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Begin New Search Topic Economics Political Geography China Content Type Policy Brief Publishing Institution Peterson Institute for International Economics Publication Year within 5 Years Publication Year within 3 Years

1. Why the proposed Brussels buyers club to procure critical minerals is a bad idea

Author:
Cullen Hendrix
Publication Date:
05-2023
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Concerned about critical mineral supply chains and its own strategic vulnerabilities, the European Union is advancing a buyers club to procure minerals critical to the clean energy transition, such as bauxite, cobalt, lithium, and nickel. The European Union is deeply dependent on imports of both raw and processed critical minerals and materials and thus highly exposed to global price volatility. The door appears to be open for the United States or other EU trading partners and like-minded countries to join this club. Decarbonization is not the only impetus behind the proposed Brussels buyers club. Both the European Union and United States view China’s dominance of critical mineral supply chains as a national security issue, because these minerals are key inputs to modern military technology. Hendrix agrees that supply chains for critical minerals desperately need widening to meet projected global demand and tackle climate change mitigation, but he warns that a purchasers club would not be a step in the right direction. A buyers club would be prone to free riding, set up distributive conflicts within the European Union, and reduce the share of climate mitigation benefits accruing to critical mineral–producing countries, many of which are developing and middle-income economies.
Topic:
Economics, National Security, European Union, Supply Chains, and Minerals
Political Geography:
China and Europe

2. Will China's impending overhaul of its financial regulatory system make a difference?

Author:
Martin Chorzempa and Nicolas Véron
Publication Date:
03-2023
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
China's reshuffle of its financial supervisory architecture announced in March, like previous changes, appears incremental rather than radical. It will not, however, resolve the main challenge hobbling China’s financial system, which is not linked to specific choices of supervisory architecture but rather to the unfinished transition from a state-directed to a market-based financial system and the way the Chinese Communist Party's pervasive role creates obstacles to good corporate governance of individual financial firms and to the independence of supervisory authorities. Too often, political authorities and sometimes the supervisors themselves intervene directly in financial firms’ decisions to allocate capital and credit, occasionally resulting in failures of risk control and risk management. The authors argue that Chinese reformers should aim at a clearer and more rigorous division of responsibilities, in which financial firms manage financial opportunities and risks, and supervisors are exclusively focused on their respective public policy mandates.
Topic:
Economics, Regulation, Finance, and Corporate Governance
Political Geography:
China and Asia

3. CHIPS Act will spur US production but not foreclose China

Author:
Gary Clyde Hufbauer and Megan Hogan
Publication Date:
10-2022
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The CHIPS and Science Act, export controls, and agreements with allied countries will accomplish many of their multiple objectives. More US semiconductor fabrication plants will be built, US R&D will be accelerated, and advanced chips and chip-making machines will be denied to China, Russia, and other adversaries. However, the Act will not make a material difference to US chip supplies in the next two or three years. Slower economic growth has already tipped the chips market in favor of ample supplies. While collective measures have inflicted considerable short-term pain on China, causing a sharp drop in the fortunes of its high-tech firms, China will respond by redoubling its self-sufficiency programs. The United States, however, should not mimic China in pursuing self-sufficiency, as US self-sufficiency is an illusion. The United States currently exports high-value chips and imports low-value chips, so increasing self-sufficiency would require the United States to prioritize basic chip production at the same time it is supposed to be competing with China in advanced chip production. Continuing to prioritize advanced chip production—where the United States has a clear advantage—is the most efficient course of action.
Topic:
Economics, Legislation, Exports, Production, and Semiconductors
Political Geography:
China, Asia, and United States of America

4. South Korea should prepare for its exposure to US-China technology tensions

Author:
Mary Lovely and Abigail Dahlman
Publication Date:
07-2022
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The stated goal of the US-led Indo-Pacific Economic Framework for Prosperity (IPEF) is to create standards that enhance and elevate regional trade and investment flows, but it is clearly aimed at reducing the role of China in global supply chains. As China is Korea’s largest trading partner, US policy discouraging Chinese participation in supply chains has immediate detrimental implications for Korean manufacturers. The United States is the second-most important destination for Korean exports. Given the values of these triangular trade flows, Lovely and Dahlman assess South Korea’s exposure to US demands to remove or reduce Chinese participation in the manufacture of exports destined for the US market. The reliance of the proposed framework on certain standards will likely reduce Chinese participation in IPEF trade networks. Korea may benefit from this trend, but IPEF could also increase production costs for Korean companies, especially in the electronics sector, a problem that would worsen if China retaliates against these companies. To reduce these risks, Korea might find it prudent to reduce its reliance on intermediate goods from China for products it produces for export to the United States. The Korean government should also seek to better understand its exposure to US–China trade tensions and diversify its trade relations. Korean firms should start preparing for supply chain disruptions, perhaps by making investments at home. Korea could also help other IPEF members reduce supply chain disruptions while addressing security concerns over China.
Topic:
Economics, Science and Technology, Supply Chains, and Competition
Political Geography:
China, Asia, South Korea, North America, and United States of America

5. China's CPTPP bid spurs South Korea to act on Asia-Pacific trade pacts

Author:
Jeffrey J. Schott
Publication Date:
06-2022
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
China’s sudden application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in September 2021 has broad implications for South Korea’s economic relations with China, Japan, and the United States. In the past, Korea frequently debated but invariably postponed deciding whether to participate in negotiations on the CPTPP, despite the substantial benefits to be gained from doing so. However, China’s application has prompted Korean officials to get off the fence and apply as well. As China moves to deepen its ties to regional partners, Korea needs to follow suit, complementing the ongoing implementation of the Regional Comprehensive Economic Partnership (RCEP) with expedited negotiations to join the CPTPP and participation in the US-led Indo-Pacific Economic Framework for Prosperity (IPEF). Korean participation in the RCEP, CPTPP, and IPEF is desirable and mutually reinforcing and should allow Korea to sustain its strong commercial interests in both the US and Chinese markets.
Topic:
Economics, International Trade and Finance, Treaties and Agreements, and Trade
Political Geography:
China, South Korea, and Asia-Pacific