Yi-chong Xu

The Political Economy of Sovereign Wealth Funds

A spectre is stalking the world’s governments, businesses and press: it is a spectre of a special type of fund, one that buys strategic resources around the world, hollows out companies, gobbles up financial institutions and threatens the sovereignty of the countries in whose resources and companies it invests. It is the spectre of sovereign wealth funds (SWFs) – dedicated government investment vehicles from China, Russia and the Gulf states, among others. These SWFs, critics declare, are the Trojan horse of states that generally are neither democratic nor share the traditions, political systems or legal systems of many OECD countries. They are ‘the new bogeymen of global finance’ (Plender 2007). To others, SWFs are no more than a financial flare, a fad that will fade quickly as the global financial crisis subsides.

The politics of nuclear energy in China

Nuclear energy is politically sensitive. For its proponents, it is clean, highly efficient and the only alternative to fossil fuels in providing a base supply of electricity. For its opponents, however, nuclear energy is nothing but trouble – a symbol of war and weaponry, dangerous and highly risky, and it creates environmental problems not only for the current generation but the future too.

China and the United States in Africa:coming Conflict or Commercial Competition?

China and the US are two key players in the recent round of ‘scrambling’ for Africa. They compete for control over oil and other strategic resources, for markets, and for political influence. Their competition has alarmed many. This study tests the alarmist interpretations by identifying what the US and China are actually doing and to how they perceive each others activities. Their ambitions are often considered in isolation. When laid out side by side, the extent to which their activities in Africa may overlap or clash can be seen more clearly. China and the US are seeking different things at different places in the continent and are careful not to upset one another. Their activities do not support the dire prediction. The ‘scramble for Africa’ may irritate; it is unlikely to cause direct confrontations because competition remains by and large economic and economic competition in an integrated global economy creates networks of constraints that ameliorate potential confrontation.China and the US are two key players in the recent round of ‘scrambling’ for Africa. They compete for control over oil and other strategic resources, for markets, and for political influence. Their competition has alarmed many. This study tests the alarmist interpretations by identifying what the US and China are actually doing and to how they perceive each others activities. Their ambitions are often considered in isolation. When laid out side by side, the extent to which their activities in Africa may overlap or clash can be seen more clearly. China and the US are seeking different things at different places in the continent and are careful not to upset one another. Their activities do not support the dire prediction. The ‘scramble for Africa’ may irritate; it is unlikely to cause direct confrontations because competition remains by and large economic and economic competition in an integrated global economy creates networks of constraints that ameliorate potential confrontation.

Chinese state-owned enterprises in Africa: Ambassadors or freebooters?

The role of Chinese state-owned enterprises (SOEs) in Africa is puzzling: they pioneered Chinas inroads into Africa and shouldered the responsibilities of building and expanding cooperation with African countries, while these very activities and engagement, according to many scholars, often contradict or even undermine the political and diplomatic objectives adopted by the central government. To understand this puzzle, this article unpacks Chinas engagement in Africa, by examining large central SOEs in the resources and infrastructure sectors. It concludes that the commitment of large SOEs in Africa relies on small public and private contractors. The paradox therefore is, that while the central government encourages and supports the large SOEs to ‘go global’, it has limited capacity to control and regulate the small contractors.The role of Chinese state-owned enterprises (SOEs) in Africa is puzzling: they pioneered Chinas inroads into Africa and shouldered the responsibilities of building and expanding cooperation with African countries, while these very activities and engagement, according to many scholars, often contradict or even undermine the political and diplomatic objectives adopted by the central government. To understand this puzzle, this article unpacks Chinas engagement in Africa, by examining large central SOEs in the resources and infrastructure sectors. It concludes that the commitment of large SOEs in Africa relies on small public and private contractors. The paradox therefore is, that while the central government encourages and supports the large SOEs to ‘go global’, it has limited capacity to control and regulate the small contractors.

The Competition for oil and Gas in Africa

China and the US are two key players in the recent round of ‘scrambling’ for Africa. They compete for control over oil and other strategic resources, for markets, and for political influence. To understand the concerns of many who have been alarmed by the competition, this article identifies what the US and China are actually doing in Africa and explains how they perceive each others activities. It argues that alarmists often consider the ambitions of both China and the US in isolation; when laid out side by side, the extent to which their activities in Africa overlap or clash can be seen more clearly. That is, China and the US are seeking different things at different places in the continent and are careful not to step on the each others toe. Their activities do not support the dire prediction. The ‘scramble for Africa’ may irritate; it is unlikely to cause direct confrontations because competition remains by and large economic and economic competition in an integrated global market creates networks of constraints that ameliorate potential confrontation.

