Legitimating State Capital: The Global Financial Professions and the Transnationalization of Chinese Sovereign Wealth

Imogen T. Liu; Adam D. Dixon

doi:10.1111/dech.12681

Legitimating State Capital: The Global Financial Professions and the Transnationalization of Chinese Sovereign Wealth

Imogen T. Liu
, Adam D. Dixon

Research output: Contribution to Journal › Article › Academic › peer-review

Abstract

© 2021 The Authors. Development and Change published by John Wiley & Sons Ltd on behalf of International Institute of Social StudiesIncreasing Chinese investment has raised the spectre of strategic state influence in Europe, yet the transformative potential of state capital as a global phenomenon remains under-explored. This article sheds light on the dual imperatives of transnationalizing state capital wherein the movement of capital entails both profit maximization and the extra-profit interests of the state. State-capitalist entities such as sovereign wealth funds (SWFs) are both market-facing and politically driven, disrupting ideological norms surrounding the strictly safe-keeper role of the state in private capital accumulation. The authors draw on the case of the China Investment Corporation, China's premier SWF, to argue that the transnationalization of state capital is a process deeply embedded in the liberal international order, and that it signals the metamorphosis of global capitalism in palimpsest-like ways. The global financial professions, namely investment banking, corporate law and management consulting along with other advisory services, have legitimated state capital by normalizing its political origins through technocratic, expert-driven practice to the effect that it is treated as no different from private capital in global capital networks. The article identifies three logics of practice by which professionals legitimate state capital: adoption, alliance and recreation of financial practices that have facilitated the embeddedness of state capital in global markets.

Original language	English
Pages (from-to)	1251-1273
Journal	Development and Change
Volume	52
Issue number	5
DOIs	https://doi.org/10.1111/dech.12681
Publication status	Published - 1 Sept 2021
Externally published	Yes

Funding

This article is partly based on work conducted in association with COST Action CA18215 — China in Europe Research Network — supported by COST (European Cooperation in Science and Technology). An earlier version of it was presented at a workshop held at COST, Brussels, on 7 November 2019. We are grateful to the workshop's participants for their comments. Thanks are also due to the special issue editors, Naná de Graaff and Jeffrey Henderson, and to Ilias Alami, Milan Babić, Aneta Spendzharova, and the anonymous reviewers, for their constructive feedback. Grant funding was provided by the European Research Council‐funded SWFsEUROPE project under the European Union's Horizon 2020 research and innovation programme (grant agreement No. 758430). This article is partly based on work conducted in association with COST Action CA18215 ? China in Europe Research Network ? supported by COST (European Cooperation in Science and Technology). An earlier version of it was presented at a workshop held at COST, Brussels, on 7 November 2019. We are grateful to the workshop's participants for their comments. Thanks are also due to the special issue editors, Nan? de Graaff and Jeffrey Henderson, and to Ilias Alami, Milan Babi?, Aneta Spendzharova, and the anonymous reviewers, for their constructive feedback. Grant funding was provided by the European Research Council-funded SWFsEUROPE project under the European Union's Horizon 2020 research and innovation programme (grant agreement No. 758430). First, the CIC has established bilateral and multilateral partnerships with other SWFs such as the Russian Direct Investment Fund (RDIF) and the Ireland Strategic Investment Fund, as well as investments in Chinese state‐owned funds including the Silk Road Fund (CIC, 2016 : 34; 2019 : 51). These ventures sit alongside private partnerships like those announced with HSBC and Nomura Securities (Yue and Lu, 2018 ). While these bilateral agreements adhered to commercial principles, the CIC is also an active participant of the Belt and Road Initiative (CIC, 2019 : 4). Infrastructure is a priority sector of the Russia–China Investment Fund which has signed, together with RDIF and Vnescheconombank, a memorandum of understanding with the CIC to promote infrastructural projects in Russia's Far East (CIC, 2013 ). Similarly, the Silk Road Fund provides direct funding to Belt and Road projects and has jointly funded, with the European Investment Fund, a subsidiary of the European Investment Bank, the China–EU Co‐investment Fund (CECIF) under the Juncker Plan. With a first‐round commitment of € 500 million, the CECIF targets European small‐ to medium‐size enterprises with an interest in the China market (European Investment Fund, 2018 ). These funds recreate established joint‐funding structures prevalent in institutional investing, but are also instances in which capital is directed toward strategic industry areas.

Funders	Funder number
Aneta Spendzharova
CECIF
EU Co‐investment Fund
European Investment Fund
European Research Council-funded
Silk Road Fund
European Cooperation in Science and Technology
European Investment Bank
Horizon 2020	758430

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title = "Legitimating State Capital: The Global Financial Professions and the Transnationalization of Chinese Sovereign Wealth",

abstract = "{\textcopyright} 2021 The Authors. Development and Change published by John Wiley \& Sons Ltd on behalf of International Institute of Social StudiesIncreasing Chinese investment has raised the spectre of strategic state influence in Europe, yet the transformative potential of state capital as a global phenomenon remains under-explored. This article sheds light on the dual imperatives of transnationalizing state capital wherein the movement of capital entails both profit maximization and the extra-profit interests of the state. State-capitalist entities such as sovereign wealth funds (SWFs) are both market-facing and politically driven, disrupting ideological norms surrounding the strictly safe-keeper role of the state in private capital accumulation. The authors draw on the case of the China Investment Corporation, China's premier SWF, to argue that the transnationalization of state capital is a process deeply embedded in the liberal international order, and that it signals the metamorphosis of global capitalism in palimpsest-like ways. The global financial professions, namely investment banking, corporate law and management consulting along with other advisory services, have legitimated state capital by normalizing its political origins through technocratic, expert-driven practice to the effect that it is treated as no different from private capital in global capital networks. The article identifies three logics of practice by which professionals legitimate state capital: adoption, alliance and recreation of financial practices that have facilitated the embeddedness of state capital in global markets.",

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AB - © 2021 The Authors. Development and Change published by John Wiley & Sons Ltd on behalf of International Institute of Social StudiesIncreasing Chinese investment has raised the spectre of strategic state influence in Europe, yet the transformative potential of state capital as a global phenomenon remains under-explored. This article sheds light on the dual imperatives of transnationalizing state capital wherein the movement of capital entails both profit maximization and the extra-profit interests of the state. State-capitalist entities such as sovereign wealth funds (SWFs) are both market-facing and politically driven, disrupting ideological norms surrounding the strictly safe-keeper role of the state in private capital accumulation. The authors draw on the case of the China Investment Corporation, China's premier SWF, to argue that the transnationalization of state capital is a process deeply embedded in the liberal international order, and that it signals the metamorphosis of global capitalism in palimpsest-like ways. The global financial professions, namely investment banking, corporate law and management consulting along with other advisory services, have legitimated state capital by normalizing its political origins through technocratic, expert-driven practice to the effect that it is treated as no different from private capital in global capital networks. The article identifies three logics of practice by which professionals legitimate state capital: adoption, alliance and recreation of financial practices that have facilitated the embeddedness of state capital in global markets.

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Legitimating State Capital: The Global Financial Professions and the Transnationalization of Chinese Sovereign Wealth

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