Challenging the liberal international order by chipping away at US Structural power: China’s state-guided investment in technology and finance in Russia

Abstract

This paper examines China’s investments in Russia as a case study of China’s challenge to the liberal order. It surveys the political economy of China’s state-owned enterprises—the primary vehicles for China’s investments in Russia—in a global context. It argues that China’s investments in Russia constitute an emerging structural economic challenge to the liberal international order. The trend of China’s investments in Russia illustrates Beijing’s strategy of fostering global economic integration that ultimately may not conform to the geopolitical underpinnings of a liberal international order. It looks at two cases of China’s investments in Russia: the technology sector and the financial sector. It shows that the liberal order’s tension with China’s strategy vis-à-vis globalization is rooted in its impact on US structural power and suggests that the active presence of Chinese state-guided capital in Russia’s high-tech development and its financial system illustrate the nature of this challenge.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on Contributor

Anton Malkin is a Research Fellow at the Centre for International Governance Innovation (CIGI). He holds a PhD from the Balsillie School of International Affairs, Wilfrid Laurier University. His research focuses on China's role in the international political economy, focusing on the intersection of China's industrial policy, global finance, and global technology. Email: [email protected]

Notes

1 The quality of data on Sino-Russian cross-border trade and investment is far from perfect. However, MOFCOM’s estimates remain more accurate than those of their Russian counterpart. This is because a lot of useful data on China’s trade and investment abroad are obscured by the presence of offshore investment centres and tax havens, like Hong Kong and the Netherlands, which receive a great deal of China’s outgoing capital and provide avenues for trade mis-invoicing (Kar and Freitas 2013). This suggests that Sino-Russian trade could be underreported as much as it could be overstated.

2 This complements a 2015 joint venture between Russia’s Skolkovo Foundation and China’s Cybernaut Investment Group to develop a Joint Venture Capital Fund (Silvius 2018).

3 This is not unprecedented, as trade credits—not only cross-border capital markets—played an important role in the internationalization of the US dollar (Eichengreen and Flandreau 2012).