China’s Strategy in Global Governance Reform(GGR)

1. China’s Strategy in Global Governance Reform(GGR) = Jiejin Zhu Fudan University

2. outline I Why we need a New Conceptualization of China’s Strategy in GGR II Research Puzzle III Theoretical Framework IV Case Study: China’s Avoiding Strategy in the Credit Rating Reform V Conclusion

3. I Why we need a New Conceptualization • Existing Conceptualization of China’s strategy in Global Governance: (1)Status Quo or Revisionist(AIIB, BRI etc) (2) Status Quo Stakeholder, Authority-seeking Stakeholder, Institutional Obstruction, External Innovation,Opposition(Ikenberry&Lin, 2017) (3)Accept, Hold Up, Invest(Margret Peasron,etc 2018)

4. Problems of these conceptualization: • The Starting Point is the Dilemma of Illiberal China and Liberal International Order. • Not Dynamic. • Not Diversified. • Actually, China’s Strategy is Dynamic and Diversified.

5. New Conceptualization: more dynamic, more diversified • Rising Power’s Strategy to Change the Established Power-dominated International Institutions: • (1)Rules; • (2)Rules Enforcement: Definition and Implementation. • We have four strategies of Rising Powers in GG Reform: • (1)Displacement: Rising Power New rule replaces existing rule; • (2)Layering: Rising Power New Rule alongside with existing rule; • (3)Conversion: Strategic redeployment of the existing rule; • (4)Avoiding: Keep the existing rule and its definition, while reducing the use of the rule and the control of established power.

6. II Research Puzzle • As a rising power, China’ s goal in GG Reform is to increase its institutional power. • Why China is taking different strategies in different issue area? Like layering, conversion, displacement and Avoiding.

7. III Theoretical Framework Revised Gradual Institutional Change Theory in Historical Institutionalism. Displacement, Layering, Conversion and Drift: Displacement, Layering, Conversion and Avoiding

8. 表2 崛起国的策略选择 Rising Power’s strategy Selection in GGR

9. Case study: China’s Strategy in International Credit Rating Reform in the G20 Toronto Summit At Toronto Summit, Chinese president Hu Jintao propose to reduce the reliance on the US-based Big Three Credit Rating Agencies, Moody, Fitch, and Standard & Poor. Chinse Central Bank Governor gave the detailed proposal at the later Financial Stability Board meeting. Why China takes this avoiding strategy rather than displacement, layering or conversion strategy?

10. Hegemony's veto capabilities: Strong • （1）Size and attractiveness of the American Bond Market in 2010. • BIS data, American bond market occupies 24.2% of the global bond market, much higer than UK, Germany and EMDCs • US SRC, Nationally Recognized Statistical Rating Organization, NRSRO。 • Power comes from the market access.

11. （2）Credibility of the Three Big Boys of US-based Credit Rating Agencies. Power comes from the credibility. • （3）Institutional power of talking about Credit Rating Reform: G20, FSB, IOSCO are controlled by the US and its alliance. • When the hegemony's veto power is strong, rising power can only choose layering or avoiding(the weapons of the weak).

12. 穆迪主权信用评级的要素及其主要测量指标 Ambiguity of existing Rule: Low • Moody Sovereignty credit ration methodology（2008） • Standard & Poor Sovereignty credit ration methodology（2008） • Fitch Sovereignty credit ration methodology（2010）

13. From China perspective, the big three Credit Rating Agencies in the US take a biased methodology towards the sovereignty credit rating. Those institutions similar to the US will get higher credit than those not. • The ambiguity of the Rules is low, plus the US power is Strong. • So for China, Avoiding, the weapons of the weak, is the only strategy China can choose.

14. Conclusion • As a rising power, China’s strategy in GGR is dynamic and diversified. • Go beyond Status Quo-Revisionist traditional conceptualization. • Liberal Bias: China’s strategy is not decided by what kind of power China is(illiberal China vs liberal international order), but by the strategic setting China is facing in GGR.

15. Thank you