Reshaping Global Capital: The Politics of Uncertainty in China's Financial Transnationalization

Six years following the global financial crisis, we are as unsure as ever about how to sustainably and equitably harness the power of global finance, and scholars, policymakers, and practitioners continue to seek better understandings of authority and power within an interdependent financial system. Meanwhile, as China's financial system becomes increasingly transnational in scope and influence, new ideas of how political authority and financial power can and should relate to one another are evolving in key sites of the global financial order such as Hong Kong, London, and Shanghai. This project investigates the dynamics and implications of this process, examining how and why different political values are reshaping the distribution of risk and the pursuit of stability within global finance. It is centered on two interrelated issues:

1. How do different conceptions of authority and power affect a financial system's stability and distribution of risk?
2. How is China's entry into global finance reshaping these financial outcomes?

These are questions at the nexus of the macro-level of China's rise in global politics, and the micro-level of effective financial governance, however international political economists have not provided adequate tools for addressing them. Even as macro-prudential regulation improves in key global financial hubs, we are constantly reminded that financial governance is a deeply political and social process, as well as an exercise in technocratic regulation. We need better research into how the process of China's financial transnationalization is affecting both the micro-dynamics and macro-shifts of financial governance.

Dynamics at both levels are sociopolitical in nature, and involve different conceptions of the relationship between political authority and financial power. Such 'conceptions of finance' are thus an important factor in determining how both public and private financial decision-makers respond to the uncertainty of financial investment and governance. They are unstable and experience both short-run change in response to crisis, or long-term shifts as the global economy evolves structurally. This project explores the implications of China's financial transnationalization by asking how different conceptions of the relationship between state, market, and society in a central process of decision making-the management of uncertainty-are reshaping financial governance in Hong Kong, London, and Shanghai. It draws upon research methods from cognitive psychology to develop an innovative research design that generates insight into how financial governance is being practiced by different actors in specific environments. It systematically maps out 'conceptions of finance' in these financial hubs, traces how this produces different responses to uncertainty, and then analyzes the implications for macro-financial stability and distribution of financial risk. Collaborating with research and policy institutions in London, Berlin, Beijing, Hong Kong, and Shanghai, the project makes an immediate, original, and significant contribution to our understanding of how China is affecting financial governance in an era of global change and flux.

This contribution enables the project to speak to three different audiences. It fosters the development of the academic disciplines of international political economy and economic sociology, illustrating how novel empirical research methods can connect micro-level dynamics and macro-level outcomes of political economy. It speaks to practitioners in public policy and financial services, providing an empirically rich insight into the shifting landscape of global finance, whilst demonstrating how different conceptions of finance generate different governance outcomes. Finally, it speaks to the wider public by broadening the debates on financial governance and China's rise, exploring how 'China' and 'the West' are interdependently connected in global finance.

As China's impact upon the global political economy deepens, the project reconceptualizes financial governance in circumstances where existing Western-oriented frameworks may no longer be adequate. It seeks to raise awareness of the importance of recognizing that social, cultural, and political factors have significant effects upon financial risk tolerance, the design of financial regulatory frameworks, corporate governance, and the prospects for financial stability. The following target audiences are expected to benefit from this:

(1) IR/IPE Scholars: The project contributes to scholarship that challenges mainstream understandings of transnational financial governance as a purely interest-driven process of negotiation between state policymakers and financial firms, benefiting scholars within traditional and critical IR/IPE fields engaged in analyzing the evolving nature of public authority and financial power as China's financial transnationalization introduces different financial cultures into the practice of global finance. Impact will be achieved through high-profile publications and vigorous knowledge-exchange activities in the international academic community. Timescale: Years 1-3

(2) Wider Academic Community: Through its multidisciplinary mixed-method research design to analyze the influence of sociopolitical factors in the management of uncertainty, the project benefits scholarship that seeks to dissolve existing methodological and disciplinary divisions in the social sciences in favour of problem-driven research. Impact will be achieved via interdisciplinary knowledge-exchange activities. Timescale: Years 1-3. Long-term impact will be achieved through enhancing my methodological skill set and establishing my interdisciplinary research reputation as a pathway to increase the stakeholder relevance of social research. Timescale: Years 3+

(3) Policy Practitioners and Advisors: The structure of financial markets and the environments in which they are embedded have significant socio-political implications, and the maintenance of financial stability and the distribution of financial risk lies at their core. Enhanced knowledge of how these outcomes are generated through different mechanisms for the management of uncertainty is an important tool for financial regulators and political agents seeking to construct more stable and equitable systems of financial intermediation, and to manage the implications of increasing global financial interdependence. Impact will be achieved through case study integrity fora, yearly policy briefs on how Chinese actors are reshaping these mechanisms, the knowledge-transfer activities of the project's Managing Uncertainty as Governance network, and creating knowledge transfer partnerships with Chinese and British policy institutions. Timescale: Years 1-3+

(4) Financial Services Communities: Financial cultures are an integral aspect of how processes of financial investment and risk management are developed and implemented. Through its in-depth empirical investigation of different conceptions of the role of public and private actors in managing financial uncertainty, the project seeks to engage the financial services industry in understanding how different financial cultures emerge out of but also influence regulatory and financial investment practices. Impact will be achieved through knowledge-exchange activities focused around the in-house presentation of research findings. Timescale: Years 2-3+

(5) Wider Public: Given the enormous societal implications of China's financial transnationalization, the project seeks to expand awareness of the implications of China's financial rise in an evolving global economic environment, for the benefit of a wider range of stakeholders, including students, teachers, and the wider public. Impact will be achieved through workshops for secondary school teachers, public lectures, and utilizing web-based dissemination channels. Timescale: Years 1-3