Economic & Financial Statecraft Program

E&F Glossary

Term

Definition

Blacklisting

Prohibiting or barring certain companies from investment portfolios or market access due to their involvement in unethical practices.. 

Capital Market Restrictions

 Limitations or conditions set by capital markets or regulators regarding investment in or partnership with entities that have associations with human rights abuses.
Capital Market Sanctions Capital market sanctions are investment bans that limit or prevent foreign companies from raising funds through the sanctioning nation's capital market(s). Generally, such measures have been put in place when such companies, and/or the states they originate from, represent an economic and/or financial threat to the host country of the capital markets in question.

Capital Markets

Capital markets are public platforms for coordinating trading in various assets, primarily stocks (equity shares in corporations) and bonds (the rights to collect fixed debt income from a corporation or other entity over a period of time). Most medium and large economies have some form of domestic capital market infrastructure, although the largest share (roughly 50% of global market capitalization) resides in the United States.

Chapter 5 of the CCP Constitution (law on CCP presence in private companies)

Chapter V of the Chinese Communist Party's constitution states that "Primary Party organizations are formed in enterprises, rural areas, government departments, schools, scientific research institutes, communities, mass organizations, intermediaries, companies of the People's Liberation Army and other basic units, where there are at least three full Party members" and that "the primary Party organizations are militant bastions of the Party in the basic units of society, where all the Party's work proceeds and they serve as the foundation of its fighting capacity". In practice, this means that all larger enterprises have established internal Communist Party cells to ensure their legal and ideological compliance with the Chinese Communist Party, which holds veto power over the activities of all host companies.

Civil-military Fusion

Civil-military fusion is a Chinese official policy promoting interaction between China's military and law enforcement and its research and development and commercial enterprise sectors. In effect, civil-military fusion is a mechanism ensuring Chinese state access to, and control over, all technological advancements and other innovations in the country for the purposes of defense procurement, whether they originate from public or private enterprises.

Corporate Bad Actors

Corporations known to be engaged in malign activity, generally in connection with their core business operations. This generally includes sanctioned corporate human rights and national security abusers, those likely to be sanctioned as well as those companies non-compliant with Western securities laws and investor protection standards.

Currency Warfare (or Currency Manipulation)

Devaluation of a country's own currency to gain an unfair advantage in trade.

Debt-trap Diplomacy

Debt-trap diplomacy refers to the Chinese practice of intentionally saddling foreign governments with excessive debt that cannot be repaid in order to gain political and economic leverage over these governments in the ensuing loan default negotiations and take ownership of a country's assets that served as collateral for the loan. The practice is particularly common in connection with Belt and Road Initiative-related infrastructure projects in developing countries.

Delisting

This is the removal of a security from an exchange, which means the stock or security will no longer be traded on that exchange; it can be voluntary or involuntary and is often the result of failing to meet the exchange's listing requirements.

Deregistering

This pertains to a company removing its public reporting and registration requirements with regulatory bodies (like the SEC in the U.S.). This can be thought of as a country formally discontinuing its recognition or registration of a foreign corporation, implying that the corporation no longer has the legitimate right or recognition to operate within its borders due to malpractice or breaches in international standards.

Digital Currency Diplomacy

The use of state-backed digital currencies (like China's digital yuan) as a tool in international diplomacy and as a potential challenge to the current global financial system.

