Beyond ports, roads and railways: Chinese economic statecraft, the Belt and Road Initiative and the politics of financial infrastructures
| Published date | 01 June 2023 |
| DOI | http://doi.org/10.1177/13540661221126615 |
| Author | Johannes Petry |
| Date | 01 June 2023 |
https://doi.org/10.1177/13540661221126615
European Journal of
International Relations
2023, Vol. 29(2) 319 –351
© The Author(s) 2022
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DOI: 10.1177/13540661221126615
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E
JR
I
Beyond ports, roads and
railways: Chinese economic
statecraft, the Belt and Road
Initiative and the politics of
financial infrastructures
Johannes Petry
Goethe University Frankfurt, Germany; University of Warwick, UK
Abstract
Scholars have focused on how the Belt and Road Initiative (BRI) facilitates Chinese
economic statecraft and its likely impact on the global order. A common thread
thereby is how connectivity through China’s construction of physical infrastructures
(e.g. ports, roads, railways) represents a source of power. However, such a focus on
physical infrastructures obscures the importance of BRI-related financial infrastructures.
Addressing this gap, this article analyses the construction of Chinese financial
infrastructures along the BRI as an exercise of economic statecraft within the context
of the liberal, US-dominated global financial order. The article traces the activities of
China’s state-owned exchanges as crucial actors that facilitate financial connectivity
by enabling investment into BRI projects (investment opportunities), bringing Chinese
investors into BRI markets (investors structure) and gradually shaping how these markets
work (investment rules). First, I analyse three individual countries (Pakistan, Kazakhstan
and Bangladesh) as examples of ‘bilateral’ and ‘offensive’ statecraft. Second, I analyse
an emerging China-centred global network of financial infrastructures as exercise of
‘systemic’ and ‘defensive’ statecraft that shields China’s foreign policy objectives (i.e.
BRI) from global pressures, potentially creating a parallel system of capital markets
with Chinese characteristics. Beyond BRI, I therefore argue for including financial
infrastructures more thoroughly into International Relations (IR)/International Political
Economy (IPE) scholarship as important object of analysis.
Keywords
China, Belt and Road Initiative, financial infrastructures, economic statecraft,
international order
Corresponding author:
Johannes Petry, Institute for Political Science, Goethe University Frankfurt, Theodor-W.-Adorno-Platz 6,
Frankfurt, 60323, Germany.
Email: j.petry@soz.uni-frankfurt.de
1126615EJT0010.1177/13540661221126615European Journal of International RelationsPetry
research-article2022
Article
320 European Journal of International Relations 29(2)
Introduction: beyond physical infrastructures along the
Belt and Road
In recent years, many International Relations (IR) and International Political Economy
(IPE) scholars have analysed Belt and Road Initiative (BRI) as a tool of China’s state-
craft (Chin, 2015; Ikenberry and Lim, 2017; Pacheco Pardo, 2018; Xiaotong and Keith,
2017). A common thread in these analyses is how connectivity through China’s construc-
tion of physical infrastructures such as ports, roads and railways represents a source of
economic statecraft and power for China (Blanchard and Flint, 2017; Goh and Reilly,
2018; Ho, 2020; Lim et al., 2021; Munn, 2020). Scholars thereby investigate how the
construction of these infrastructures reconfigures economic (inter)dependencies between
China and BRI countries (Garlick, 2018), affects regional power dynamics and contests
existing regional/global orders (Goh, 2019; Gong, 2019; Rolland, 2017), with the poten-
tial to usher in a new era of global economic activity that would be markedly more
China- than US-centred (Beeson, 2018; Miller, 2017; Nordin and Weissmann, 2018).
However, such a focus on connectivity through physical infrastructures obscures the
importance of BRI-related financial infrastructures. While finance is one of BRI’s ‘five
connectivities’, as Lai et al. (2020) pointed out, analyses of BRI’s financial dimension
are scarce. Existing analyses mostly focus on BRI-linked financial institutions and their
lending for physical infrastructure projects (Ho, 2020; Liu et al., 2020) such as the Asian
Infrastructure Investment Bank (AIIB) (Callaghan and Hubbard, 2016) or Chinese pol-
icy banks (Chen, 2021; Kong and Gallagher, 2017), and how/whether these impact
regional and global power constellations (Hameiri and Jones, 2018; Pacheco Pardo,
2018). When finance is discussed in the context of BRI, the focus is on financing physi-
cal infrastructures rather than on financial infrastructures themselves – the socio-techni-
cal arrangements that enable the financing, trading and investing of/into BRI-related
projects via capital markets. Addressing this gap, this article analyses the Chinese con-
struction of such BRI-related financial infrastructures which I argue represents an impor-
tant tool of Chinese economic statecraft and which potentially adds another dimension to
China’s growing challenge of the liberal global economic order.
