Acting one way and talking another: China's coercive economic diplomacy in East Asia and beyond - by CWP Alumni Christina Lai

Wednesday, Aug 16, 2017
by dsuchens

Over the last two decades, China has experienced one of the most dramatic and sustained periods of economic growth in world history. China's use of economic statecraft provides an important venue in which to examine the role of unacknowledged ‘coercive diplomacy’ within the context of China's ‘peaceful rise discourse.’ In contrast to Western countries, which have overtly used sanctions and other forms of economic coercion, China has publicly denied any such policies while at the same time quietly pursuing them. China's denial of using coercive economic statecraft has muted the reactions of neighboring publics and government, but it cannot entirely forestall them. Without seriously undermining China's ‘peaceful-rising’ image, a more explicit statement from Beijing regarding its coercive economic measure could provide deterrence and assurance to China's neighbors in resolving the disputes. This article first surveys existing literature on economic statecraft focusing on the coercive aspects of such strategies. Second, it presents an in-depth case study on how China uses economic leverages over its neighbors in East Asia: North Korea, Japan, and the Philippines. Finally, it highlights the limits of China's economic statecraft within the constraints of China's ‘peaceful rise’ discourse. It concludes with implications for Asian politics and beyond.

KEYWORDS: Chinese foreign policypeaceful rise discourseEast Asian security

Introduction

Over the last two decades, China has experienced one of the most dramatic and sustained periods of economic growth of any great power in world history. This has led to debates in both academic and policy circles about whether China will pose a threat to the United States and its regional allies in Asia. More specifically, China's frequent use of economic leverage to achieve political goals has aroused concerns in East Asian countries. It also indicates that Beijing's use of economic statecraft and coercive diplomacy risk compromising its positive reputation as a ‘peaceful rising country.’

As China experiences greater integration with the region, it also has a significant stake in upholding Asian order to secure China's economic development. China's increasing level of interdependence coupled with rising political tensions with its neighbors in East Asia raises the following questions: to what extent has China's economic leverage vis-à-vis its neighbors helped Beijing achieve its political goals? How effectively does China use its economic leverage to gain political concessions from others?

While China has rarely resorted to the overt use of force abroad since the Korean War, China has more frequently used economic power to resolve political disputes. Like other major powers in the world, China is no exception when it exerts its economic influences strategically. For example, in 2003, China reportedly shut off an oil pipeline to North Korea for three days, claiming that the shutdown was due to ‘technical difficulties’ (Elliott 2003Elliott, K. A. (2003). Economic leverage and the North Korean nuclear crisis. International Economics Policy Briefs, PB03-3. [Google Scholar]). China's move was widely interpreted as an exercise of its economic leverage to pressure Pyongyang to attend a trilateral meeting on nuclear disarmament held in Beijing. Moreover, the Chinese government decided to suspend its exports of rare earth materials in response to Japan's detention of a Chinese fishing boat captain in 2011 near the Senkakus islands in the East China Sea. Chinese officials denied that they had held up the trade of these materials as retaliation (King and Armstrong 2013King, A., & Armstrong, S. (2013). Did China really ban rare earth metals exports to Japan. Paper presented at the East Asia Forum. [Google Scholar]). Finally, in 2012, in response to territorial disputes in the South China Sea, China imposed restrictions on banana imports from the Philippines (The Washington Post, 2012In Philippines, banana growers feel effect of South China Sea Dispute. (2012, June 10). The Washington Post. ).

China's actions in these cases pose an interesting puzzle for the current literature on economic sanctions and political coercion. While the United States and other countries have publicly announced the use of economic pressure to achieve national goals, China has publicly denied that these trade restrictions were used to achieve political ends. The timely application of trade embargoes contributed to Chinese success in the North Korea and Japan cases mentioned above, but the Chinese government has refused to acknowledge using such economic tactics. China's use of economic statecraft provides a new perspective from which to examine the role of unacknowledged ‘coercive diplomacy’ within the context of China's ‘peaceful rise discourse.’

The goal of this study is to examine the broad range of tools and rhetorical strategies used in China's economic statecraft and to evaluate how effective they are in attaining China's political goals. It first surveys existing literature on economic statecraft with a focus on the coercive and deterrent aspects of such strategies. Second, it presents in-depth case studies on how China uses economic leverage over its neighboring countries in East Asia: North Korea, Japan, and the Philippines. Finally, this study highlights the limits of China's economic statecraft as it is constrained by China's ‘peaceful rise’ discourse. It concludes with policy implications in Asia and beyond.

Coercive diplomacy and economic statecraft

All things being equal, great powers like the United States, Russia, and China would gain economic leverage as they become more powerful. On the other hand, they face various disputes with a range of countries. China is in some aspects no exception when it comes to the frequent use of economic leverage toward its neighbors, but a closer investigation on China's recent coercive economic diplomacy reveals a different story as well: China's long-held self-image as a ‘peace-loving’ country has prevented its overt execution of coercive measures.

The utility of coercive diplomacy is an integral part of the economic statecraft, and research on economic sanctions has identified major factors in determining the duration and effectiveness policy tools like economic sanctions. While some scholars argue that sanctions are often ineffective in achieving desired policy outcomes (Morgan & Schwebach, 1997Morgan, T. C., & Schwebach, V. L. (1997). Fools suffer gladly: The use of economic sanctions in international crises. International Studies Quarterly41(1), 27–50.[Crossref][Web of Science ®][Google Scholar]; Pape, 1997Pape, R. A. (1997). Why economic sanctions do not work. International security22(2), 90–136.[Crossref][Web of Science ®][Google Scholar]), some works explore how economic sanctions can win political concessions by imposing opportunity costs on the targeted states (Blanchard & Ripsman, 1999Blanchard, J. M. F., & Ripsman, N. M. (1999). Asking the right question: When do economic sanctions work best ? Security Studies9(1–2), 219–253.[Taylor & Francis Online][Web of Science ®][Google Scholar]; Drezner, 1999Drezner, D. W. (1999). The sanctions paradox: Economic statecraft and international relations. Cambridge, UK: Cambridge University Press.[Crossref][Google Scholar]). The targeted countries are more vulnerable to the extent that there is ‘asymmetric interdependence,’ or to the extent that they need goods or services from the sanctioning state more than the sanctioning states need goods or services from them, or that they are less able to acquire or substitute for goods and services at the same price from other sources (De Castro, 2013De Castro, R. C. (2013). China's realpolitik approach in the South China Sea dispute: The case of the 2012 Scarborough shoal standoff. Paper presented at the Managing Tensions in the South China Sea, Center for Strategic & International Studies. [Google Scholar]; Keohane & Nye, 1977Keohane, R. O., & Nye, J. S. (1977). Power and interdependence: World politics in transition. Boston, MA: Little Brown. [Google Scholar]; Ravindran, 2013Ravindran, M. S. (2013). China's potential for economic coercion in the South China Sea disputes: A comparative study of the Philippines and Vietnam. Journal of Current Southeast Asian Affairs31(3), 105–132. [Google Scholar], p. 7). Moreover, the relations between foreign policy goals and economic sanctions have also been addressed in the literature on political economic and regime types (Brooks, 2002Brooks, R. A. (2002). Sanctions and regime type: What works, and when? Security Studies11(4), 1–50.[Taylor & Francis Online][Web of Science ®][Google Scholar]; Hart, 2000Hart, R. A. (2000). Democracy and the successful use of economic sanctions. Political Research Quarterly53(2), 267–284.[Crossref][Web of Science ®][Google Scholar]). That literature notes that successful coercion attempts usually end at the threat stage, before actual sanctions are imposed (Drezner, 2003Drezner, D. W. (2003). The hidden hand of economic coercion. International Organization57(03), 643–659.[Crossref][Google Scholar]). A non-democratic regime may be more vulnerable to targeted economic sanctions, because domestic discontent in democracies is often seen a form of politics, while public demonstrations against the authoritarian country can be an indication of crises exploited by sanctioning countries (Major, 2012Major, S. (2012). Timing is everything: Economic sanctions, regime type, and domestic instability. International Interactions38(1), 79–110.[Taylor & Francis Online][Web of Science ®][Google Scholar]).

