DOCSLIB.ORG

China: Economic Outlook, 2015

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
China: Economic Outlook, 2015 DIRECTORATE-GENERAL FOR EXTERNALPOLICIES POLICY DEPARTMENT IN-DEPTH ANALYSIS China: Economic outlook, 2015 Authors: Barbara BARONE Roberto BENDINI ABSTRACT China stands now at a crossroads, where factors that for many years contributed to its growth have nearly – if not completely – exhausted their potential. As domestic economic challenges grow more pressing, Beijing has embarked on a new development strategy to 'rebalance' its economy and reinforce its integration into global markets. A number of elements of this strategy – including the 'One Belt One Road' initiative – are likely to have a major impact across the globe. DG EXPO/B/PolDep/Note/2015_216 EN July 2015-PE 549.063 © European Union, 2015 Policy Department, Directorate-General for External Policies This paper was requested by the European Parliament's Delegation for relations with the People's Republic of China. English-language manuscript was completed on 15 July 2015. Printed in Belgium. Authors: Barbara BARONE, Roberto BENDINI with input from Jakub PRZETACZNIK. Research assistance: Melina van der VELDEN (intern). Editorial Assistant: Jakub PRZETACZNIK Feedback of all kind is welcome. Please write to the author: [email protected]. To obtain copies, please send a request to: [email protected] This paper will be published on the European Parliament's online database, 'Think tank'. The content of this document is the sole responsibility of the author and any opinions expressed therein do not necessarily represent the official position of the European Parliament. It is addressed to the Members and staff of the EP for their parliamentary work. Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the European Parliament is given prior notice and sent a copy. China: Economic outlook, 2015 Table of contents 1. China's 'new normal' economy 4 2. Domestic economic challenges 9 2.1. Real estate, local government debt and urban development 9 2.2. Financial markets 12 2.3. Regional and rural-urban disparities 12 2.4. Urbanisation, quality of life and social unrest 15 3. China's development strategy 18 3.1. Financial liberalisation 18 3.2. Fiscal reform 20 3.3. Structural reforms 20 3.4. Global pursuits 22 4. Conclusions 24 3 Policy Department, Directorate-General for External Policies 1. China's 'new normal' economy Two decades of double-digit growth secured China's ascension to Despite its economic economic records. In 2013 China achieved the status of world's largest slowdown, China has won trading power, accounting for over 10 % of global trade. In 2014, China its race with the US for broke another record: the country recorded the globe's largest economic global economic leadership. output in 'purchasing power parity' (PPP), i.e. taking into account differences in prices for goods and services across countries. According to IMF estimates, the country’s GDP in PPP reached USD 17.6 trillion that year, slightly surpassing the USD 17.4 trillion of the United States – the uncontested global economic leader for over a century1. When its GDP is measured in current USD prices, China is only the second largest – but there too the gap is narrowing. Along with economic growth China also has managed to cut sharply the Extreme poverty has proportion of people living in absolute poverty. When Beijing began declined sharply in China. implementing market reforms in 1979, over 80 % of the Chinese population lived in absolute poverty. This share dropped to less than 10 % by 2013. Figure 1: Percentage of Chinese living in extreme poverty, defined as living on less than USD 1.25 per capita in PPP terms2 Source: OECD 2015, p. 17 China's economic growth has China's impressive economic performance has, however, shown steady slowed to 6.8 % in 2015. signs of abating in the aftermath of the global financial crisis. When China's GDP was growing at an accelerating rate, it reached its maximum –14.2 % – in 2007. As global demand fell, so did China's growth rate, hitting 7.4 % in 2014 and 6.8 % in the first quarter of 2015. Estimates for the coming years confirm a decline in Chinese output, is projected to drop to 6 % by 2018. 1 http://www.ft.com/intl/cms/s/2/d79ffff8-cfb7-11e3-9b2b- 00144feabdc0.html#axzz3cYf39iYF While several voices in the scientific community pointed out flaws in the estimation and comparability of China's figures in PPP. 2 World Development Indicators 1981 to 2009, OECD estimates from 2009 onward based on the estimated national income distribution. 