More than a merely technical process, controlling and shaping financial infrastruc-
tures are itself a source of power and an area of contestation as financial infrastructure
providers can shape what is invested in (investment opportunities), who gets to invest
(investor structure) and how investment is conducted (investment rules). By facilitating
this connectivity, financial infrastructures enable the exercise of power within financial
markets, can serve as tools of economic statecraft and can follow differing logics that
facilitate fundamentally different market dynamics/outcomes. The construction of BRI
financial infrastructures should hence be understood as complementing other mecha-
nisms of (Chinese) influence and power. In other words, there is a financial infrastruc-
ture dimension to economic statecraft that requires critical examination.
This article therefore analyses how Chinese financial institutions construct financial
market infrastructures along the BRI as an exercise of Chinese economic statecraft within
the context of the liberal, US-dominated global financial order (GFO). The article thereby
traces the activities of China’s state-owned exchanges1 as crucial actors that facilitate BRI
financial connectivity through creating and governing financial infrastructures that enable
Petry 321
investment into BRI projects (investment opportunities), bringing Chinese investors into
BRI markets (investors structure) and gradually shaping how these markets work (invest-
ment rules).
After illustrating the emergence of financial infrastructure connectivity as an impor-
tant foreign economic policy in the context of BRI, the empirical analysis first focuses
on Pakistan, Kazakhstan and Bangladesh where Chinese stock exchanges partially
acquired the respective national stock exchanges. Here, the construction of financial
infrastructures that can be characterised as ‘bilateral’ and ‘offensive’ economic statecraft
alters the power relations between China and the respective countries enables the imple-
mentation of BRI as Chinese foreign economic policy. Beyond these three cases, the
article then outlines the emergence of a broader network of Chinese financial infrastruc-
tures along the BRI. The construction of this network can be understood as exercising
‘systemic’ and ‘defensive’ statecraft which gradually embeds BRI countries within a
parallel system of capital markets with Chinese characteristics that potentially shields
China’s foreign policy objectives from the pressures of the US-dominated global finan-
cial system. While, like much of BRI, China’s construction of BRI financial infrastruc-
tures is still in its formative stages, this development potentially adds another dimension
to China’s growing challenge to the rules, norms and procedures that underpin the liberal
global order. Beyond the BRI, the article therefore makes a case for including financial
infrastructures more thoroughly into IPE and IR scholarship as important objects of
analysis.
Next to secondary sources, the article draws on an extensive review of policy docu-
ments, financial market news, data and regulations, and 44 semi-structured elite inter-
views conducted with exchanges, investors and regulators in Shanghai, Beijing, Hong
Kong, London, Frankfurt, Singapore and Karachi. The article is structured as follows:
‘Infrastructures, capital markets and the GFO’ section discusses financial infrastructures,
their relation to capital markets and economic statecraft (‘Financial infrastructures: ena-
bling statecraft through connectivity (power)’ section), followed by how this manifests
differently in global, Chinese and developing country capital markets (‘Chinese and
global exchanges in the differential organisation of capital markets’ section). ‘Constructing
Chinese financial infrastructures along the Belt and Road’ section discusses the construc-
tion of Chinese financial infrastructures along the BRI, focusing on Pakistan (3.1),
Kazakhstan (3.2) and Bangladesh (3.3) and a broader emerging network of BRI-related
financial infrastructures (3.4). ‘Conclusion: towards a parallel system of capital markets
with Chinese characteristics?’ section concludes by highlighting the potential signifi-
cance of these Chinese financial infrastructures for the liberal global economic order.
Infrastructures, capital markets and the GFO
Financial infrastructures: enabling statecraft through connectivity (power)
What is the connection between financial infrastructures, power and statecraft? Armijo
and Katada (2015) define financial statecraft as ‘the intentional use, by national govern-
ments, of domestic or international monetary or financial capabilities for the purpose of
achieving ongoing foreign policy goals, whether political, economic, or financial’
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