However, little work has been done on the relationship between coercive diplomacy and its rhetorical justification. The study claims that coercive measures and economic sanctions are parts of a nation's grand strategy to influence or change the behaviors of others, and the justifications of these measures should also be an integral part of nations’ image-building narratives. The logic of sanction implies an attempt conducted by the sender country in using its leverage in one area to gain the target's concessions in another area. In order to make such issue linkage credible, the sender must be explicit in both its rhetoric and implementation, so that the target can be fully convinced that reaching a joint deal over the two issues would be more beneficial than dealing with them separately. In this sense, China's ambiguous responses fail to provide fair justifications for its coercive economic measure. Although an effective sanction must be backed up by credible rhetoric and action, it does not mean that China has to fundamentally alter its peaceful development discourse. Without seriously undermining China's ‘peaceful-rising’ image, a more explicit statement from Beijing regarding coercive economic measure could provide deterrence and assurance to China's neighbors that the bilateral relations would improve later if they resolve the disputes immediately.

Throughout history, states have always sought to use economic resources and trade-related measures to achieve political gains. For example, the United Nations, European countries, and the USA jointly pressured the Milosevic's regime in Serbia and Montenegro by using financial sanctions. The United States applied the broad use of trade sanctions against Iraq in the first Persian Gulf War. Between 2002 and 2006, the US government also implemented the Illicit Activities Initiative to pressure Kim Jong Il in North Korea to back away his nuclear weapons development (Asher, Comras, & Cronin, 2011Asher, D. L., Comras, V. D., & Cronin, P. M. (2011). Pressure: Coercive economic statecraft and US national security. Washington, DC: Center for a New American Security. [Google Scholar]). To some extent, China was also a target of US economic sanctions, as the United State Congress passed legislation to implement interim economic and diplomatic sanctions due to the 1989 Tiananmen Square incident (Rennack, 2006Rennack, D. E. (2006). China: Economic sanctions. Washington, DC: Library of Congress. [Google Scholar], p. 2).

More recently, the United States and the European Union imposed sets of economic sanctions targeting Russia to change its foreign policy toward Ukraine. Russia Prime Minster Dmitry Medvedev, in turn, signed a raft of sanctions against Turkey in response to Turkey shooting down a Russian warplane in Syria. These economic sanctions include an embargo on food products, and a ban on chartered flights. The Russian government also cancelled visa-free travel for Turkish citizens starting in 2016 (Reuters, 2015Russia approves detailed sanctions against Turkey over downed plane. (2015, December 1). Reuters. ). All these examples indicate that the coercing states are often quite explicit in terms of sending clear messages to the targeting states: they can either satisfy the coercer's demands or be punished.

In this sense, China's coercive economic diplomacy presents a unique challenge for foreign policy studies, as Beijing has never officially acknowledged such measures (Glaser, 2012Glaser, B. S. (2012). China's coercive economic diplomacy – a new and worrying trend. Washington, DC: Center for Strategic and International Studies. [Google Scholar]). The case studies presented herein show that economic sanctions always pose complicated challenges for actors engaging in coercive diplomacy, as they can send unintended signals that lead the targeted countries to exaggerate or underestimate the goal and resolve of the sanctioning state.

Deterrence and assurance in China's foreign policy

This study builds on insights from the literature on economic sanctions and deterrence strategies to highlight the limits of China's coercive diplomacy. In Arms and Influences, Thomas Schelling makes a clear distinction between deterrence and compellence. Deterrence involves efforts to prevent changes to the perceived status quo, while compellence refers to attempts to get others to change their current behavior (Schelling, 1966Schelling, T. C. (1966). Arms and influence. New Haven, CT: Yale. [Google Scholar], p. 69–70). This study addresses the way in which Beijing has handled political disputes with North Korea, Japan, and the Philippines. In each of these cases, China's foreign objective varies according to its perception of the status quo. For example, China aimed at deterring North Korea from conducting missile tests, and deterring Japan from taking further steps to bring the Senkakus Island under its domestic jurisdiction. On the other hand, China attempted to de-escalate the stand-off around the disputed islands by demanding that the Philippines Navy withdraws from nearby waters.

In assessing the outcome of China's economic sanctions, Thomas Christensen further distinguishes between deterrence and assurance. Deterrence involves credible threats that the target states will suffer if they undertake a specified behavior. Assurance works through credible signals that the national interests of the target state will not be undermined if it agrees to a policy compromise (Christensen, 2011Christensen, T. J. (2011). Worse than a monolith: Alliance politics and problems of coercive diplomacy in Asia: Alliance politics and problems of coercive diplomacy in Asia. Princeton, NY: Princeton University Press.[Crossref][Google Scholar], p. 261).

The selective use of trade-related measures is an integral part of economic statecraft, as states can execute these policy options to express intentions, identity, and interests (Baldwin, 1985Baldwin, D. A. (1985). Economic statecraft. Princeton, NJ: Princeton University Press. [Google Scholar]). The purposes of coercive diplomacy are either demand compliance from the targeted states or discouraging them from continuing certain policies. China's absence of clear justification can undercut two of the key elements of successful coercive diplomacy, as China exhibits unclear signals about its capabilities, resolve, and assertiveness both for the present and future. This, in turn, might produce mixed results for China's strategic use of economics in the neighboring countries.