The State Grid Corporation in China

Until the late 1980s, it had been accepted that network industries such as electricity, telecommunications, rail, water supply and natural gas were vertically and horizontally integrated, owned and managed by publicly-owned monopolies under ministerial control. The state ownership and vertically integrated structure were justified by: intensive investment in the industries with high financial risks; the requirement for public resources to support the investment; the significant economic importance of the infrastructure; the desire to protect the public interest in these industries that supplied essential services; and concerns about private monopoly power. State-owned monopolies in many developed countries might have guaranteed universal access to electricity, clean water supplies or other public utilities (Fare, Grosskopf and Logan 1985; Scherer 1980; World Bank 1992), but in many developing and transition economies, they had ‘suffered from low labour productivity, deteriorating fixed facilities and equipment, poor service quality, chronic revenue shortages and inadequate investment, and serious problems of theft and non-payment’ (Kessides 2004: 2). In the following decades, a great push was made in these countries to privatise, deregulate and unbundle the network industries (Newbery 1999). Privatisation and restructuring of the electricity industry were sold to more countries in a shorter period of time than any other industry (Hunt and Shuttleworth 1996; Joskow 1998; Hunt 2002; Xu 2004).

Coal India Limited: The Last One Standing

Two features have characterised the Indian coal industry: centralisation and state ownership. Both have their historical reasons. Centralisation originated in the late eighteenth century when the East India Company was granted a licence to start coal mining in the Raniganj Coalfield along the west bank of the river Damodar, about 120 miles west of Calcutta. Despite the laissez-faire policy of the British-Indian government, centralisation of the coal industry continued; upon independence, about 70% of the country’s coal production was in the hands of a few large producers, and 60% of the coal was consumed by three sectors: rail, steel and utility. Today, more than 80% of the coal production is from Coal India Limited (CIL). State ownership can be traced back to the World War II era when the British-Indian government temporarily took over the production and distribution of coal, imposed price controls and determined wages through government arbitration, in order to serve the war effort of the British troops.

Energy and Environmental Challenges in China

Energy is central to human survival and development. Energy is therefore not only a development issue but also a political one as it has implications for social justice and equity. No government can ignore energy issues, whether they are related to availability, reliability, affordability, or increasingly, sustainability. However, all four components of ‘energy security’ are interpreted differently across countries and by different players.

The Shenhua Group: A Giant Made in a Decade

Compared with other state-owned enterprises reviewed, the Shenhua Group has the shortest history — it was created only 15 years ago — yet it is now the largest coal producer in the world. It has been built into a large integrated corporation with operations in coal mining, rail, port, power generation and shipping. It moved up to the list of the Global Fortune 500 (the top 500 corporations worldwide as measured by revenue), ranking 35th among Chinese companies, and 356th in the world. Financially, Shenhua has consistently outperformed the rest of the coal industry in China and has had a safety record in coal mining comparable to its international peers. It is also becoming a technological leader in areas such as coal liquefaction and coal-to-gas processing. Shenhua, nonetheless, has not been able to avoid some of the problems commonly experienced by other SOEs in China. This chapter examines the development path of the Chinese coal industry in which Shenhua was created, and analyses the factors that contributed to its explosive expansion, albeit that this expansion took place in a relatively efficient and sustainable manner.

The Political economy of SOEs in China and India

China and India have attracted overwhelming attention lately not only because of their fast economic growth but also because of their idiosyncratic patterns of development, which are not always easy to categorise. They have not followed the same development path as those countries which industrialised in the nineteenth and first half of the twentieth century; neither have they trotted along exactly the same route as the so-called ‘Asian tigers’, even though both models of development were admired by many in the two countries. To some, the development in China, and increasingly in India, too, represents a model of ‘state capitalism’ or at least ‘state-backed capitalism’. To others, both China and India are moving closer to the ‘Washington model’ identified by John Williamson some 20 years ago (1989). They have made solid progress on eight of Williamson’s ‘ten commandments’, including fiscal discipline, trade liberalisation, openness to foreign investment and tax reform.