Thoughts On Foreign Capital And China’s National Economic Security

As a follow-up to yesterday’s post about the shifting sands of economic security policy, this Bystander passes on this paper from 2007, Economic Security: Redressing Imbalance, as an informative piece of background. It is written by Jiang Yong, director of the Economic Security Research Center at the China Institutes of Contemporary International Relations, which does policy research for the government.

Jiang makes the point that China’s policy makers are concerned that foreign capital is supplanting domestic ownership  in the backbone industries (including steel) and has reached a critical level in many of them at which, even then, it was seen as threatening the country’s national economic security. Plus he puts a case that policy makers, perhaps taking a leaf out of Japan’s book 20 years ago, should ensure that there is national reciprocity when it comes to foreign capital investment, not to be protectionist but as a deterrence to overwhelming inward flows.

Much of the paper is concerned with the growth of foreign capital in the financial sector (making it a worthwhile read now for anyone in financial services) but its broad points provide some context to make the recent Rio situation a little more understandable.

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