Divestment

The action of selling off subsidiary business interests or investments to object to unethical practices, such as human rights abuses.
Due Diligence The process companies undergo to ensure their supply chains are free from human rights abuses, including forced labor.
Economic Resilience The capacity of a nation's economy to withstand or recover quickly from shocks.
Economic Threat In a security context, an economic threat is a potential or actual circumstance, originating either domestically or externally, that threatens to materially harm a nation's economic welfare or stability. Examples include industry capture, corporate espionage, or the exploitation of economic dependencies for political purposes.
Economic Warfare Economic warfare is the use, or threat of use, of policy instruments, technologies, and other state capacities to weaken or destabilize an adversary's economy. It can occur in conjunction with, or as an alternative to, conventional military strategy. Economic warfare strategy and military strategy are the two primary components of a state's grand strategy towards its adversaries.
Environmental, Social, and Governance (ESG) Criteria Standards some investors use to screen potential investments for their social responsibility.
Ethical Investing Investment strategies that consider both financial returns and ethical considerations, such as human rights.
Executive Order 13959 Executive Order 13959 is a Presidential Order implemented by the Trump Administration that prohibits all U.S. investors (institutional and retail investors alike) from holding the securities of companies identified by the U.S. government as "Communist Chinese military companies". It was upheld and strengthened by the Biden Administration with the issuance of Executive Order 14032 on June 3, 2021.
Extraterritorial Sanctions The imposition of sanctions by one country on persons or entities of another country based on their activities outside the sanctioning country.
Financial Disclosure When companies disclose to the public and to investors where they source their products or the nature of their investments.
Financial Inclusion The push to make financial systems more accessible to previously underserved populations.
Financial Intelligence (FININT) Gathering and analyzing financial transactions to derive patterns of behavior that could indicate illicit activities.
Financial Threat In a security context, a financial threat is either a potential or actual situation in which a state's capacity to maintain a stable money supply, support conditions for economic growth, collect taxes, and use state revenues to fulfil public needs becomes jeopardized (e.g. cyberattacks by a rogue actor on a major bank), or a situation in which a malign actor (e.g. an adversarial state or a terrorist group) is able to use some mechanism to finance its security-threatening or other problematic activity (e.g. a terrorist organization financing its activities through the sale of illicit drugs).
Foreign Investment Screening​ Foreign investment screening is the process of a foreign investment recipient’s government's identification, review, and if necessary, rejection of investments emanating from abroad. Foreign investment screening mechanisms have recently been created or expanded by a number of Western countries in order to give their governments greater control over national security-threatening and other potentially problematic foreign investments.
Global Magnitsky Sanctions Sanctions imposed under the Magnitsky Act targeting individuals and entities responsible for human rights abuses.
Investor Protection Investor protection is a country's legal and normative framework protecting investors from facing unjustified and/or undisclosed business risk. Investor protection principles ensure that the interests of investors are respected and promoted by their fiduciaries. An example of an investor protection violation could include an investment firm failing to disclose its exposure to sanctioned foreign entities or those facing imminent government sanctions.
Magnitsky Act U.S. legislation that allows the government to sanction foreign government officials implicated in human rights abuses anywhere in the world.
National Champions Companies backed and protected by their home country's government due to their strategic importance, receiving benefits like subsidies or favorable policies. Huawei is a prime example in China.
PLA Affiliates List The U.S. Department of Defense first published a list of companies known to be owned, controlled, or affiliated with the Chinese “People’s Liberation Army” in 2019, and has continued to add to it. Many of the companies listed are involved in developing technologies and equipment for the militaries and surveillance efforts of China and other repressive regimes.
Soft Power Instruments Tools used to gain influence over other nations not through coercion but through attraction and co-optation, including through economic and financial means.
Sovereign Wealth Funds (SWFs) State-owned investment funds that manage a country's reserves and can be used as a tool in geopolitical strategies.
State Induced Forced Labor Labor compelled by government authorities, where individuals are mandated to work against their will, often under threat and with little to no compensation.
State-owned Enterprises (SOEs) Companies that are either wholly or partially owned by the government and often play a significant role in economic and financial statecraft.
Strategic Investment Investments made primarily for geopolitical considerations rather than just economic return.
Supply Chain Legislation Laws that require companies to demonstrate that their business operations and products do not benefit from forced labor or other human rights abuses.
Supply Chain Vulnerabilities Risks posed to a country when its supply chains are overly dependent on an adversarial nation.
Suspension of Trading This refers to the temporary halt or interruption of trading of a security on an exchange, usually due to pending news or geopolitical events, ensuring the market remains fair and orderly.