Europe at a crossroads: East-West financial networks in a context of geopolitical polarization

The case of Evergrande – a Chinese property developer – received much business press attention when Western investors in its corporate bonds lost billions of dollars as it went into liquidation and was eventually delisted. The case illustrated the strong financial relationship that has evolved between Eastern debt markets and Western investors. However, the Evergrande example highlights a less well understood issue: that Western firms have also been centrally involved in the structuring and marketing of Chinese debt securities, effectively enabling the globalization of Chinese finance. Using social network analysis, drawing on data extracted from legal documents (offering circulars), our paper shows the roles played by Chinese, European and North American financial institutions in the construction of Evergrande’s debt securities. Evergrande therefore provides a window on our entwined economies. But it also illuminates an unknown: how these historic relations may change as geopolitical tensions grow. We reflect on the unanticipated outcomes that may arise from U.S.-China political polarization, in a context where European states seek to steer their financial centers towards domestic geopolitical priorities, but are also responsive to their financial interests. One possible outcome is that a more isolationist and recalcitrant U.S. partner may drive European financial actors towards the pursuit of their historic business interests in China, while being less mindful of U.S. foreign policy interests.