Existing literature on sanctions and bargaining offers a ‘saving face’ explanation for China's denials and ambiguous responses regarding sanctions. The vagueness of China's responses and selective measures increase Beijing's flexibility in anticipating the ‘quiet’ change of policies without embarrassing both countries. Namely, China and the targeted states can resume long-term interaction after the crisis, and official denials can lower the political costs for other countries to back down. However, such an explanation fails to look at what happened after China's unacknowledged use of economic leverage. Some of the cases indicate that the short-term success of China's strategy backfired in long run for the bilateral relations between China and the targeted countries, as most observers interpreted China's behavior as an intentional strategy of coercion through trade restrictions. This strategy, designed to preserve China's image of a peace-loving country, actually undermines China's discourse of being a peaceful rising country. China's denial of economic statecraft can only partly avoid the appearance of using pressure, and can mute but not forestall reactions by the publics and governments of the targeted countries.

By acting one way and talking another, China's leaders risk undermining the credibility of their denials that China is now or would in the future use its economic capabilities in other ways to win concessions from other countries. Thus, in the long run, other countries may either overreact to or underestimate China's resolution to use trade as an instrument of coercive diplomacy. The different costs-and-benefits of these examples present a mixed picture for the short-term and long-term effectiveness of China's economic statecraft. Variations in how the targeted countries perceive such policies point to important aspects of coercive diplomacy and risk calculation.

China's peaceful rise: an image-conscious country

China's national capabilities have grown rapidly since Deng Xiaoping launched economic and political reforms. During Deng's tenure, his most famous statement advised later Chinese leaders to ‘hide our capabilities and bide our time,’ and it has become an important guideline for Chinese foreign policy even after the end of the cold war.11. His ‘24 character strategy’ informed later Chinese leaders to ‘observe calmly; secure our position; cope with affairs calmly; hide our capabilities and bide our time; be good at maintaining a low profile; never claim leadership.’View all notes The term ‘China's peaceful rise’ reflected Deng's dictums and was used by both China's officials and scholars to highlight China's foreign policy in the twenty-first century. In 2003, former Vice Principal of the Central Party School, Zheng Bijian, introduced this term in the Boao Forum for Asia (2003Zheng, Bijan. (2003). A new path for China's peaceful rise and the future of Asia. Boao Forum for Asia. [Google Scholar]). Premier Wen Jiabao reiterated this concept again when he delivered a speech in the United States (Wen, 2003Wen, Jiabao. (2003, December 10). Turning your eyes to China. Speech by Chinese Premier at Harvard University. [Google Scholar]). Both claimed that the essence of China's peaceful rise lies in economic development and maintaining a stable international environment. Later on, this term evolved into China's peaceful development to avoid any negative implication of the word ‘rise,’ and to officially include an image of peace-loving China in its discourse (Suettinger, 2004Suettinger, R. L. (2004). The rise and descent of “peaceful rise”. China Leadership Monitor12(2), 1–10. [Google Scholar]).

The essence of China's peaceful rise lies in economic development and maintaining a stable international environment. Therefore, the notion of image – whether China is viewed as a peace-loving country, revisionist state, or threat to Asian countries – is useful in understanding Chinese foreign policy. A rising China is especially aware of the consequences of ‘China's threat theory,’ because a possible anti-China alliance could be readily established among Asian countries (China Daily, 2010China threat' theory is absurd. (2010, September 2). China Daily[Google Scholar]; Global Times, 2006Global Times. (2006, August 2). Why is China always haunted by the China threat ? People's Daily. “China Threat Theory” Rejected, April 26 2009. [Google Scholar]). When China's behavior became assertive starting in 2009–2010, Beijing's rhetoric was still consistent with Deng's guidance to be prudent and moderate in international politics. For instance, Chinese State Councilor, Dai Bingguo stated:

Some people misinterpret the Chinese idiom “keep a low profile and make due contributions.” They take China's announcement of a peaceful development path as a smokescreen for its real intention before it gets strong enough. This is groundless suspicion…the Chinese is a good-will and responsible nation…In our relations with other countries, we will seek equality, harmonious co-existence, mutual benefit and common development. Ours is a country that follows the path of peaceful development and treats others with candor and sincerity. The world may feel reassured and confident in dealing with such a country as China. (Dai, 2010Dai, B. (2010, December 13). Stick to the path of peaceful development. China Daily[Google Scholar])

The term ‘peaceful development’ was a critical indicator of China's reassurance strategy, because this official slogan intended to ease the worries from China's neighboring states. Similarly, Yang Jiechi, Minister of Foreign Affairs said in 2010:

A more developed China will undertake more international responsibilities and will never pursue self-interests at the expense of the interests of others … Our own interests and those of others are best served when we work together to expand common interests, share responsibilities and seek win-win outcomes…… China is undertaking more and more international responsibilities commensurate with its strength and status. (Yang, 2010Yang, Jiechi. (2010, February 5). A changing China in a changing world. [Google Scholar])

Therefore, China's seemingly ‘puzzling or confusing’ responses to such coercive economic measures need to be examined in a broader context, beyond a narrow focus on political disputes with its neighbors. Namely, China's discourse on peaceful rise serves as a long-term and fundamental goal for its national interests, while its coercive measures aim at achieving immediate policy objectives.

The tensions between these long-term and short-term policy objectives have led to China's ambiguous responses and assertive foreign behaviors toward its neighbors in East Asia. China's foreign policy-makers have to weigh carefully between the cost of undermining China's reputation abroad and the benefit of achieving immediate goals using coercive measures.

This study argues that the justification of coercive diplomacy is as important as the substance of such measures, especially for a rising country attempting to signal benign intentions. China was a targeted state for economic sanctions from the USA and European countries due to the Tiananmen Square incident in the 1990s, and it has also opposed economic sanctions. For example, in response to US sanctions on Iran, China publicly opposed to such unilateral measures to curb Tehran's nuclear program. China's Foreign Ministry spokesman indicated the ‘proper’ way to decrease political tensions and downplayed the role of economic sanctions. He said:

China has consistently believed that sanctions are not the correct way to ease tensions or resolve the issue of Iran's nuclear program… The correct path is dialogue and negotiations. China opposes putting domestic law above international law to impose unilateral sanctions on another country. (Reuters, 2012China repeats opposition to unilateral sanctions on Iran.(2012a, January 4). Reuters[Google Scholar])

Hong's rhetoric increases the international audience cost of China's overt use of economic sanctions in the future, as any explicit statement would induce hypocrisy charges against China's double-standard.

