Chapter 5 Economic statecraft (Week 7-9)

5.1 Discussion questions

  • Wong (2021). Why is China’s economic statecraft self-defeating?

  • Norris (2016). What are China’s strategic priorities? And how can economic statecraft serve China’s strategic interests?

  • How do we evaluate the effectiveness of China’s economic statecraft? (*)

“China’s Economic Statecraft” by Matt Ferchen 16:30-22:30

5.2 Self-defeating statecraft

Wong (2021) argues that China’s practice of economic statecraft is far less impressive that we often thought. It often sparks resistance and has not lead to any long-term strategic gains. She argues that China’s economic statecraft is not driven by grand strategic designs or an incentive to export autocratic political system. Instead, it is “something more practical and immediate: stability and survival.”

“China’s economic statecraft, then, is often employed to put out immediate fires and protect the CCP’s domestic and international image.”

Therefore, China has been focusing on > “national sovereignty and territorial integrity (such as Taiwan, Tibet, and the East China and South China Seas) and domestic governance (such as China’s treatment of the Uyghurs in Xinjiang and its handling of the COVID-19 pandemic)”

In terms of the approaches, China uses negative sanctions in a targeted and symbolic way, while focusing more on applying positive inducements. She divides the inducements into two types: the illegitimate subversive ones (“subversive carrots”) vs. the legitimate public ones (“legitimate seduction”). The former method works the best in countries that have little public accountability (Cambodia, Hungary, Serbia), but less well in countries with greater transparency (the Philippines, Australia, Sri Lanka, Maldives, Malaysia). The latter method is often applied to countries with more public accountability (Greece, Australia). Wong argues while the latter method seems to hold promises of long-term strategic gains by cultivating vested interests abroad, it also encounters several challenges: it takes longer and is getting harder (due to China’s economic model, assertive foreign policy, and economic coercion).

Taken together, she argues that while China has “mostly been able to achieve transactional, short-term objectives”, for countries with public accountability “China’s long-term strategic influence remains limited” (Wong 2021, 51).

5.3 A fairly effective channel

Norris (2016) begins by tackling China’s grand strategy. Here are the hierarchy of strategic priorities that he lays out:

  • Regime stability. This point is shared by Wong (2021). Somewhat differently, however, Norris emphasizes “Economic growth has come to replace communist ideology as the chief legitimizing dynamic underpinning the CCP’s popular credibility.” Recall that Weiss & Wallace (2021) also talks about the three pillars of CCP’s legitimacy: nationalism, economic growth, and public safety. Note that some scholars are concerned that CCP would replace economic growth with nationalism as the country’s economy slows down. See, for instance, this foreign policy argument: China Is a Declining Power – and That’s the Problem: The United States needs to prepare for a major war, not because its rival is rising but because of the opposite.
  • Prevent a balancing coalition against China.
  • Diversify and secure strategic raw materials supplies.
  • Taiwan issue.

Norris therefore argues that China’s economic statecraft relies on:

  • Ensuring good economic growth, which can help address potential domestic threats and fueling China’s growing military might.
  • Deepening integration into the global economy. This is because China’s economy has been relying on export-oriented model which calls for greater integration.
  • Exercising economic statecraft in an effective manner.

On the final point, Norris argues that China has been fairly adroit because of its own economy success and its mixed economy which allows the government to direct “private” economic actors for strategic ends. The cases he lists include China’s economic coercion against France, the Philippines, Taiwan, North Korea, Japan, and Mongolia. He also point to China’s diversification of strategic material supplies and acquisition of dual-use technologies. Finally, he points out China also leverages its influence via free trade agreements and institutions such as the Shanghai Cooperation Organization (SCO) and the Belt and Road Initiative (BRI).

5.4 How can we move this research forward?

The above readings overlap in discussing what China wants and whether its economic statecraft can get China what it wants. But there are still some gaps. Wong (2021) begins by laying out China’s short-term strategic focus. But evaluates its success via the criteria of long-term strategic gains. Norris (2016) makes the argument that China’s economic statecraft is adroit and effective. But he seems to focus heavily on the different approaches China employ rather than examining whether the statecraft does help China realize its strategic goals or not.

5.5 Data

CFR has some interactive resources. See here for a map of countries that have joined the BRI. See here for Belt and Road Tracker that covers the import, FDI, and debt from China.

AidData’s Global Chinese Official Finance Dataset (2000-2014) covers over 4000 records of Chinese official finance. For maps and visualizations, check out their homepage China’s Global Development Footprint.

Boston University’s Global China Databases.

World Bank’s Belt And Road Initiative Trade Costs Database

The American Enterprise Institute’s China Global Investment Tracker