What Role Does Economic Coercion Play in China's Diplomatic Strategy?

• EconomyPortals
• 21 Sep, 2023

Economic coercion, the use of economic tools and measures to influence the behavior of other nations, has become a significant component of China's diplomatic strategy in recent years.

As China's economic might has grown, so too has its ability to wield economic leverage as a tool of statecraft.

In this blog post, we will delve into the role that economic coercion plays in China's diplomatic strategy, examining its methods, objectives, and the implications for both China and the international community.

The Methods of Economic Coercion

China employs several methods of economic coercion in its diplomatic strategy:

• Trade Measures: China can impose trade restrictions, tariffs, or import bans on specific products or industries from targeted countries. This can have a significant impact on a nation's economy, especially if it heavily depends on trade with China.
   
• Market Access: China may restrict or expand market access for foreign companies operating within its borders, which can affect their profitability and competitiveness.
• Consumer Boycotts: Chinese consumers represent a substantial market, and organized boycotts of foreign products can damage the business interests of companies originating from countries with which China has disputes.
   
• Investment: China can alter its investment patterns, directing capital away from countries or sectors it wishes to pressure and towards those it seeks to reward.
   
• Financial Tools: China can use its financial clout to influence international financial institutions, such as the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB), to allocate funds in ways that align with its objectives.

Objectives of Economic Coercion

China's use of economic coercion serves several strategic objectives:

• Political Influence: Economic coercion can be used to gain political influence or compliance from other nations, particularly in international forums or on issues where China seeks support.
   
• Resource Acquisition: China may employ economic leverage to secure access to valuable resources, such as minerals, energy, or agricultural products, from targeted countries.
   
• Territorial Disputes: In disputes over territory or maritime claims, China can use economic measures to pressure countries to accept its position or cease certain activities, such as oil exploration or military cooperation with rival nations.
   
• National Security: Economic coercion can be a tool to protect China's national security interests, such as restricting the sale of advanced technology that could have dual-use applications.

Examples of Economic Coercion

South Korea's THAAD Deployment: When South Korea deployed the U.S. THAAD missile defense system in 2017, China responded with economic measures against South Korean businesses, particularly in the tourism and entertainment industries. These measures were seen as an attempt to pressure South Korea to reconsider its decision.
 

Australia's Trade Tensions: China has imposed trade restrictions on Australian exports, such as barley, wine, and coal, following disputes over issues like calls for a COVID-19 origins investigation and concerns about foreign interference in Australian politics.
 

Hong Kong National Security Law: After the introduction of the national security law in Hong Kong, China has used economic measures to discourage foreign criticism or sanctions related to the situation in the semi-autonomous territory.

Implications for China and the International Community

China's use of economic coercion has far-reaching implications:

Diplomatic Tensions: Economic coercion can escalate diplomatic tensions and create animosities between China and targeted countries, potentially leading to a downward spiral of relations.
 

Global Governance: China's influence over international financial institutions raises concerns about the independence and fairness of global governance structures.
 

Supply Chain Vulnerabilities: Countries dependent on Chinese supply chains are vulnerable to disruptions caused by economic coercion, highlighting the need for diversification.
 

Compliance and Resistance: Some countries may comply with China's demands to avoid economic consequences, while others may resist, risking economic losses for the sake of principles or national interests.
 

International Norms: China's use of economic coercion raises questions about adherence to international norms, including those outlined in trade agreements and conventions.

In conclusion, economic coercion has become a key instrument in China's diplomatic toolkit. It allows China to exert pressure, protect its interests, and advance its strategic objectives on the global stage. As China's economic power continues to grow, understanding and effectively responding to its use of economic coercion will be crucial for countries and the international community to navigate the complexities of the global diplomatic landscape.