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Chinese Economic StatecraftCommercial Actors, Grand Strategy, and State Control$
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William J. Norris

Print publication date: 2016

Print ISBN-13: 9780801454493

Published to Cornell Scholarship Online: August 2016

DOI: 10.7591/cornell/9780801454493.001.0001

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State Administration of Foreign Exchange

State Administration of Foreign Exchange

A SAFE Tool of Economic Statecraft

(p.167) 8 State Administration of Foreign Exchange
Chinese Economic Statecraft

William J. Norris

Cornell University Press

This chapter examines an instrument of Chinese economic statecraft: the State Administration of Foreign Exchange (SAFE), the financial entity in charge of managing China's foreign exchange reserves. More specifically, it considers one episode to show how the state was able to use SAFE to pursue its strategic foreign policy objectives: Costa Rica's 2007 derecognition of Taiwan. The chapter first provides an overview of SAFE before discussing SAFE's purchase of Costa Rican bonds in 2008 and 2009. It shows that SAFE's bond purchase was part of a larger pattern of economic inducements collectively designed to strengthen Costa Rica's ties to the mainland while severing its connection to Taiwan. The SAFE–Costa Rica episode illustrates how China's sovereign wealth funds can be used to achieve a foreign policy goal.

Keywords:   Chinese economic statecraft, State Administration of Foreign Exchange, China, foreign exchange, foreign policy, Costa Rica, derecognition, Taiwan, bonds, sovereign wealth funds

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