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The Shanghai Cooperation Organization expands into South Asia

Last month, India and Pakistan were accepted as full members of the Shanghai Cooperation Organisation (SCO), a platform to discuss politics, economics and security matters in Eurasia. While some observers doubt the organization’s importance, the step is likely to have three main beneficiaries: China, Russia, and the region as a whole.

Benefits for Beijing

India’s and Pakistan’s inclusion are good news for Beijing, as it turns the organization into an ideal negotiating platform for China’s regional investment plans. Once sanctions on Iran will be lifted, Tehran’s accession seems only a question of time. An expanded SCO allows China to promote the Silk Road Economic Belt, China-Pakistan Economic Corridor (CPEC), Bangladesh-China-India-Myanmar (BCIM) Corridor and Central Asia-China Gas Pipeline with policy …


The Long Road to Currency Multipolarity

Last week, in an effort to help protect currencies in the Southeast Asian region against global headwinds, Indonesia proposed a broader use of the Chinese yuan in the ASEAN region in order to better synchronise with China as Asean’s largest trading partner. The timing of the statement was noteworthy, as it occurred at the end of a week that, some argue, badly affected the Chinese government’s international reputation of being the world’s leading technocrats, firm in control of the second largest economy. Quite to the contrary, China’s decision to de-peg the yuan from the dollar, only to hastily spend U$ 200 bn to prevent the currency from devaluating, make the Chinese leadership seem hesitant and divided about the speed of …


Market turmoil and the future of Chinese institution building

As the financial crisis in China unfolds, analysts are scrambling to grasp the implications for the global economy. As Martin Wolf wrote in his excellent analysis in the Financial Times,

One must distinguish between what is worth worrying about and what is not. The decline of the Chinese stock market is in the second category. What is worth worrying about is the scale of the task confronting the Chinese authorities against their apparent inability to deal well with the bursting of a mere stock market bubble.

Indeed, market corrections occur, and while China has been hardest-hit, they are already taking place elsewhere. While such events are unlikely to affect global China’s standing much, the Chinese government is under growing pressure …


Can Shanghai become a global financial center?

Shanghai’s current stock market turmoil has left the many observers wondering about short-term implications for the global economy. Looking beyond immediate worries, two issues are worth noting. First of all, the current crisis is an unmistakable sign that the Post-Western World is already a reality: Two decades ago, a plummeting stock markets in the global economy’s periphery would have hardly caused global tensions. Today, by contrast, the saying “When China sneezes, the world catches a cold” seems remarkably fitting. After all, a staggering 38% of global growth in 2014 came from China, and 120 countries trade more with China than with any other country.

Secondly, the current crisis adds an interesting twist to one of the Chinese government’s most ambitious …


BRICS: Time to create an OECD-type structure?

Will the BRICS institutionalize, and will BRICS-related initiatives proliferate? Most observers focus on highly symbolic security issues, like the crisis in Ukraine or UN Security Council Reform. Yet potential for enhancing intra-BRICS cooperation is mostly in the technical realm and of little visibility to the general public. One example is the creation of an OECD-like institution. The Organisation for Economic Co-operation and Development, created in the 1960s, provides a platform to compare policy experiences, seeking answers to common problems, identify good practices and coordinate domestic and international policies of its members.

Over the past years, the BRICS have established a series of initiatives in this sense — discussing issues such as statistics, tax administration and public health, yet …


TPP vs. RCEP: Trade and the tussle for regional influence in Asia

After the United States’ recent diplomatic disaster of trying to prevent general adherence to China’s Asian Infrastructure Investment Bank (AIIB), US policy makers have been under pressure to strengthen their presence in Asia on the trade front: By concluding the Trans-Pacific Partnership (TPP), a potentially historic trade agreement linking the US, Japan and ten other countries, China would see its goal of reducing Washington’s presence in its neighborhood severely thwarted. Furthermore, the TPP would connect the United States to the economic center of the 21st century, one of the fastest-growing regions of the world, and cement its relationship to Japan, its key ally. It would be the first real manifestation of Obama’s pivot to Asia, which so far consisted of …


Does the BRICS grouping need its own rating agency?

Over the past years, the BRICS grouping has greatly increased the scope of its cooperation, ranging from the creation of a development bank, a parliamentary working group and yearly meetings of the BRICS’ national security advisers. New proposals are voiced with great frequency, especially in the Russian and Indian media, ranging from a virtual BRICS Secretariat, BRICS Sports Games to more outlandish ideas such as a BRICS space station or inviting Greece to join the BRICS grouping. Many of these ideas only briefly appear in the news and are never taken up by policy makers.

The idea of creating a BRICS-led rating agency, however, has been discussed with some frequency over the past year, and the Russian government …


The Politics of China’s Amazonian Railway

In January 2015, construction of the so-called Grand Interoceanic Canal (usually called Nicaragua Canal) has finally begun. If completed, the canal would be the largest civil-engineering and construction project in the history of mankind, spanning 276 kilometers across the Central American nation. The previously unknown businessman Wang Jing, with likely approval and support of the Chinese government, estimates the cost of the construction to reach U$ 40 billion dollars, even though experts believe the total cost will be closer to one U$ 100 billion dollars.

Compared to the Nicaragua Canal, the Trans-Pacific Railroad, set to cross South America and connect the Atlantic to the Pacific Ocean, is a bargain. The 5,300 kilometer rail connection, if ever built, is expected …