How does China’s emergence as a global creditor a?ect national policymaking? The international and comparative political economy literature has long debated the extent to which international capital mobility constrains national autonomy, but has mainly focused on private capital ?ows. Incorporating China’s state-led capitalism into this political economy framework, I expect that Chinese credit enhances national governments’ room to maneuver. It is a distinct form of long-term capital characterized by a risk-tolerant ?nancial system that marshals China’s patient form of domestic capital internationally. Its lack of policy conditionality endows governments with more ?scal space to intervene in their economies. For developing country governments facing strong redistributive pressures, su?cient ?scal space to supply more jobs, higher wages, and better public services is often key to political survival.However, patient capital has its costs. The ?ne print of these state-to-state deals often involves commercial conditions, ranging from contracting with Chinese ?rms and suppliers to providing state guarantees or commodity collateral, that risk intensifying national debt and dependency.

This chapter provides an overview of this book, which examines China’s economic expansion into the Western Hemisphere from both the creditor and debtor perspectives while making several contributions. First, this study brings new and original data to bear on the classic question of states’ room to maneuver under ?nancial globalization, a question that is increasingly pertinent given the rise of state-led ?nance over the past two decades. Second, employing a mixed-method approach, this book sheds light on the behavior of state-led ?nancing, particularly how its commercial conditionality rather than policy conditionality a?ects national-level governance decisions. Finally, it makes an important theoretical contribution by disaggregating the structure of global ?nance. The globalization scholarship suggests local state capacity and institutional development can mitigate "race to the bottom" pressures, but this study ?nds that the type of international investment (state vs. market) can also in?uence the extent of policy discretion. The emergence of China’s state-led ?nancing endows governments with greater ?scal space, or the ability to sustain their spending through volatility.

Chapter 6 examines severe and protracted economic contractions following the Great Recession of 2008–09 in two countries on the European periphery: Latvia and Greece. It documents the evolution of main macroeconomic aggregates and social indicators in these two countries before, during, and after the 2008–09 crisis. The chapter also critically examines the role played by the International Monetary Fund (IMF) and other European institutions in the design and implementation of austerity in these economies, and draws lessons for other nations from these two experiences. The chapter also discusses the futility of democratic consultation (referendums) in Greece for the amelioration of conditionality and austerity.