China’s Foreign Investments: Hedges Against Policy Uncertainty

In 2020, why did the State Grid Corporation of China, a State-Owned Enterprise (SOE) and the second largest corporation in the world by revenue, buy 97% of Chile’s largest electric utility provider, Compañia General de Electricidad (CGE)? Existing explanations in the literature fail to offer a compelling answer. Why is this sort of economic action in the interests of the Chinese state? And why do Chinese economic influence actions occur at some times and not others? I argue that China is more likely to use economic forms of influence when the target country’s policy is more uncertain. Non-economic influence activities could lose effectiveness during a period of policy uncertainty, but ownership of a key asset in the target country can serve as a hedge against the possibility that future policy in the target country will not align with China’s preferences. To adjudicate my hypothesis, I rely on a novel high-frequency, cross-national, machine-coded event data set called Machine Learning for Peace (MLP), which identifies Resurgent Authoritarian Influence (RAI) events and Civic Space (CS) events in 33 target countries. This paper contributes a clear theoretical model of how China assembles its portfolio of influence operations. Furthermore, by arguing that state-affiliated actors use public economic markets for strategic political purposes, I contribute an expanded conception of China’s involvement in global economic markets.