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1. Xi Demands Fealty Despite Domestic And Foreign Woes

Author:
Willy Wo-Lap Lam
Publication Date:
01-2024
Content Type:
Journal Article
Journal:
China Brief
Institution:
The Jamestown Foundation
Abstract:
The Politburo held a “democratic life meeting (民主生活会)” on December 21–22, 2023, in which President Xi Jinping gave an internal, unpublished speech. According to accounts provided to the author by three officials at the rank of department head or above, Xi admitted that he had repeatedly postponed the Third Plenum of the 20th Central Committee (which according to Party norms should have taken place in October) because he “could not offer any viable solution for the nation’s problems.” Xi, who is general secretary of the Chinese Communist Party (CCP) and commander-in-chief, went on to blame the other 23 Politburo members and other senior cadres, not only for failing to give him good advice but also for demonstrating signs of disobedience. Reports of Xi’s frank admission of the dire straits of the Party’s leadership were widely circulated on social media. The official Xinhua read-out of the Politburo meeting also cited Xi as demanding “unison of thought” among top-tier officials. This entails adhering closely to the instructions of the “core leadership”—in other words, to Xi himself (Xinhua, December 25, 2023). The supreme leader raised the “two safeguards (两个维护),” a slogan that refers to “safeguarding the authority of comrade Xi Jinping as core of the party” and “safeguarding Xi Jinping Thought on socialism with Chinese characteristics for a new era.” President Xi also admonished his close advisors to “take a firm grip on the internal laws of developments [of issues]; accurately distinguish between events and trends, crises and opportunities, and benefits and harms … and effectively combat risks and take action on the basis of stability” (People’s Daily, December 23, 2023). This instruction tallies with caveats given by Xi throughout the past year, in which he has warned that China faces unprecedented challenges and that the party-state apparatus must ready itself to tackle “black swans and gray rhinos.”
Topic:
Financial Crisis, Leadership, Xi Jinping, Chinese Communist Party (CCP), and Banking
Political Geography:
China and Asia

2. The Egyptian Financial Crisis: Implications for the region, and for Israel too

Author:
Eran Lerman
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
Jerusalem Institute for Strategy and Security (JISS)
Abstract:
Egypt continues to play an active role in regional affairs, including the Aqaba emergency meeting on the Palestinian situation (February 26) and the ongoing effort to prevent escalation in Gaza. At the same time, Cairo is in the middle of a significant financial crisis. The effects of the war in Ukraine – specifically, grain shortages – brought the Egyptian pound to more than 30 to the dollar, up from 20 in November and 15 in early 2022, facilitated by deliberate government action in response to demands by the IMF. Inflation still soars, and so does youth unemployment. All this could destabilize a nation of 105 million on our border, with dire consequences.
Topic:
Financial Crisis, Conflict, Fiscal Policy, and Financial Stability
Political Geography:
Africa, Middle East, Israel, Egypt, and MENA

3. China as an International Lender of Last Resort

Author:
Sebastian Horn, Bradley C. Parks, Carmen M. Reinhart, and Christoph Trebesch
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper shows that China has launched a new global system for cross-border rescue lending to countries in debt distress. We build the first comprehensive dataset on China’s overseas bailouts between 2000 and 2021 and provide new insights into China’s growing role in the global financial system. A key finding is that the global swap line network put in place by the People’s Bank of China is increasingly used as a financial rescue mechanism, with more than USD 170 billion in liquidity support extended to crisis countries, including repeated rollovers of swaps coming due. The swaps bolster gross reserves and are mostly drawn by distressed countries with low liquidity ratios. In addition, we show that Chinese state-owned banks and enterprises have given out an additional USD 70 billion in rescue loans for balance of payments support. Taken together, China’s overseas bailouts correspond to more than 20 percent of total IMF lending over the past decade and bailout amounts are growing fast. However, China’s rescue loans differ from those of established international lenders of last resort in that they (i) are opaque, (ii) carry relatively high interest rates, and (iii) are almost exclusively targeted to debtors of China's Belt and Road Initiative. These findings have implications for the international financial and monetary architecture, which is becoming more multipolar, less institutionalized, and less transparent.
Topic:
Debt, Emerging Markets, International Trade and Finance, Financial Crisis, Belt and Road Initiative (BRI), and Sovereign Debt
Political Geography:
Africa, China, and Asia

4. Global Value Chain Disruptions and Firm Survival During COVID-19: An Empirical Investigation

Author:
Sasidaran Gopalan and Ketan Reddy
Publication Date:
08-2023
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
Despite the rapid acceleration of countries participating in global value chains (GVCs) over the last three decades, global GVC participation rates have plateaued since the global financial crisis (GFC) and worsened with the onset of the coronavirus disease (COVID-19) pandemic. The massive supply chain disruptions induced by the pandemic not only appeared to expose the vulnerabilities of GVCs, largely because of concentration risks, but also contributed to a dramatic decline in trade flows globally. As countries around the world emerge from the shadows of the pandemic, there is growing academic and policy interest in deciphering how countries should build effective strategies that facilitate firm survival, especially viewed from the lens of resilience and robustness. Considering this background, in this paper, we propose to make a twofold contribution to this literature. First, we undertake a comprehensive firm-level investigation (in a cross-country setting) to ascertain whether firms engaged in GVCs relative to non-GVC firms exhibited better survival instincts during the COVID-19 pandemic. Second, we uncover the heterogeneity of the shock across sectors and industries, considering the varied sectoral/industrial exposure to the COVID-19 pandemic. We document that GVC firms showcased greater robustness and resilience during the pandemic phase compared with other firms. Our results also show that the degree of resilience and robustness varies significantly by industry.
Topic:
Financial Crisis, Trade, Global Value Chains, and COVID-19
Political Geography:
Global Focus

5. Cash Cabal: How Hezbollah Profits from Lebanon's Financial Crisis

Author:
Samara Azzi and Hanin Ghaddar
Publication Date:
06-2023
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
In March 2020, Lebanon opted for a “hard default” on $32 billion in sovereign debt, allowing the government to avoid negotiating with its Eurobond holders and investors. Beirut thereafter showed little interest in addressing the consequences of default, and the country’s economic meltdown worsened. As usual, the Lebanese people were the casualties, suffering amid what the World Bank has called a “deliberate depression.” This official negligence has cleared the way for a proliferating cash economy—which in turn has spawned a currency exchange scheme involving the central bank, foreign exchange agents, and Lebanese politicians. Hezbollah specifically has profited in areas ranging from real estate to solar energy, pharmaceuticals, and the illicit Captagon trade. In this Policy Note, authors Samara Azzi and Hanin Ghaddar—a venture capitalist and a former Lebanese journalist—skillfully diagram the corrupt status quo and explain why entrenched actors want to avoid systemic change. But as the study makes clear, the future health of the Lebanese economy requires an overhaul, and the international community must now press for deep reforms and personal accountability.
Topic:
Politics, Non State Actors, Financial Crisis, Economy, Hezbollah, and Shia Islam
Political Geography:
Middle East and Lebanon

6. Can the Lira be saved?

Author:
Fadi Nicholas Nassar and Mike Azar
Publication Date:
03-2023
Content Type:
Video
Institution:
Middle East Institute (MEI)
Abstract:
MEI's US-Lebanon Fellow Fadi Nicholas Nassar speaks to Beirut-based international finance professional Mike Azar on Lebanon's financial crisis. What is the state of Lebanon's banking system, and how did it become so dysfunctional? What does Azar recommend to get Lebanon's economy back on track, and can the Lira be saved?
Topic:
Financial Crisis, Economy, and Banks
Political Geography:
Middle East and Lebanon