China has been trying to develop closer financial ties with countries it believes to be sympathetic to its objectives. The idea is to reduce its dependence on the dollar, and so become less vulnerable to American financial sanctions
. China accounts for over 70% of the production of the raw materials used to manufacture solar cells, but also the cells themselves, and the modules into which they are assembled. Dan Wang, an analyst at Gavekal Dragonomics, a research firm, suggests that China’s lead in solar technology is likely to be irreversible. The same is true of batteries for the booming electric-vehicle industry. Wind energy is going gangbusters too.
China is also increasingly dependent on foreign expertise. The vast majority of Chinese patent filings are home-grown, but the share involving foreigners has risen from 4.8% to 5.9% since 2012. Scientists based in the, Japan and America are increasingly common partners with Chinese inventors, even as Western companies and universities talk of disengaging from China to try to stop industrial espionage. In 2020 China was responsible for 8.
The countries with which China has the closest economic relationships are all still Western or Western-leaning: America, South Korea, Singapore, Germany and Japan. And during Mr Xi’s rule most Western economies have becomein China has more than doubled, for instance. Chinese long-term investors have doubled their gross exposure to Australia, even as politicians in both countries hurled invective at each other.
But China’s financial links with its near abroad remain weak. Take its bond market. A new paper by four economists, Christopher Clayton, Amanda Dos Santos, Matteo Maggiori and Jesse Schreger, examines private investors’ holdings of yuan-denominated bonds. In recent years the vast majority of inflows into these assets have come from America, the euro zone and Japan. A paper published in 2018 by Camilo Tovar and Tania Mohd-Nor of theexamined the importance of the yuan to other currencies .
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