Can China harness its financial assets into financial power : evidence from Africa and Latin America.

• Main Author: Koh, De Wei.
• Other Authors: Friedrich Wun-Yuen Wu
• Format: Theses and Dissertations
• Language: English
• Published: 2013
• Subjects: DRNTU::Humanities
• Online Access: http://hdl.handle.net/10356/55171
• Institution: Nanyang Technological University

Over the past few decades, China has accumulated over US$3.3 trillion of foreign exchange reserves as it rises to become a global financial power. Does China's financial assets increase its ability to pursue its national interests internationally? By looking at the major macroeconomic indicators; the globalization and influence of Chinese state-owned enterprises, state-owned banks, and sovereign wealth funds; the internationalization of the renminbi, as well as China's growing influence in several regional groupings, it is clear that China has the necessary mechanisms to assert its financial power. This paper examines the efficacy and limitations of these mechanisms in Africa and Latin America, in the economic, political, and international domains. In the economic domain, China has consistently used foreign oil contracts and acquisitions to secure direct oil flow from developing nations. An analysis of recent cases shows that while China is able to successfully harness its financial power in its pursuit for oil, it needs to fulfil its promises to the satisfaction of the recipient countries in order to maintain the value of its offers. In the political domain, China had used its financial assets to purchase diplomatic allegiance from various African and Latin American countries in support of the One-China Policy. Studying both successful and unsuccessful cases revealed that while China is generally able to use its financial power against Taiwan successfully, its national goals have, in recent years, shifted to the economic domain. In the international domain, a comprehensive quantitative study is carried out on UN and World Bank data, showing that the increase in investment from Chinese companies has not led to an increase in voting coincidence in the UN General Assembly.