4 China: Economic outlook, 2015 Figure 2: GDP growth Source: POLDEP on WEO data There is little likelihood that The country's economic slowdown, which began in 2010 and has shown no growth will rebound. signs of rebounding, has fuelled the debate over whether China has reached a turning point in its development path3. Some analysts argue the country is stuck in a 'middle income trap', unable to sustain high-speed growth. These observers stress the 'structural' nature Some analysts say the country will remain caught of the country's slowdown and point to development bottlenecks (e.g. in a 'middle income trap', labour market issues, inefficient capital allocation, the limits of China's while others argue that comparative advantages in labour-intensive and low-technology growth in absolute terms is production) 4. still impressive. Other scholars, on the other hand, argue that, despite the declining growth rates, the size and the global impact of the Chinese economy remain strong in absolute terms. To put matters into perspective, these analysts say, if China grows at 7 %, its additional output would be EUR 595 billion – almost three times the EUR 206 billion it added ten years ago, when the country’s growth rate was 12 %5. Moreover, even with slower growth, China is likely The Chinese government to become a high-income country by 2020. This school of thought further has called China's lower interprets China's recent growth as reflecting a greater reliance on growth the ‘new normal’. domestic consumption6. This interpretation is in line with the official position of the Chinese The 'new normal' economy government. According to Beijing, China’s more muted economic growth should shift towards more stems from a ‘rebalancing’ towards a ‘new normal’, a phrase first used by consumption, services and President Xi Jinping during a trip to Henan in May 2014. The government's 3 http://www.eastasiaforum.org/2011/01/29/chinese-wages-and-the-turning-point-in-the- chinese-economy/ http://blogs.worldbank.org/futuredevelopment/there-no-middle-income-trap 4 http://siteresources.worldbank.org/INTEASTASIAPACIFIC/Resources/226262- 1158536715202/EA_Renaissance_full.pdf 5 http://www.brookings.edu/blogs/future-development/posts/2015/02/18-china-growth- quah 6 http://www.brookings.edu/blogs/future-development/posts/2015/02/18-china-growth- quah 5 Policy Department, Directorate-General for External Policies private sector – not an easy efforts to 'rebalance' aim to prioritise people’s wellbeing over growth switch. targets, countering the risk of the ‘middle-income trap’7 by fostering entrepreneurship and innovation and by increasing the supply of public goods and services8 and ensuring that people’s income grows as rapidly as GDP. The ‘new normal’ economy represents a shift from one driven by investment and labour-intensive exports to one based on domestic consumption and services. Yet this transition is proving difficult. While a sharp fall in global demand has lowered the growth of China's export volumes, increases in local consumption have been very modest (see Figure 3). Figure 3: Contribution to GDP9 growth Source: POLDEP on National Bureau of Statistics data Investment has been largely Investment has been largely sustained by infrastructure. Investments in real sustained by infrastructure. estate (see Section 2.1) and manufacturing, on the other hand, have shrunk significantly, especially in the past two years (see Figure 4). 7 http://siteresources.worldbank.org/INTEASTASIAPACIFIC/Resources/226262- 1158536715202/EA_Renaissance_full.pdf 8 Premier Li Keqiang’s speech at the World Economic Forum (Davos, January 2015) 9 Gross Domestic Product by Expenditure Approach (NBS calculation) at current prices 6 China: Economic outlook, 2015 Figure 4: Growth in fixed asset investments, year-on-year (three-month moving average) Source: CEIC Along with slower growth, China faces the risks of protracted deflationary pressures. Deflation reflects downward pressure in several channels: overcapacity in the metals, mining and heavy industrial sectors; a The economy is at risk of contraction in the property market; and falling import prices. deflation, despite the government’s interest rate In May 2015, China's annual inflation rate softened to 1.2 %, down from the cuts. 1.5 % recorded the previous month. Food prices had increased by only 1.6 %, while the increase the previous year had been over 3 %. Non-food prices rose by only 1.0 % in the year up to May 2015. The ex-factory price for consumer goods is now falling more rapidly than at any point since the peak of the global financial crisis, and the decline in the price of goods sold by heavy industries is even more pronounced. To respond to lower growth, declining prices, higher debt and debt-service costs, the People's Bank of China (PBOC) has cut its benchmark lending rate four times in the last six months. The latest cut (on 27 June) brought the benchmark lending rate down to 4.85 %, while the one-year deposit rate was set to 2 %10. The reserve requirements for banks lending to farmers and small businesses have also been reduced. China's nascent economic shift towards consumption is connected to the emergence of its sizable middle class and the country's rapid urbanisation. The rise in consumption has also brought a higher demand for services – A higher demand for quality such as healthcare, education, tourism and financial services – at the services underpins increases expense of the consumption of manufactured goods11.