On the other hand, there has been a dialog taking place in which attempts have been made to reconcile China's peaceful rise discourse and its frequent uses of economic sanctions. For example, Chinese scholars argue that China can still be a peace-loving country, so long as it ‘prudently’ uses its economic leverage against countries that damage world peace and undermine China's national interest (Reilly, 2012Reilly, J. (2012). China's unilateral sanctions. The Washington Quarterly35(4), 121–133.[Taylor & Francis Online][Web of Science ®][Google Scholar], p. 123).

Economic statecraft can also produce a positive international image. For example, Avery Goldstein indicates that Beijing's decision not to significantly devalue its currency during the 1997 Asian financial crisis helped establish an image of being a ‘responsible power in Asia’ (2003Goldstein, A. (2003). An emerging China's emerging grand strategy. In G. J. Ikenberry & M. Mastanduno(Eds.)International Relations Theory and the Asia-Pacific, 55–106. New York, NY: Columbia University Press. [Google Scholar]). Similarly, China's overseas trade and economic cooperation zones in Africa represents another aspect of its new tools for economic statecraft. The zone program established a platform not only for China to promote its soft power in a successful development story, but also to enhance economic benefits for both China and the host country (Bräutigam & Xiaoyang, 2012Bräutigam, D., & Xiaoyang, T. (2012). Economic statecraft in China's new overseas special economic zones: Soft power, business or resource security ? International Affairs88(4), 799–816.[Crossref][Web of Science ®][Google Scholar]).

Another focus of China's image-building project is to defuse ‘China threat theory.’ Namely, both China's scholars and policy-makers are currently trying to understand why a stronger China could be perceived as threatening to others, and what China could do to address these concerns (Rabinovitch, 2008Rabinovitch, S. (2008). The rise of an image-conscious China. China Security4(3), 33–47. [Google Scholar]). China's assertive stances in the South China Sea and the East China Sea disputes have created regional suspicion over the validity of China's ‘peaceful rise.’ Some argue that China's assertiveness is a normal process to catch up with its rising capabilities (Friedberg, 2011Friedberg, A. L. (2014). The sources of Chinese conduct: Explaining Beijing's assertiveness. The Washington Quarterly37(4), 133–150.[Taylor & Francis Online][Web of Science ®][Google Scholar]; Mearsheimer, 2010Mearsheimer, J. J. (2010). The gathering storm: China's challenge to US power in Asia. The Chinese Journal of International Politics3(4), 381–396.[Crossref][Web of Science ®][Google Scholar]). However, there are major differences between Beijing's military posture and economic policy toward its neighbors. China still sought to promote sustainable economic development in Asia and express keen interests in regional integration. For example, when China became more assertive in the South China Sea disputes, Beijing held the ‘win-win’ logic to promote its economic interests without seriously undermining others’. In its 2011 White Paper on peaceful development, China indicated that its economic development depends on a peaceful and stable domestic and international environment, and China's development will also contribute to Asian economic and prosperity (China's State Council, 2011China's State Council, People's Republic of China. (2011, September 6). White Paper on China's peaceful development. [Google Scholar]).

Moreover, when China realized that its ‘perceived assertiveness’ may undermine its positive image, the Chinese leadership managed to ease worries from its neighbors by addressing the gap between China's rhetoric and behavior. Specifically, Beijing has toned down its rhetoric from 2012 to 2014. For example, China positively responded to Association of Southeast Asian Nations (ASEAN)'s request on drafting Code of Conduct, as Chinese Foreign Minister Wang Yi and China's Ambassador Huang Huikang to Malaysia both agreed to explore ‘preventive measures on managing risks at sea’ (2015Huang, Huikang. (2015, August 10). China's strategic interest in Asia pacific – speech by ambassador Huang Huikang at the Malaysian Armed forces defense college Diners' Club. [Google Scholar]).

So far, the main challenge for China's foreign objectives is to successfully reassure others that China is and will maintain a peaceful manner even in the future when the balance of power has shifted in its favor. On the other hand, occasional and limited coercive diplomacy does not necessarily damage a nation's image. The economic strategies that are well perceived and executed might undermine bilateral relations for the time being, but long-term relations with others and a state's reputation can be maintained with clear objectives, assurances, and justifications.

Therefore, the construction of China's self-identity and perceived image from its neighbors can be reinforcing and lead to a constitutive process of adjusting perceptions toward each other. To the extent that China seeks to pursue more revisionist goals, its official statements would be more explicit in linking up China's strategic objectives and coercive measures. China's peaceful development is and will be closely related to China's low-profile statements on its coercive economy statecraft.

Case studies: China's neighbors in East Asia

The country-specific studies cover different regime types and substantive disputes. The country-specific studies show that China's handling of coercive diplomacy – a combination of denial and assertive attitude – yielded limited success both in terms of achieving political goals and maintaining its long-held image of a peace-loving and responsible country.

North Korea: cutting energy supplies as a warning

Admittedly, the limitations to data gathering from North Korea's media outlets certainly make it difficult to evaluate not only the effects of China's sanctions on North Korea's economy and foreign behavior. Nevertheless, this study attempts to overcome this challenge by referring to open sources, such as media coverage from South Korea, policy reports from security analysts, and official statements from US officials.

China remains North Korea's major security ally and trading partner, as the North is highly dependent on China's energy and food supplies. In this sense, severe measures on trade suspension would increase the possibility of regime collapse and millions of North Korean refugees might enter China's northeastern region (Wu, 2005Wu, A. (2005). What China whispers to North Korea. The Washington Quarterly28(2), 35–48.[Taylor & Francis Online][Web of Science ®][Google Scholar]).

After North Korea conducted a missile test into waters between South Korea and Japan, in February 2003, China briefly cut off oil supplies as a punitive measure (Christensen, 2003Christensen, T. J. (2003). PRC security relations with the United States: Why things are going so well. China Leadership Monitor8(Fall), 1–10. [Google Scholar]). Even though both the Chinese Foreign Ministry and the state-owned oil company refused to comment on this, the timely response from the US on China's leverage is worth noticing. When the US secretary of state, Colin Powell, visited Beijing at the same time, Powell said that China ‘was working quietly behind the scenes’ in putting pressure on Pyongyang (The Guardian, 2003China cuts oil supply to North Korea. (2003, March 31). The Guardian. ).

China also suspended oil exports to North Korea in September 2006 when the North tested ballistic missiles in July. Although senior officials from China's Petroleum Company refused to comment on this event, the reduction in oil supplies caught much attention from the Western media and security analysts in Northeastern Asia (The New York Times, 2006China may be using oil to press North Korea. (2006, October 31). The New York Times[Google Scholar]). Moreover, China openly supported a United Nations resolution condemning nuclear tests by North Korea and a ban on sales and transfer of military equipment to North Korea (UN Security Council, 2006UN Security Council. (2006). Security council condemns nuclear test by democratic people's Republic of Korea, unanimously adopting resolution 1718. Retrieved fromhttp://www.un.org/press/en/2006/sc8853.doc.htm [Google Scholar]). Beijing's low-profile measures and public statements created a contrast between its foreign rhetoric and behavior.

