Presented to the Faculty of the Josef Korbel School of International Studies University of Denver In Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy by Michael S. Bartee June 2018 Advisor: Suisheng Zhao © Copyright by Michael S. Bartee 2018 All Rights Reserved Author: Michael S. Bartee Title: GREAT POWERS HAVE GREAT CURRENCIES: POPULAR NATIONALIST DIS- COURSE AND CHINA’S CAMPAIGN TO INTERNATIONALIZE THE RENMINBI Advisor: Suisheng Zhao Degree Date: June 2018 ABSTRACT Why did the Chinese government begin promoting the internationalization of its cur- rency, the renminbi, after the 2008 global financial crisis? Only a few years earlier, Beijing balked at U.S. demands to reform its currency regime, which would require dismantling many of the country’s long-preferred tools for promoting growth and maintaining domestic stability. Similar concerns about the dilution of monetary policy independence motivated previous rising economies Germany and Japan to proactively discourage the internationalization of their cur- rencies. While China’s central bank had long explored promoting greater international use of the renminbi, and such a policy would generate some benefits for China, I find that both in- stitutions and interests fall short of explaining this policy shift. Rather, I suggest that beliefs, influenced by popular nationalist sentiment, are central to explaining why the central bank chose to focus its policy efforts on renminbi internationalization as well as how it finally overcame political opposition to currency reform. In the years leading up to the financial crisis, nationalist voices increasingly stressed the need for China to boast a global currency commensurate with its growing international stature. Leveraging cognitive framing theory, I argue that nationalist sen- timent shifted the lens through which policies of currency reform were evaluated, from a logic of economics—conducive to determining domestic winners and losers—to that of global politics, which stressed more abstract goals of power and prestige. Using a mixed-methods approach of qualitative discourse analysis and quantitative content analysis of an author-assembled corpus of primary texts, I find that this change in evaluative frame caused some previously-opposed officials in the bureaucracy to begin to support currency reform. While there is no evidence that the central bank or China’s senior leaders intentionally invoked nationalist themes to pro- ii mote renminbi internationalization, I argue that this change in popular sentiment presented an unprecedented opportunity for the central bank to advance its policy agenda. Renminbi inter- nationalization was thus in large part the political outcome of a popular idea that, as voiced by economist Robert Mundell, “great powers have great currencies.” iii ACKNOWLEDGEMENTS This dissertation makes bold claims about the power of language to both project and reflect the worlds we know. It is with no small irony that I now struggle to find the words to express how grateful I am to all those that have supported me through this long journey. In truth, no words can do justice to the debt of gratitude I owe them. I am thankful for the warm but honest guidance from my dissertation advisor, Professor Sam Zhao, who generously shared so much of his time and knowledge. I thank Professor Rachel Epstein for her endless patience, encouragement, and candid advice throughout the many twists and turns of my graduate studies. Professors Haider Khan, Ilene Grabel, and Jonathan Moyer, too, were invaluable sources of expertise and insight. This project would not have been possible without this supportive Korbel family. I am also thankful for my colleagues in government, including Dave Sergeant, Lynn Emery, Charles Keyes, Tracy Thoma-Casabianca, and John Alexander, who were so supportive in making it possible for me to take time away from work to pursue scholarly endeavors. I also extend my appreciation to the Smith Richardson Foundation for its financial support of field research for this project. I thank my amazing children, Brandon and Tyler, for their patience and understanding during my many long hours at the keyboard, and for keeping me grounded with their humor and enthusiasm for life. However, my deepest gratitude goes to my wife, Jennifer, for giving me the courage to take the leap into pursuing doctoral study in the first place, and for her constant encouragement through even the most difficult moments along the way. I am thankful for her loving and selfless support over more years than I dare admit, through several trips to Asia for field research as well as countless hours at the library. I could not be here today without her, nor would I ever want to. Finally, I honor with these pages the legacy of my late grandfather, Donald Bartee. His life of service, sense of humor, and dedication to family are the yardstick against which I aspire to live my own life. To these amazing people and all of the friends and family that have been there for me—you know who you are—from the bottom of my heart, I thank you. iv TABLE OF CONTENTS Chapter One: Introduction ................................ 1 Argument in Brief .................................. 2 Understanding Currency Internationalization .................... 5 China’s Campaign to Internationalize the Renminbi ................. 8 Policy Changes to Support Renminbi Internationalization after the Financial Crisis 10 Political Efforts ................................ 11 Commitments for Further Monetary Reform . 13 The Puzzle ...................................... 14 Financial Repression and the Domestic Bias Against Financial Reform . 15 Resisting Western Pressure for Currency Liberalization . 18 Historical Precedent .............................. 19 Research Question .................................. 21 Preferred Hypothesis ................................. 21 Alternative Arguments ................................ 24 Economic Arguments ............................. 25 International Political Explanations ...................... 26 Domestic Political Explanations ........................ 27 The “Trojan Horse” Hypothesis ........................ 29 Null Hypothesis ................................ 30 Summary of Potential Drivers ............................ 32 Structure of the Dissertation ............................. 33 Chapter Two: Research Design ............................. 35 The Challenges of Studying the Chinese Political Process . 36 Overcoming Data Limitations ......................... 38 Introduction to the Methodological Approach .................... 39 The Dependent Variable ............................... 40 Defending the (Single?) Case Study Approach . 42 Establishing Causal Mechanism ........................ 45 The Independent Variables .............................. 46 External Catalysts ............................... 48 Internal Motivations .............................. 51 Ideational Drivers ............................... 54 Unit of Analysis: The Interest Group ........................ 56 Senior Leadership (IG-1) ........................... 58 The Central Bank (IG-2) ............................ 59 Other Government Organizations (IG-3) .................... 60 Local and Regional Governments (IG-4) ................... 61 The State Sector (IG-5) ............................ 61 Private Industry (IG-6) ............................ 62 Academia (IG-7) ................................ 63 v The General Public (IG-8) ........................... 63 Process Tracing ................................... 63 Advantages of Process Tracing ........................ 64 Scoping the Process Tracing Approach .................... 65 Advancing the Argument with Process Tracing . 66 Discourse and Content Analysis ........................... 66 Combining Discourse and Content Analysis . 67 Applying Discourse and Content Analysis To Renminbi Internationalization . 73 Establishing Causality ............................. 75 Evaluating the Competing Hypotheses with Quantitative Content Analysis . 76 Staying Focused on Motives, Not Outcomes ..................... 81 Chapter Three: A Theoretical Model of Nationalism and Policy Change . 82 Explaining Policy Change .............................. 83 Beliefs ........................................ 85 Cognitive Framing ............................... 86 Identity ...................................