Load more

Recommended publications
  • Policies Governing China's Overseas Development Finance
    MARCH 2018 | NUMBER 016 THE CENTER FOR CLIMATE POLICY LAB INTERNATIONAL THE FLETCHER SCHOOL ENVIRONMENT & RESOURCE POLICY TUFTS UNIVERSITY Policies Governing China’s Overseas Development Finance Implications for Climate Change Kelly Sims Gallagher and Qi Qi Policies Governing China’s Overseas Development Finance Implications for Climate Change Table of Contents PAGE 1. Introduction 2 2. “Who’s who” in China’s Overseas Green Finance Policy Landscape 5 3. China’s Regulatory Structure for Overseas Investment 8 Abstract 4. China’s Policies Encouraging Socially-Responsible Overseas Investment 12 China’s foreign direct investment began to grow in 1999, and gained further 5. China’s Efforts to Green its Banking System 22 momentum when President Xi Jinping launched the Belt and Road Initiative 6. Comparing Policies Influencing Green Investments at Home and Abroad 26 (BRI) in 2013. China is now the largest investor in least-developed countries, in developing Asia, and the fourth-largest investor in Africa. Motivated by concerns 6.1. Industrial Investments that are Encouraged, Restricted, or Prohibited 26 about the carbon consequences of China’s overseas investments, this paper 6.2. The Direct and Indirect Effects of China’s Industrial Policies 31 identifies and evaluates Chinese policies governing China’s overseas investments, 6.3. Chinese Financial Institutions 32 and focuses particularly on how those policies influence environmental outcomes in recipient countries. Policies governing domestic investments are also examined 6.4. The Impact of the Green Credit Policy on Commercial Banks 39 with a view to clarifying inconsistencies between domestic and overseas policies. 6.5. The Impact of China’s Green Bond Policy 45 7.
    [Show full text]
  • New Foreign Policy Actors in China
    Stockholm InternatIonal Peace reSearch InStItute SIPrI Policy Paper new ForeIgn PolIcy new Foreign Policy actors in china 26 actorS In chIna September 2010 The dynamic transformation of Chinese society that has paralleled linda jakobson and dean knox changes in the international environment has had a direct impact on both the making and shaping of Chinese foreign policy. To understand the complex nature of these changes is of utmost importance to the international community in seeking China’s engagement and cooperation. Although much about China’s foreign policy decision making remains obscure, this Policy Paper make clear that it is possible to identify the interest groups vying for a voice in policy formulation and to explore their policy preferences. Uniquely informed by the authors’ access to individuals across the full range of Chinese foreign policy actors, this Policy Paper reveals a number of emergent trends, chief among them the changing face of China’s official decision-making apparatus and the direction that actors on the margins would like to see Chinese foreign policy take. linda Jakobson (Finland) is Director of the SIPRI China and Global Security Programme. She has lived and worked in China for over 15 years and is fluent in Chinese. She has written six books about China and has published extensively on China’s foreign policy, the Taiwan Strait, China’s energy security, and China’s policies on climate change and science and technology. Prior to joining SIPRI in 2009, Jakobson worked for 10 years for the Finnish Institute of International Affairs (FIIA), most recently as director of its China Programme.