In 2011, political tensions heightened between the two Koreas as the North allegedly launched torpedoes that led to the sinking of a South Korean navy ship, the Cheonan. Beijing cut off oil supplies to North Korea after its artillery shelling of Yeonpyeong Island and nearby waters, which was considered deterrence against any further provocations toward Seoul by Pyongyang (Sutter, 2011Sutter, R. (2011). China's recent relations with North Korea-look beyond ‘stability’. International Journal of Korean Studies15(2). [Google Scholar]). China claimed that the halt of supplies was due to technical problems and refused to acknowledge this linkage again. However, responses from the United States again indirectly implied China's strategic move in constraining North Korea which did not respond to South Korean live-fire drills afterward. More specifically, US Defense Secretary Robert Gates publicly endorsed China's constructive role in maintaining regional order. During his visit to Beijing, he said that ‘we acknowledge and appreciate China's constructive actions late last fall in terms of trying to tamp down tensions on the peninsula’ (The Korea Times, 2011China cut off oil to stop N. Korea from retaliating against South. (2011, January 19). The Korea Times[Google Scholar]). The United States has always been supportive of a more active Chinese role in promoting denuclearization. Therefore, China's non-response and the official statement from the USA presented an example of China's unacknowledged use of economic leverage toward North Korea.

The impact of Beijing's economic sanctions against Pyongyang and its willingness to exert such coercive measures remains to be seen, as China needs to maintain a delicate balance between credible deterrence with North Korea and security reassurance to the USA, Japan, and South Korea (Christensen, 2005Christensen, T. J. (2005). Have old problems trumped new thinking? China's relations with Taiwan, Japan, and North Korea. China Leadership Monitor14, 1–10. [Google Scholar]; Song, 2011Song, J. (2011). Understanding China's response to North Korea's provocations. Asian Survey51(6), 1134–1155.[Crossref][Web of Science ®][Google Scholar]). More specifically, Beijing's coercive economic diplomacy ought to be just enough to curb Pyongyang's behavior, but not to push Pyongyang too hard to the brink of regime collapse.

Starting in 2017, North Korea has conducted nuclear tests and missile tests repeatedly, and the rising tension on the peninsula posed challenges to China and the United States. In February, China announced a ban on coal imports from North Korea, which would last for the rest of the year. Several North Korean cargo ships, most fully laden, were heading back home, and China's embargo was in accordance with UN resolution last year (Reuters, 2017bChina says enforcing North Korea coal ban seriously, no violation. (2017b, April 21). Reuters[Google Scholar]). In response to North Korea's escalation, US Sectary of State Rex Tillerson confirmed that China threatened to impose sanctions on North Korea. He said ‘China has told the United States that it warned Pyongyang it would impose sanctions actions ‘on their own’’ (Reuters, 2017aChina warned North Korea of sanctions after any nuclear test: Tillerson. (2017a, April 12). Reuters[Google Scholar]). However, when asked about Tillerson's statement, Chinese Foreign Minister Spokesman Geng Shuang refused to reveal what actions China might take if North Korea conducts a new missile test. Specifically, he asked the UN meeting should not ‘fixate’ on new sanctions against North Korea (Reuters, 2017cU.S. says ‘major conflict’ with North Korea possible, China warns of escalation. (2017c, April 28). Reuters. ).

In conclusion, China's silence on its economic measures toward North Korea represents a careful calculation for national interests and its concern for international reputation (Nanto, Manyin, & Dumbaugh, 2010Nanto, D., Manyin, M., & Dumbaugh, K. (2010). China–North Korea relations (CRS Report for Congress). Washington, DC: Congressional Research Service. [Google Scholar]; Swaine, 2009Swaine, M. D. (2009). China's North Korea dilemma. China Leadership Monitor30, 1–27. [Google Scholar]). More specifically, Beijing knows that failing to play a constructive role might render its reputation vulnerable, because the international community relies on China to rein in Pyongyang. If China's attempt to apply leverage ever fails to compel North Korea, then provocative actions by North Korea such as missile tests might put China in a negative and embarrassing position.

Japan: rare earth materials and the WTO disputes

In September 2010, the Japanese government arrested a Chinese captain and his crew when their fishing boat collided with a Japanese Coast Guard vessel nearby the disputed Senkaku islands. When Japan decided to put the captain in jail under domestic law rather than deport him to China, Beijing responded strongly. Chinese Premier Wen Jiabao publicly demanded in a UN general assembly meeting that the Japanese government release the captain, and he claimed that further action would be taken if Japan did not comply (The New York Times, 2010cBlock in minerals called threat to Japan's economy. (2010c, September 28). The New York Times[Google Scholar]). This fishing incident soon became the headlines for media coverage from both counties.

Although the Democratic Party of Japan is considered more accommodating to China than Japan's other parties, Prime Minister Kan Naoto admitted that the government's handling of this incident had caused diplomatic frictions with China (Przystup, 2011Przystup, J. J. (2011). Japan-China relations: Looking for traction. Comparative Connections13(1), 119. [Google Scholar], p. 2). Strong domestic pressure certainly contributed to Beijing's harsh response to Japan and its restriction on the export quota of rare earth materials. However, there is a dispute over whether these quotas were directly linked to the arrest of the Chinese captain. According to Thomas Christensen's observation, political elites felt the urge to react assertively to uphold the sovereignty and national interests (Christensen, 2015Christensen, T. (2015). The China Challenge: Shaping the choices of a rising power. New York, NY: WW Norton. [Google Scholar], p. 258). The halt of Chinese shipping of crucial industrial materials did indeed pose a threat to Japan's economy. As Banri Kaieda indicated:

The custom agents were still not allowing shipments of rare earths to Japan…The de facto ban on rare earths export that China has imposed could have a very big impact on Japan's economy. We need to restore Japan – China ties, especially economic exchanges, as soon as possible. (The New York Times, 2010cBlock in minerals called threat to Japan's economy. (2010c, September 28). The New York Times[Google Scholar])

On the other hand, according to Iain Johnston's in-depth study, China's quotas in rare earth materials can be considered as a special case, because the economic sanctions were threatened but not imposed. By carefully examining Japan's import data before and after the territorial disputes, Johnston finds that there was little evidence in support for such embargo from August to December 2010 (2013Johnston, A. I. (2013). How new and assertive is China's new assertiveness ? International Security37(4), 7–48.[Crossref][Web of Science ®][Google Scholar], p. 23–28). Under the increasing tensions with China, the Japanese media and experts could have over-estimated the effect and misinterpreted the relatively small amount of decline in rare earth material (The New York Times, 2010cBlock in minerals called threat to Japan's economy. (2010c, September 28). The New York Times[Google Scholar]). Still, interviews with Chinese foreign officers revealed that the top Chinese leadership informally instructed local customs officials to delay rare earth materials exports to Japan until the political dispute was resolved (Reilly, 2013Reilly, J. (2013). China's economic statecraft: Turning wealth into power. Syndey, Australia: Lowy Institute for International Policy. [Google Scholar]).

