Description
Over the recent decade or so, the geo-economic shift in the world economy in favour of the emerging economies has attracted significant attention among academic and policy communities. For some observers, the increasing weight of rising Southern economies implies a world economy that is increasingly taking shape around the multiplicity of substantial economic centres, with implications for the international division of labour. Some observers, on the other hand, consider the narratives on the rising economies more hype than the reality on the ground that the global political economy is still dominated by the advanced economies and that foundations of the American hegemony are still intact. This paper aims to contribute to the discussion by focusing on an underexplored terrain of global economic relations: long-term finance for infrastructural and industrial projects. While financial institutions from advanced economies keep being the major source for the short-term capital inflows to the developing economies, emerging economies, most notably China, are increasingly becoming important sources for long-term capital inflows. Drawing on Susan Strange’s distinction on relational and structural power, the paper makes a two-fold argument. First, South-South networks of long-term capital are finding their place alongside the North-South networks, which makes low- and middle-income economies are less dependent on the North, thereby undermining the relational power of the latter. Second, bringing dynamics of change to the modalities and understanding of development cooperation, emerging providers of long-term finance have been instrumental in recent alterations, albeit incremental, in the practices of traditional financiers. Therefore, international development cooperation seems to witness the advent of the structural power of emerging economies.
