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Nation-State Legitimacy, Trade, and the China Investment Corporation

32 Pages Posted: 2 Apr 2010 Last revised: 13 Feb 2011

Gordon L. Clark

Oxford University - Smith School of Enterprise and the Environment

Ashby H. B. Monk

Stanford University - Global Projects Center

Date Written: March 31, 2010

Abstract

Relations between China and the USA began with the best of intentions: the USA would sponsor the normalization of China’s status in the international community through trade in exchange for China’s commitment to peaceful co-existence with the west. As an emerging economy, China has relied upon trade for export-led economic growth, mimicking the path taken by its immediate neighbours over the past 25 years and the road taken previously by Germany and Japan. For a variety of reasons, the original deal has been over-taken by the massive surge in Chinese exports to the USA, the tensions occasioned by the global financial crisis, and the sense in which the USA, as a debtor country, is now reliant upon China for its long-term future. The China Investment Corporation (CIC) is a product of the original deal and is emblematic of the new status of China in the global economy. As one of the world’s largest sovereign wealth funds, the CIC has eschewed conventional portfolio investment in developed financial markets for strategic investment in resources and jurisdictions deemed essential to China’s long-term growth. As such, attempts to rein-in its ambitions through the Santiago Principles and the like have been circumvented by a very different approach to investment. The CIC is re-making the rules of engagement in global financial markets, thereby redrawing the nature and scope of the long-term relationship between the two superpowers of the twenty-first century: China and the USA.

Keywords: Trade, China, imbalances, global investment

JEL Classification: G23, G24, L12

Suggested Citation

Clark, Gordon L. and Monk, Ashby H. B., Nation-State Legitimacy, Trade, and the China Investment Corporation (March 31, 2010). Available at SSRN: https://ssrn.com/abstract=1582647 or http://dx.doi.org/10.2139/ssrn.1582647

Gordon L. Clark (Contact Author)

Oxford University - Smith School of Enterprise and the Environment ( email )

South Parks Road
Oxford, OX1 3QY
United Kingdom
+44 1865 285197 (Phone)
+44 1865 285073 (Fax)

HOME PAGE: http://www.geog.ox.ac.uk/staff/glclark.html

Ashby H. B. Monk

Stanford University - Global Projects Center ( email )

United States

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