However, China told a different story to others, and Prime Minister Wen Jiabao denied any regulations on rare earth exports. More specifically, when delivering a public speech at a China-European Union meeting, Premier Wen assured political and business leaders. He said:

China is not using rare earth as a bargaining chip…We aim for the world's sustainable development. It is necessary to exercise management and control over the rare earth industry, but there won't be any embargo. What we pursue is to satisfy not only domestic demand but also the global demand for rare earth. (The New York Times, 2010cBlock in minerals called threat to Japan's economy. (2010c, September 28). The New York Times[Google Scholar])

Whether or not a hard embargo on rare earth metals was actually instituted, it is fair to infer that the negative impacts on Japan's economy caused by an embargo and China's firm stances on the political disputes led Japan's compromise to release China's captain (Asahi, 2010Japan felt the diplomatic pressure when China suspended rare earths exports in the Senkaku issue. (2010, September 23). Asahi. ; Nikkei, 2010Japan-China Foreign Ministers' Meeting, China: ‘Don't bargain at rare earth materials’. (2010, October 29). Nikkei. ).

On a broader level, China's export quotas on rare earth materials created worries for other countries. For example, the Obama administration described China's move as a ‘wake-up call,’ as the United States, the European Union, and Japan filed a complaint against China at the World Trade Organizations (The Wall Street Journal, 2015China ends rare-earth minerals export quotas. (2015, January 5). The Wall Street Journal. [Google Scholar]). In 2014, the Dispute Settlement Panel ruled against China in the case and urged that it put an end to the disputes. According to the official documents issued by the World Trade Organization (WTO) panel, all the panelists reviewing this disputes held that ‘‘conservation’ does not allow Members to adopt measures to control the international market for a natural resource, which is what the challenged export quotas were, in the view of the Panel, designed to do’ (WTO, 2014World Trade Organization. (2014). WTO dispute settlement 431: China – measures related to the exportation of rare Earths, Tungsten and Molybdenum, summary of key findings. Retrieved fromhttps://www.wto.org/english/tratop_e/dispu_e/cases_e/ds431_e.htm [Google Scholar]).

Although China put an end to such export quotas after losing the case at the WTO, its foreign reputation was negatively affected. China's claims for environmental protection, plant, and human safety – the reasons for such export restrictions – were not justified, as the quotas were against the principle of ‘non-discrimination’ of the WTO obligations. Rather, according to the Western media, China's quotas on rare earth metals were aimed at gaining the advantage for domestic industries and driving up prices (BBC News, 2015China scraps quotas on rare earths after WTO complaint. (2015, January 5). BBC News. [Google Scholar]). China's seemingly noble justifications for a restriction on export quotas turned out to be perceived negatively by the West and the WTO as a foreign policy tool to gain more national interests. In this sense, China's use of rare earth materials against Japan created mixed results of short-term and long-term consequences. For example, a public opinion survey conducted by the Japanese think tank indicated that 63.1% of the Japanese respondents agreed that the territorial disputes had affected economies for both China and Japan.22. Genron NPO. (2014). The 10th Japan–China Public Opinion Poll – Analysis Report on the Comparative Data. Full text available from http://www.genron-npo.net/en/pp/docs/10th_Japan-China_poll.pdfView all notes China might have taught Japan a lesson by showing how vulnerable its economics could be, but China also suffered great loss from ‘losing face’ in the international organizations.33. Interview with University Professors in May 2016.View all notes

The Philippines: trade restrictions on banana imports

With heightened tensions in the South China Sea, China's rapid growth of naval force and its assertive stances have caught much attention among Southeast Asian countries and the United States. This section examines China's use of economic measures against the Philippines in the territorial disputes, specifically, the stand-off between the two countries over the Scarborough Shoal in 2012.

When both countries dispatched naval vessels surrounding the Scarborough Shoal in April 2012, the probability of military conflict significantly increased. In May, the Chinese government imposed trade restrictions on the Philippines bananas, claiming that there were pests found in its banana imports. Most of the banana growers and exporters were suspicious about China's quarantine, because no such restriction had happened in the last decades.44. ‘In Philippines, banana growers feel effect of South China Sea dispute,’ The Washington Post, June10 2012. More importantly, Stephen Antig, president of the Pilipino Banana Growers and Exporters Association, claimed that ‘the Scarborough Shoal issue may be viewed as political, but it could have a devastating effect on trade relations between the country and China.’ For a detailed coverage, see ‘Banana industry fears loss of China trade over Scarborough row,’ Philippine Inquirer, May 7 2012.View all notes At the same time, China's International Travel Service, a large government-run travel agency, was suspending trips to the Philippines on grounds of safety (BBC News, 2012China travel agencies suspend Philippine tours. (2012, May 10). BBC News. [Google Scholar]).

Although Beijing never admitted these punitive measures were about the territorial disputes in Scarborough Shoal (aka Huangyan Island in Chinese), China's official responses elusively pointed to such linkage. For example, Tong Xiaolong, the Chinese ambassador to the ASEAN, indicated that ‘if the Huangyan Island situation keeps developing, bilateral ties, including the trade relationship, will surely be affected’ (China Daily, 2012China-Philippines trade may be affected – experts. (2012, May 14). China Daily[Google Scholar]; The Manila Times, 2013PH-China disputes ‘temporary setback’. (2013, July 6). The Manila Times. ). China's Vice Minister of Foreign Affairs, Fu Ying, also made a strong statement amid the escalating tensions, as she said to the chief Filipino diplomat in Beijing that Manila was ‘severely damaging the atmosphere of the bilateral relations between China and the Philippines’ (The New York Times, 2012Dispute between China and Philippines over Island becomes more heated. (2012, May 10). The New York Times. ). The Chinese Foreign Minister also indicated that ‘the Philippines should take practical steps to promote a healthy atmosphere and to secure cooperation’ (Reuters, 2012Philippines seeks new markets amid sea dispute with China.(2012b, May 17). Reuters. ).