    [Show full text]
  • A) China's Development Assistance in PNG, Samoa and Tonga
    The Development Needs of Pacific Island Countries Report prepared by: Graeme Smith, George Carter, Mao Xiaojing, Almah Tararia, Elisi Tupou and Xu Weitao The Development Needs of Pacific Island Countries DISCLAIMER: The analysis and policy recommendations of the research paper do not necessarily reflect the views of the United Nations Development Programme, its Executive Board or its Member States. The designations employed in the paper do not imply the expressions of any opinion whatsoever on the part of the Secretariat of the United Nations or UNDP concerning the legal status of any country, territory, city or area or its authorities, or concerning the delimitation of its frontiers or boundaries. The recommendations of the paper are solely the views of the researchers and do not reflect the views of any government, including Australia, China, Tonga, Samoa, or Papua New Guinea, or other; or other organization. All rights reserved. Any part of this publication may be quoted, copied, or translated by indicating the source. No part of this publication may be used for commercial purposes without prior written permission from UNDP China. The Development Needs of Pacific Island Countries Table of Contents List of Abbreviations ................................................................................................................ 1 List of Tables and Figure ......................................................................................................... 3 1. An Introduction to the Research Project ........................................................................
    [Show full text]
  • Urban China China
    URBAN CHINA URBAN URBAN CHINA CHINA TOWARD EFFICIENT, CITIES AND SUSTAINABLE INCLUSIVE, INCLUSIVE, AND TOWARD EFFICIENT, SUSTAINABLE URBANIZATION INCLUSIVE, AND BUILDING EFFICIENT, BUILDING EFFICIENT, SUSTAINABLE URBANIZATION The World Bank Development Research Center of the State Council, The People’s Republic of China ISBN 978-1-4648-0206-5 90000 9781464 802065 SKU 210206 Urban China Urban China Toward Efficient, Inclusive, and Sustainable Urbanization The World Bank Development Research Center of the State Council, the People’s Republic of China Washington, DC © 2014 International Bank for Reconstruction and Development / The World Bank and the Development Research Center of the State Council, P. R. China 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 17 16 15 14 This work is a product of the staff of The World Bank and the Development Research Center of the State Council, P.R. China. Note that neither The World Bank nor the Development Research Center of the State Council, P. R. China necessarily own each component of the content included in the work. The World Bank and the Development Research Center of the State Council, P. R. China therefore do not warrant that the use of the content contained in the work will not infringe on the rights of third parties. The risk of claims resulting from such infringement rests solely with you. The findings, interpretations, and conclusions expressed in this work are those of the authors and do not necessarily reflect the views of nor imply an official endorsement by The World Bank, its Board of Executive Directors, the governments they represent, or the Government of China.
    [Show full text]
  • The Shanghai Co-Operation Organisation: China’S Initiative in Regional Institutional Building
    Journal of Contemporary Asia Vol. 41, No. 4, November 2011, pp. 632–656 The Shanghai Co-operation Organisation: China’s Initiative in Regional Institutional Building JOSEPH Y. S. CHENG Contemporary China Research Project, City University of Hong Kong, Hong Kong ABSTRACT China’s initiative in establishing and promoting the development of the Shanghai Co-operation Organisation (SCO) is an interesting case study of China’s attempt at regional institution building. China’s increasing interest in Central Asia coincided with its gradual acceptance and rising enthusiasm regarding participation in regional organisations. The ‘‘Shang- hai Five’’ mechanism and the SCO were seen as appropriate mechanisms for pursuing China’s multiple interests in the region; their development was also in line with the improvement in Sino-Russian relations. Chinese leaders have skilfully developed the SCO’s institutional frame- work, and they seem intent on getting good value for the resources spent. The leaders have also demonstrated considerable patience when the SCO’s development encountered setbacks. KEY WORDS: Shanghai Co-operation Organisation, regionalism, institution building, Central Asia, Sino-Russian relations, oil, gas, New Silk Road Following the break-up of the Soviet Union, China has engaged in increasingly close co-operation with the five Central Asian republics (Kazakhstan, Tajikistan, Kyrgyzstan, Turkmenistan and Uzbekistan). This co-operation has been perceived by the Chinese leadership as essential to maintaining security along its western border, promoting the economic development of western China, diversifying the sources of China’s energy imports and those of other raw materials, and the securing of a peaceful and friendly international environment along its frontiers.
