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Using Renminbi (RMB) bonds, especially Chinese Government bonds (CGB), as collateral for both onshore and cross-border over-the-counter (OTC) derivatives is a hot topic following China switching to a netting jurisdiction in August 2022. Since then, Chinese financial institutions are required to exchange initial margin and variation margin with offshore counterparties for dealing cross-border derivatives. As the market infrastructure for using RMB bonds as collateral for cross-border OTC derivatives transactions is not well established and RMB bonds are not extensively accepted by foreign counterparties as eligible collateral, Chinese financial institutions are unable to utilise their huge RMB bond holdings. At the same time, many foreign investors are allowed to access China's onshore RMB bond market with RMB bond holding up to RMB 3.4tr, but are unable to use those inventories as collateral for their onshore and cross-border derivatives trading and other financial transactions. Using RMB bonds as collateral is also an initiative of RMB internationalisation. The purpose of this paper is to give an extensive explanation of the status of using RMB bonds as collateral in the Chinese market, point out challenges faced by market participants and provide suggestions to promote using RMB bonds as collateral for both onshore and cross-border derivatives transactions. This paper provides the full picture of China's onshore RMB bond investment and bond collateral management along with the latest data. It also provides extensive analysis for deficiencies in respect of the RMB bond collateralisation. It concludes with suggestions for the future development of the Chinese market to use RMB bonds as collateral for both onshore and cross-border OTC derivatives. [ABSTRACT FROM AUTHOR]

In the wake of new academic and government attention paid to China's growing Arctic security interests, this article examines the strategic advantages which may lead China to deploy submarines into the polar waters as well as the disadvantages and dangers inherent in such a mission. In contrast to the general belief that such an under-ice presence is both imminent and dangerous to the US and its allies, this piece suggests a more nuanced appreciation for the limited value of the Arctic as a realm of Sino-American competition. [ABSTRACT FROM AUTHOR]

China's increasingly active economic diplomacy in recent years has often been deeply linked to its geostrategic interests. Japan is said to be watching this development with alarm. Analysts have often claimed that this has resulted in Sino-Japanese rivalry, where the Japanese see any gains made by China in zero-sum terms, and make concerted efforts to counter China's growing influence. This article, however, is critical of such views. While elements of rivalry may indeed be visible in some aspects of Sino-Japanese relations, it would be premature to apply this perspective to economic statecraft, which is inherently multifaceted. This article claims that too much attention has been paid to the strategic aspects of Chinese economic statecraft at the expense of economic/commercial ones that could foster cooperative relations between Beijing and Tokyo. It argues that Japan does not hold a monolithic view that Chinese diplomatic activities in the economic realm are an axiomatic threat to Japanese security interests, and it remains premature to say that Japan and China are 'rivals' in the realm of economic statecraft. Future analysis in this area needs to pay greater attention to the complicating effects that economic interdependence can have in strategic policies. [ABSTRACT FROM AUTHOR]

This analysis contributes to a fast-growing body of literature on Sino-Western relations and the tension between economic and security interests. It takes Britain's China policy as a case study considering the Integrated Review 2021. It argues that London's stance towards Beijing has shifted – officially – from the so-called "golden era" to a complex phase of diplomatic–military tensions and scrutinised economic relations, principally because of US pressure. However, this shift de facto has not had a structural impact on the economic side of the relationship between London and Beijing. The article reaches this conclusion by framing its narrative through the lens of the economy-security conundrum at the heart of the Liberal International Order and through the lens of the New Cold War between the US and China. These two factors are crucial for understanding the change between Britain's China policy pre- and post-2016. [ABSTRACT FROM AUTHOR]

Prevailing narratives of security in the Pacific have been framed as a contest between the so-called Indo-Pacific security narrative with its China-threat focus and the human-security and environment focus of the so-called Blue Pacific narrative. The main purpose of this article is to explore areas of convergence as well as divergence in these regional security narratives. The question posed is how the Pacific's regional security priorities on climate change can be advanced alongside the geopolitical and geostrategic priorities of the region's major external powers. Past examples of security cooperation in the Pacific point to the way different security narratives and agendas can come together to deliver outcomes probably acceptable to all parties. With this background, the possibilities of cooperation arising from the Boe Declaration on regional security, adopted by the Pacific Islands Forum in 2018, are examined. The article suggests that the current geopolitical environment provides opportunities for Pacific states to drive their agenda by leveraging the complementary security interests of major external powers in the region. However strategic competition between the major powers could in the long term be counterproductive to achieving the region's climate change goals and ambitions. [ABSTRACT FROM AUTHOR]

Since 2009, when Bitcoin was invented, a private currency has returned to the world stage, offering the advantages of absolute secrecy to its owner. Imitations soon emerged: they do not have the same characteristics, but incorporate increasingly refined financial technologies that has drawn special attention following the lockdown triggered by the pandemic crisis in 2019. As supply is fixed, the prices of bitcoins spiral upward, as well as the prices of other cryptocurrencies do although to a lesser extent. Platforms for custody and conversion of cryptocurrency are set up, and they expanded their business to grant credit either with their own or others cryptocurrencies and to use them as collateral in derivative contracts. Consistently with Gresham's law bad money starts driving out good money and Central Banks are considering the issue of digital sovereign currencies, but the interests around virtual products and fears for the stability of banks and financial intermediaries are slowing down the decision-making process. Only China is taking advantage of an own digital currency and has prohibited any other digital currency out of its control. The topic is also relevant to geopolitical balances and it triggers more international conflicts. The attempt to include cryptocurrency and cryptoassets into the scope of the existing legislation does not lead to a solution. The suggested solution is twofold: we must reiterate the legal nature of sovereign money and the lack of any protection for crypto-users. Legitimacy by public authorities, which is currently granted, either implicitly or explicitly, should be avoided. Crypto-assets (or STO-Security Tokens) are free to operate, but the decentralized ledgers they use must make information accessible to regulatory and supervisory Authorities, and States must guarantee cybersecurity of digital processes. [ABSTRACT FROM AUTHOR]

