China, once the Middle Kingdom, has risen to worldwide power. China’s endurance and adaptability are shown by its rise from an agrarian nation to an economic powerhouse. Chinese economic might is not the only draw on the world. The strategic precision with which China uses its economic strength, like a dragon’s dance, to maneuver the geopolitical environment fascinates it.
Based on David Baldwin’s renowned work on economic statecraft, this kind of statecraft involves using a state’s economic resources like chess to achieve strategic victories on the world stage. Similar to ‘geoeconomics’, governments employ trade, investment, and aid to influence and persuade as well as for economic goals. When employed correctly, these levers may gently push recipient nations to take actions that support the strategist’s goals. This phenomena may be interpreted as quick quid pro quo agreements or a strategic strategy that gradually and quietly convinces nations to align with the strategist’s goals.
Beijing’s geopolitical power has increased as the People’s Republic of China (PRC) has improved its economic statecraft. After reviewing the vast literature on China’s diverse economic statecraft, three key strategies emerge: materially punitive measures, which involve direct economic penalties usually as retaliation; incentivized applications, which use economic rewards to encourage behaviors that support China’s goals; and preemptively punitive measures. To fully understand these strategies, their application in Asia, Europe, and Africa must be examined. The goal is to identify China’s strategic decision-making factors, evaluate the consequences, and understand the dynamics that shape these statecraft endeavors by examining a variety of cases, including major achievements and significant challenges. With this approach, we may better understand China’s intricate economic statecraft network.
Rare Earths and Ripples: China’s Strategy and Sino-Japanese Relations
In 2010, China banned rare earth exports to Japan, demonstrating its economic statecraft. Beijing reacted to a maritime incident near the Senkaku/Diaoyu islands. The skipper of a Chinese fishing trawler was arrested after a collision with a Japanese coastguard ship. China’s restriction on rare earths, which are essential for Japan’s advanced industries, shows its desire to utilize economic tools for diplomatic leverage. China’s actions may be daring and risky given the East China Sea tensions and Japan’s US ties.
Japan was in trouble due to economic restraints. Escalating the issue might cause regional instability, while complying with Beijing may improve their position. The possible escalation of Chinese economic coercion was a major concern given its shaky economy and Prime Minister Abe’s term’s focus on economic rehabilitation. Japan might have punished China or condemned it, but it chose a more diplomatic approach to resolve the matter. Appeasement is not the main theme of this story. Rather than being forgotten, many experts believe this event fostered animosity and might change Sino-Japanese relations in the future.
The EU-China Arms Embargo Dance: Strategic Allure vs. Deep-Rooted Mistrust
The PRC has successfully employed its economic statecraft policy to impose constructive sanctions like enticing investment possibilities and enhanced market entrance rights. European Union was one target of this strategy. China has offered incentives to the EU to reconsider its arms embargo. After the 1989 Tiananmen Square events, the EU embargo forbids the export of dangerous military equipment to China. Despite various exceptions in its legal framework, such as the sale of non-lethal or dual-use hardware to China, the Chinese government regards the weapons embargo as a major hurdle to a meaningful Strategic Partnership (SP) with the EU.
China has pledged to boost market access and suggested enabling European contractors to join its quickly growing military sector to convince the EU to lift this ban. This idea is appealing, especially given the EU’s trade deficit with China. After the 2008 financial crisis, defense funding decreased, making China’s military modernization appealing to European stakeholders.
However, Beijing’s efforts in Brussels have failed, and the ban remains. EU foreign policymaking is difficult and requires agreement from all 27 members, which may explain this phenomena. Beijing’s resolve to grant access to the military market would have been strengthened if it had also guaranteed transparency and increased market access in other sectors, addressing the EU’s concerns. The strategic animosity between the parties appears to outweigh the immediate benefits of lifting the embargo.
The EU’s hesitancy is better understood from the perspective of the US and Asia. The relaxation of the embargo might shift the strategic balance, affecting the EU’s ties with the US and Asia. Thus, China’s proposition, albeit enticing, is assessed against geopolitical factors. Please provide a title for this article.
China’s Diplomatic Tightrope: Nations, Economics, and Dalai Lama Shadow
China’s anticipatory and psychologically painful economic statecraft is crucial to global geopolitics. To preserve economic links with this major Asian power, governments worldwide take precautions and carefully evaluate measures that may offend the Chinese government. One famous action involves the Dalai Lama. His teachings may reverberate in tranquil monasteries, but his diplomatic acts resound in political authorities.
Consider 2009 South Africa: A peace summit invitation to the Dalai Lama was quickly canceled, perhaps owing to economic worries from China. However, South Africa is not alone in this situation. Norway and the UK have faced similar ‘Dalai Lama issues,’ where they must carefully balance paying tribute to a revered spiritual leader with China’s economic impact.
India is deeply connected to Tibet’s spiritual past and present. It shelters the Dalai Lama and has a complex relationship with China. The relationship became more complex post-COVID-19. Beijing gradually emphasized its strategic economic leverage as India-China border tensions rose. China’s recent blockade of Australia’s coal imports due to political tensions shows how commerce may be used as a geopolitical instrument.
China’s economic diplomacy uses psychological methods and economic weapons to demonstrate physical might. As China’s global influence grows, nations must continuously review their values in light of the practical repercussions of resisting its goals.
Chinese Economic Diplomacy in the Global South: A Double-Edged Sword
China has grown rapidly in the industrial sector and used economic statecraft to strategically integrate economic and diplomatic efforts to become a global power. Economically disadvantaged and rising nations are visibly affected by the strategy. China’s Belt and Road Initiative (BRI) infrastructure and trade project crosses several of these economies. The Belt and Road Initiative (BRI) may boost infrastructure, jobs, and economic growth. However, significant financial and political restraints typically accompany it. Chinese investments favor Chinese labor and resources, marginalizing indigenous industries. The investments increase the recipient countries’ GDP but also increase their debt, providing China with enormous policy influence. The Western model frequently relates aid to governance improvements and human rights, while China’s “no strings attached” policy gives recipient countries a tantalizing amount of autonomy. This technique usually gives China enormous political influence over these states.
China’s economic approach in these countries has pros and disadvantages. One major drawback is debt, which may cause governments to default and lose vital assets. The predominance of Chinese labor and goods destroyed local industries. Economic influence may lead to political domination, which might align other nations with China’s global stances. China’s investment approach also downplays governance and human rights, which might reinforce authoritarian regimes. These nations are economically vulnerable due to their overreliance on Chinese investment. China’s economic moves provide growth possibilities but also pose enormous challenges that nations must navigate. This requires weighing short-term gains against sovereignty and politics.
The article originally appeared on Modern Diplomacy.