    [Show full text]
  • China's Belt and Road Initiative in the Global Trade, Investment and Finance Landscape
    China's Belt and Road Initiative in the Global Trade, Investment and Finance Landscape │ 3 China’s Belt and Road Initiative in the global trade, investment and finance landscape China's Belt and Road Initiative (BRI) development strategy aims to build connectivity and co-operation across six main economic corridors encompassing China and: Mongolia and Russia; Eurasian countries; Central and West Asia; Pakistan; other countries of the Indian sub-continent; and Indochina. Asia needs USD 26 trillion in infrastructure investment to 2030 (Asian Development Bank, 2017), and China can certainly help to provide some of this. Its investments, by building infrastructure, have positive impacts on countries involved. Mutual benefit is a feature of the BRI which will also help to develop markets for China’s products in the long term and to alleviate industrial excess capacity in the short term. The BRI prioritises hardware (infrastructure) and funding first. This report explores and quantifies parts of the BRI strategy, the impact on other BRI-participating economies and some of the implications for OECD countries. It reproduces Chapter 2 from the 2018 edition of the OECD Business and Financial Outlook. 1. Introduction The world has a large infrastructure gap constraining trade, openness and future prosperity. Multilateral development banks (MDBs) are working hard to help close this gap. Most recently China has commenced a major global effort to bolster this trend, a plan known as the Belt and Road Initiative (BRI). China and economies that have signed co-operation agreements with China on the BRI (henceforth BRI-participating economies1) have been rising as a share of the world economy.
    [Show full text]
  • Chinese Finance to Lac in 2016*
    PRINT OPTIONS Global Economic CHINA-LATIN AMERICA REPORT Governance Initiative FEBRUARY 2017 CHINESE FINANCE TO LAC IN 2016* Margaret Myers and Kevin Gallagher WEB OPTIONS Estimates of Chinese economies, which have relatively limited access to capital markets. Brazil, Ecuador, and Venezuela accounted for 92 Finance to LAC in 2016 percent of total lending to the region, with approximately 72 percent—or $15.2 billion—issued to Brazil alone. Despite slowing economic growth in both the Asian and National oil company Petrobras received the vast majority Latin American and Caribbean (LAC) regions, Chinese of Brazil’s share, despite being immersed in a sprawling policy bank finance to LAC governments and state-run corruption scandal. Though a primary recipient of CDB companies reached $21 billion in 2016. and Eximbank loans in the past, Argentina received no finance from policy banks in 2016. Estimates produced annually by the Inter-American Dialogue and Boston University’s Global Economic Governance Initiative (GEGI) put 2016 as the third- highest year on record for Chinese policy bank (Chinese Development Bank and China Eximbank) finance to LAC, topped only by lending in 2010 and 2015 (see Figure Brazil, Ecuador, and Venezuela 1). As indicated in the Dialogue-GEGI online China-Latin America Finance Database, CDB and Eximbank have accounted for 92% of total provided upwards of $141 billion in finance to LAC since 2005, when Chinese banks began lending to the region. lending to the region, with As in previous years, Chinese policy bank finance to LAC approximately 72%—or $15.2 surpassed Inter-American Development Bank (IDB) and World Bank (WB) individual lending to the region.