Although China's financial market grows more mature, an old, and arguably unethical form of finance—usury—still exists. In an age when the internet is widely available, various online lending platforms allow access to varieties of usury cloaked in new forms. In this article, we discuss three types of illegal usury crimes: campus loans that trick college students into heavy debts, naked loans that target young female students and use nude photos as collateral, and recipe loans that swindle people with valuable property (e.g., real estate). We found that these new forms of usury can be ascribed to a mismatch: the borrowers have a high marginal propensity to consume but limited liquidity to spend. Cultural, social, and legal factors in China are also significant contributors to the existence of these crimes. [ABSTRACT FROM AUTHOR]

We propose and test a theory of using commodities as collateral for financing. Under capital control and collateral constraint, investors import commodities and pledge them as collateral to earn higher expected returns. Higher collateral demands increase commodity prices and make the inventory-convenience yield relation less negative. Our model illustrates these equilibrium effects and suggests that the violation of covered interest-rate parity is a proxy for collateral demands. Evidence from eight commodities in China and developed markets supports the theoretical predictions. Our findings complement the theory of storage and provide new insights into the financialization of commodity markets. [ABSTRACT FROM AUTHOR]

Why did a would-be recognized nuclear state oppose nonproliferation for two decades, but then change its position in 1984? Based on extensive fieldwork in Beijing where the author conducted 20 interviews with high-profile Chinese government and military officials, ambassadors of disarmament, and nuclear and astronautic scientists, this article argues that China openly opposed nonproliferation to give its nascent nuclear program time to achieve a retaliatory capability. Once this goal was fulfilled in the mid-1980s, China began accepting nonproliferation norms. While China's fervent opposition seemed ideological in a revolutionary era, it was indeed a rational behavior in pursuit of security interests. [ABSTRACT FROM AUTHOR]

Using data from China, where the identity of engagement auditors is disclosed, we find significant relationships between engagement auditors' negative experiences and the costs of corporate bonds. Further tests differentiate field and review auditors' experiences, and we find that both field and review auditors' negative experiences are significantly related to higher costs of corporate bonds. In addition, we find that the above results are significant only when the engagement auditors are affiliated with non-Big10 audit firms. Using path analysis, we find that credit rating is a possible channel through which information on engagement auditors' negative experiences can transfer to bond investors. Regarding non-price terms, we conclude that engagement auditors with negative experiences are associated with smaller bond sizes, shorter bond maturities, a higher likelihood of requiring collateral, and more restrictive covenants. Further analyses also show that the effects of engagement auditors' negative experiences on the costs of corporate bonds are less pronounced for well-governed firms. To show that our results obtained from China's corporate bond market are relevant to loan markets, we replicate the above tests using a Chinese sample, and the results from the loan market are consistent with those from the corporate bond market. Overall, our empirical results suggest that investors are indeed concerned with engagement auditors' negative experiences. [ABSTRACT FROM AUTHOR]

American policy towards China is now up for grabs, with hardliners and soft-liners battling for the upper hand. The hardliners view China as an existential threat to American security and interests. The soft-liners regard China as a powerful counterpart, on occasion friend, competitor, or adversary, but not an existential threat. In my view, the hardline approach – to be pursued through protectionist trade policies and aggressive technology policies — would prove disastrous, weakening the world economy and creating a self-fulfilling grave risk of future conflict. [ABSTRACT FROM AUTHOR]

We provide the first comprehensive and robust evidence on the relationship between CSR disclosure quality and the costs of corporate bonds in China. We find that firms with high CSR disclosure quality are associated with lower costs of corporate bonds. Our findings are robust to endogeneity issues arising from reverse causality, omitted variable bias, and the interdependencies between price and non-price terms. The negative relationship between CSR disclosure quality and the costs of corporate bonds is stronger in weak corporate governance firms and in firms located in regions with weak institutional environments. We also find that firms’ misconduct significantly mitigates the influence of CSR disclosure quality. In the additional analyses, we provide evidence that CSR disclosure can offer incremental information beyond the credit ratings. Regarding non-price terms, we conclude that firms with higher quality of CSR information are less likely to be subject to collateral terms, but they tend to include more restrictive covenants. Further analyses also show that compared with low-quality or mandatory CSR disclosure firms, bond investors perceive firms with CSR disclosures rated above “A” categories or voluntary CSR disclosure as less likely to cause asymmetric information problems and thus charge lower risk premiums. Overall, this study demonstrates that CSR disclosure quality is an important determinant that affects both price and non-price bond contract terms. [ABSTRACT FROM AUTHOR]

We examine the effect of corporate governance on the collateral requirements for firms' bank loans in China. We find that firms with lower excess control rights and other large shareholders face lower collateral requirements, which is more pronounced in non-state-owned enterprises (SOEs) than in SOEs. Regarding board characteristics, we find that smaller board size, more independent directors, separation of the positions of CEO and chairman, and larger supervisory board size can reduce a firm's use of collateral; the effect of all the preceding characteristics is more pronounced in SOEs. Overall, our research suggests that, in China, corporate governance structures are able to affect bank-lending decisions in respect of collateral requirements and that the influence depends on the controlling shareholder type and associated agency problems. [ABSTRACT FROM AUTHOR]