Domestic pressure heightened as China's use of economic leverage impacted both the Philippines’ agricultural and tourists industries. There was controversy concerning whether both sides truly agree to settle this dispute. Recent official statements from the Philippines diplomat revealed that China reneged on that deal by refusing to withdraw its ships when the Philippines did (Associated Press, 2016Philippine diplomat to China: Don't turn shoal into island.(2016, April 13). Associated Press. ). Although there were reasonable bases for the Philippines to believe that China had used economic sanctions, President Aquino was still quite puzzled about China's intentions. Specifically, he described that foreign relations with China were confusing and went from ‘hot to cold.’ He said:

“At the end of the day, it goes from hot to cold, sometimes they're very conciliatory, sometimes they make very provocative statements,” he said. “We will confess we don't understand some of the messages sometimes. We're not sure.” (The New York Times, 2014Philippines concerned about China, leader says. (2014,September 23). The New York Times. )

Whether China will use similar economic sanctions toward other claimant countries in the South China Sea disputes remains to be seen, as these countries have different threat perceptions toward China. They might also hold different stakes in upholding their territorial claims.55. Interviews with China's experts in May 2016.View all notes Nevertheless, China's assertiveness and coercive measures against the Philippines raised suspicion among other claimant countries about China's commitment to solving the territorial disputes peacefully.

Assessment of China's coercive economic diplomacy

In the case of territorial disputes with the Philippines and Japan, Beijing had to credibly threaten to defend its claims without at the same time suggesting to other Asian countries that China would destabilize the regional order. When dealing with North Korea, Beijing needed to deter Pyongyang from changing the regional order, so that Beijing could maintain its credibility in arms controls. Admittedly, handling these political issues was no easy task, given the complicated nature of the maritime and nuclear disputes. Moreover, a domestic politics perspective may explain why there are significant constraints for a rising China to implement coercive policies. For example, China's manufacturing and private sectors were also suffering loss, and they might not fully support Beijing’ economic sanctions abroad. Chinese officials also needed to put significant effort into coordinating bureaucracies, state-owned companies, and media to execute a set of economic sanctions (Reilly, 2013Reilly, J. (2013). China's economic statecraft: Turning wealth into power. Syndey, Australia: Lowy Institute for International Policy. [Google Scholar], p. 9–11). This study admits that such administrative difficulties can lead to mixed results for China's coercive diplomacy. Nevertheless, Beijing's concerns for its image also play a crucial role in constraining its coercive measure.

China's effort in maintaining a peace-loving image might be offset due to the negative perceptions arising from these disputed issues. Recent survey data from Japan and the Philippines both point to an increasing ‘less favorable’ impression on China among respondents. For example, a China–Japan joint public opinion survey showed that 54.6% of the Japanese respondents ‘wish to have peaceful coexistence and co-prosperity [with China], but are not sure if it will be realized.’66. Refer to endnote 2.View all notes A public poll conducted by Social Weather Station, a Philippines research institute, concluded that the perception of China had turned significantly negative in May 2012 (Social Weather Station, 2012Social Weather Station. (2012). Second quarter 2012 social weather survey: Net trust in China a bad -36; 48% of Filipinos closely followed the Philippines-China Scarborough shoal stand-off. [Google Scholar]).

Therefore, it is challenging for Beijing to execute coercive diplomacy to protect China's national interests without appearing to China's neighbors to be assertive and threatening. The successful execution of coercive diplomacy lies in carefully blending credible threats with assurances about the limited purposes of those threats.

In order to maintain stability in Northeastern Asia, China's economic leverage serves as both deterring and warning signals to North Korea. The halts of energy supplies have put pressure on North Korea to think twice about its nuclear ambitions and provocative behavior. China's coercive diplomacy was never meant to be a drastic measure unless the North was completely hostile to China (International Crisis Group, 2013International Crisis Group. (2013). Fire on the city gate: Why China keeps North Korea close (Asia Report No. 254). [Google Scholar], p. 10).

In the case of the Philippines, China's stricter inspection and quarantine served as a warning to the Aquino administration. For instance, one Chinese scholar pointed out that ‘Beijing's move was convenient to operate; it could test the reaction from the Philippines before economic sanctions are introduced. The fruit rotting due to the lengthy inspections certainly causes significant losses for exporters’ (China Daily, 2012China-Philippines trade may be affected – experts. (2012, May 14). China Daily[Google Scholar]). China's active territorial claims and rapid modernization of naval forces created worrisome feelings among its neighbors about China's more assertive stances in regional affairs. The feeling of uncertainty among the Philippines public can also be observed through survey data. Starting from 210 till 2012, there are relative changes on the level of public trust among China, the United States, Australia, and Japan. For example, with regard to China, most of the Philippines publics have higher trust in the United States, Australia, and Japan (Social Weather Station, 2012Social Weather Station. (2012). Second quarter 2012 social weather survey: Net trust in China a bad -36; 48% of Filipinos closely followed the Philippines-China Scarborough shoal stand-off. [Google Scholar]). Eventually, the Philippines government decided to settle the territorial disputes with China under international law. The Permanent Court of Arbitration began hearing a case proposed by the Philippines in July 2015, but so far the Chinese government has refused to take part in the settlement process (The Economist, 2015Big motherland: China's principle of non-interference may not apply when ethnic Chinese are concerned. (2015, October 10). The Economist[Google Scholar]). Internationalizing this bilateral dispute under a legal framework is certainly a suboptimal outcome as far as China is concerned.

The evaluation of China's coercive diplomacy toward Japan also points to the different time frame in assessing the consequences. In the short term, Beijing seemed to win, as Japan apologized and sent back the Chinese captain. However, its export quotas on rare earth materials backfired in the long term. The United States, EU, and Japan jointly filed a complaint at the WTO which caught worldwide attention and China ended up losing this case.

Furthermore, China's assertiveness and its export quotas on rare earth materials impact current US–China relations, because China's coercive diplomacy deepened the security dilemma in East Asia. Amid the heightened tension of this dispute, the US assured Japan of its security commitment in deterring potential conflicts with China, because the Senkaku Islands and the adjacent waters are included in the US–Japan Security Treaty. More specifically, the United States supported Japan's stance in this event, as US Secretary of Defense Robert Gates and the Chairman of the Joint Chiefs of Staff, Michael Mullen, affirmed that the United States would ‘remain its commitment to the region and fill its alliance responsibilities’ (U.S. Department of Defense, 2010U.S. Department of Defense. (2010, September 23). DOD News briefing with secretary gates and Adm. Mullen from the Pentagon. [Google Scholar]).