    [Show full text]
  • China Development Bank – the World’S Largest Development Finance Institution Issued Its Debut International Green Bond
    China Development Bank – The World’s Largest Development Finance Institution Issued Its Debut International Green Bond China Development Bank (CDB) priced its debut international green bond on 9 November 2017. The Bonds consists of a 5-year USD 500 million tranche and a 4-year EUR 1 billion tranche. It will be listed on the Hong Kong Exchange and the China Europe International Exchange. The bond proceeds will be used for green projects in the renewable energy, clean transportation and water resources management sectors along the Belt & Road route. Crédit Agricole CIB and Deutsche Bank were the Joint Green Structuring Advisors. Joint Lead Managers and Joint Bookrunners for the USD tranche were Agricultural Bank of China Limited Hong Kong Branch, Bank of China (Hong Kong), BNP PARIBAS, China Construction Bank (Asia), Commonwealth Bank of Australia, Crédit Agricole CIB, Deutsche Bank and Standard Chartered Bank. Joint Lead Managers and Joint Bookrunners for the EUR tranche were Bank of Communications, CCB Europe, Commerzbank, Crédit Agricole CIB, Deutsche Bank, HSBC, ING and SEB. CDB is China’s development finance institution (DFI). It serves national strategy and aspires to promote people’s livelihood. It is the world’s largest DFI in terms of assets at the end of 2016. It is China’s largest bank for overseas investment and financing, and China’s largest green bank, both in terms of balance of loans at the end of 2016. The Bonds represents China’s first-ever quasi-sovereign international green bond. The USD tranche was priced at T+78bps with a coupon rate of 2.750%, and the EUR tranche was priced at MS+43bps with a coupon rate of 0.375% , both inside CDB’s secondary curves.
    [Show full text]
  • Section 2: the China Model: Return of the Middle Kingdom
    SECTION 2: THE CHINA MODEL: RETURN OF THE MIDDLE KINGDOM Key Findings • The Chinese Communist Party (CCP) seeks to revise the inter- national order to be more amenable to its own interests and authoritarian governance system. It desires for other countries not only to acquiesce to its prerogatives but also to acknowledge what it perceives as China’s rightful place at the top of a new hierarchical world order. • The CCP’s ambitions for global preeminence have been con- sistent throughout its existence: every CCP leader since Mao Zedong has proclaimed the Party would ultimately prove the superiority of its Marxist-Leninist system over the rest of the world. Under General Secretary of the CCP Xi Jinping, the Chi- nese government has become more aggressive in pursuing its interests and promoting its model internationally. • The CCP aims to establish an international system in which Beijing can freely influence the behavior and access the mar- kets of other countries while constraining the ability of others to influence its behavior or access markets it controls. The “com- munity of common human destiny,” the CCP’s proposed alter- native global governance system, is explicitly based on histor- ical Chinese traditions and presumes Beijing and the illiberal norms and institutions it favors should be the primary forces guiding globalization. • The CCP has attempted to use the novel coronavirus (COVID-19) pandemic to promote itself as a responsible and benevolent global leader and to prove that its model of governance is su- perior to liberal democracy. Thus far, it appears Beijing has not changed many minds, if any.
    [Show full text]
  • China's Belt and Road
    Independent Task Force Report No. 79 Report Force Task Independent China’s Belt and Road China’s Belt Independent Task Force Report No. 79 China’s Belt and Road March 2021 March Implications for the United States Jacob J. Lew and Gary Roughead, Chairs Jennifer Hillman and David Sacks, Project Directors Independent Task Force Report No. 79 China’s Belt and Road Implications for the United States Jacob J. Lew and Gary Roughead, Chairs Jennifer Hillman and David Sacks, Project Directors The Council on Foreign Relations (CFR) is an independent, nonpartisan membership organization, think tank, and publisher dedicated to being a resource for its members, government officials, business executives, journalists, educators and students, civic and religious leaders, and other interested citizens in order to help them better understand the world and the foreign policy choices facing the United States and other countries. Founded in 1921, CFR carries out its mission by maintaining a diverse membership, with special programs to promote interest and develop expertise in the next generation of foreign policy leaders; convening meetings at its headquarters in New York and in Washington, DC, and other cities where senior government officials, members of Congress, global leaders, and prominent thinkers come together with Council members to discuss and debate major international issues; supporting a Studies Program that fosters independent research, enabling CFR scholars to produce articles, reports, and books and hold roundtables that analyze foreign policy issues and make concrete policy recommendations; publishing Foreign Affairs, the preeminent journal on international affairs and U.S. foreign policy; sponsoring Independent Task Forces that produce reports with both findings and policy prescriptions on the most important foreign policy topics; and providing up-to- date information and analysis about world events and American foreign policy on its website, CFR.org.
    [Show full text]
  • Asian Infrastructure Investment Bank (AIIB)
    Asian Infrastructure Investment Bank (AIIB) Martin A. Weiss Specialist in International Trade and Finance February 3, 2017 Congressional Research Service 7-5700 www.crs.gov R44754 Asian Infrastructure Investment Bank (AIIB) Summary In October 2013, at the Asia-Pacific Economic Cooperation Summit in Bali, Indonesia, China proposed creating a new multilateral development bank (MDB), the Asian Infrastructure Investment Bank (AIIB). As its name suggests, the Bank's stated purpose is to provide financing for infrastructure needs throughout Asia, as well as in neighboring regions. As of January 2017, the AIIB has approved nine projects, investing a total of $1.7 billion. The AIIB was formally established in late 2015 with 57 founding members. Membership in the AIIB is open to all members of the World Bank or the Asian Development Bank (ADB). The AIIB’s Articles of Agreement create two classes of membership: regional and non-regional members. According to the AIIB Articles, regional members hold 75% of the total voting power in the Bank. Fourteen of the G-20 nations are AIIB members. The United States is not an AIIB member. The AIIB was initially conceived as a regional financing mechanism for Chinese President Xi Jinping’s “One Belt, One Road (OBOR)” initiative. This initiative is a central component of President Xi’s regional economic and foreign policy and aims to boost economic connectivity from China to Central and South Asia, the Middle East and Europe (the Silk Road Economic Belt) and, along a maritime route, from Southeast Asia to the Middle East, Africa, and Europe (the 21st Century Maritime Silk Road).
    [Show full text]
  • Xi Jinping's Inner Circle (Part 2: Friends from Xi's Formative Years)
    Xi Jinping’s Inner Circle (Part 2: Friends from Xi’s Formative Years) Cheng Li The dominance of Jiang Zemin’s political allies in the current Politburo Standing Committee has enabled Xi Jinping, who is a protégé of Jiang, to pursue an ambitious reform agenda during his first term. The effectiveness of Xi’s policies and the political legacy of his leadership, however, will depend significantly on the political positioning of Xi’s own protégés, both now and during his second term. The second article in this series examines Xi’s longtime friends—the political confidants Xi met during his formative years, and to whom he has remained close over the past several decades. For Xi, these friends are more trustworthy than political allies whose bonds with Xi were built primarily on shared factional association. Some of these confidants will likely play crucial roles in helping Xi handle the daunting challenges of the future (and may already be helping him now). An analysis of Xi’s most trusted associates will not only identify some of the rising stars in the next round of leadership turnover in China, but will also help characterize the political orientation and worldview of the influential figures in Xi’s most trusted inner circle. “Who are our enemies? Who are our friends?” In the early years of the Chinese Communist movement, Mao Zedong considered this “a question of first importance for the revolution.” 1 This question may be even more consequential today, for Xi Jinping, China’s new top leader, than at any other time in the past three decades.
    [Show full text]