The tightened US–Japan security alliance inevitably made China more alert toward a possible future conflict with Japan, whether in the Taiwan Straits or the East China Sea.77. Amid the tensions of territorial disputes and quota on rare earth materials, the Japanese publics are more aware of China's assertiveness and use of economic leverage. For example, in a public opinion poll conducted by Yomiuri Shimbun, 71% of the respondents agreed that Japan ‘should deepen its alliance with the U.S.’ to address its security concerns. Yomiuri Shimbun, October 2010 Telephone Public Opinion Poll. Data available from: http://www.mansfieldfdn.org/backup/polls/2010/poll-10-31.htmView all notes When this incident came to an end, the United States once again reassured Japan of its commitment to defend ‘the principle of freedom of navigation’ and sought to ‘encourage China's responsible and constructive role in regional stability and prosperity.’88. ‘Toward a Deeper and Broader U.S.-Japan Alliance: Building on 50 Years of Partnership,’ June 21 2011. It is a joint statement by top government officials from both countries, including Secretary of State Hillary Clinton, Secretary of Defense Robert Gates from the United States, Minister for Foreign Affairs Takeaki Matsumoto, and Minister of Defense Toshimi Kitazawa from Japan. Full text available through http://www.state.gov/r/pa/prs/ps/2011/06/166597.htmView all notes The Senkaku issue and the rare earth material embargo increased the mutual distrust between China and Japan, and it also strengthened the ‘China threat’ among domestic political discourse (Nagy, 2014Nagy, S. R. (2014). Nationalism, domestic politics, and the Japan economic rejuvenation. East Asia31(1), 5–21.[Crossref][Google Scholar]). So far, China's coercive economic statecraft toward its neighbors has created mixed results of success and failure in different time frames. The gaps between China's peaceful development discourse and unacknowledged economic sanctions point to the binding effects of China's assurance rhetoric and how its neighbors interpret China's intentions.

On a broader level, the fact that China is frequently flexing its economic muscle to achieve political goals certainly carries significant strategic implications for the United States and its Asian allies. The mixed results showed that China's coercive economic diplomacy has not been consistent with its grand strategy, and they are mostly treated as ways to achieve immediate political goals. China's economic statecraft will be more successful if it can be incorporated into China's image-building of a responsible and peace-loving country in the international community.99. Interview with China's experts, May 2016.View all notes

Finally, the assessment of China's coercive economic diplomacy toward these three countries leads to the comparison between China and other countries. If the United States, Russia, and others throughout the world are equally aware of their reputation abroad, then why they do not execute their coercive diplomacy the same way as China does? In other words, why do these countries not make implicit or ambiguous statements when executing coercive measures? The main differences between China and others lie in the nature of the political disputes and China's greater interdependence with Asian countries. More specifically, the political incidents that led to China's economic sanctions toward its neighbors are parts of the on-going territorial disputes (Japan and the Philippines) and long-existing nuclear weapon controls (North Korea) in East Asian politics. These political issues cannot be resolved anytime soon, and Beijing decided to opt for an immediate way to further its national interests: a combination of economic sanctions that are favorable to China and ambiguous responses for the coercive measures in order to quickly restore foreign relations with the targeted countries after the incidents.

Beyond Asia: Norway's Nobel Peace Prize in 2010

This research has policy implications in East Asia politics and beyond. For example, Beijing has imposed selected trade restrictions on Norway in response to the awarding of a Nobel Prize to Chinese dissident Liu Xiaobo in 2010 (The Diplomat, 2014Soul or Salmon? Norway's Chinese Dilemma. (2014, May 9). The Diplomat. ). Moreover, China's implicit response for such a linkage is getting more attention from the West. Before the award ceremony, Geir Lundestad, the head of the Norwegian Nobel Institute, indicated that a senior Chinese official had warned him that awarding the peace prize to Liu ‘would affect relations between Oslo and Beijing (BBC News 2010).’ After the announcement of Liu as the prize recipient, Beijing attempted to prevent the representatives of Japan and European countries from attending the ceremony (Reuters, 2010aChina asks Japan not to attend Nobel peace award. (2010a,November 9). Reuters[Google Scholar]). Specifically, China's Vice Foreign Minister, Cui TianKai, made a quite strong statement that threatened a troubled China–Norway relation ahead. He publicly stated:

The choice before some European countries and others is clear and simple: do they want to be part of the political game to challenge China's judicial system or do they want to develop a true friendly relationship with the Chinese government and people in a responsible manner?… If they make the wrong choice, they have to bear the consequences. (Reuters, 2010aChina asks Japan not to attend Nobel peace award. (2010a,November 9). Reuters[Google Scholar])

After the awarding of Nobel Peace Prize, Norway soon experienced a fall on salmon exports to China starting in January 2011, as the Chinese government imposed stricter inspections on Norwegian salmon. The rotting salmon at Chinese warehouses led to a significant decrease of Norway's export from 1000 tons in December 2010 to 75 tons in February 2011.1010. Alf-Helge Aarskog, chief executive of Marine Harvest, one of the major salmon exports companies in Norway, admitted the link between the Nobel Prize and sanction on salmon exports. He said: ‘It is no secret that declining sales in China are connected to the Nobel Peace Prize. This is a difficult political situation between Norway and China, and not something that can be solved by the industry.’ For a detailed coverage, see ‘Norway sees Liu Xiaobo's Nobel Prize hurt salmon exports to China,’ Financial Times, August 5 2013. ‘A year after Nobel, Norwegian salmon off the menu in China,’ Agence France-Presse, October 5 2011. For original language source, see ‘Fredsprisen ødela for norsk laks i Kina.’ https://www.nrk.no/nordland/mener-dette-odela-for-norsk-laks-i-1.11183004View all notes Similar to China's refusal of sanctions toward Asian countries, China's stance toward Norway sent out a clear message toward the Western countries that it can exert economic leverages beyond Asia. When China and Norway normalized bilateral relations in 2017, Norway's salmon export to China is expected to resume very soon (Reuters, 2017dNorway signs deal to help resume salmon exports to China.(2017d, May 23). Reuters. ).

Conclusion

As China's tools of economic statecraft are diverse and increasingly frequent, ranging from a termination of energy supply, a suspension of export materials, and trade restrictions on import goods, a systematic understanding of the strategic nature of China's foreign policy is indeed an important research topic for both academia and policy worlds.

The findings of this study have significant implications for policy and theory, as they strongly suggest that the current consensus among pundits and policy-makers about the China's economic threat is exaggerated. Contrary to the conventional belief that China's economic leverage is a powerful tool, China's leaders are discovering that economic coercion is not a magic bullet to gain concessions in all circumstances. The tensions between China's status-quo foreign discourse and its coercive diplomatic measures offer a way of thinking about foreign policy objectives, the effectiveness of economic sanctions, and China's image management strategy.

The ramifications for the scholarship are also important, as future research on Chinese foreign policy and economic statecraft should devote more effort in finding the ‘ambiguous use’ of economic measures and the negative consequences to sanctioners’ reputations even of quiet sanctions. Scholars in political economy have pointed out that when well-chosen ‘sanctions were threatened but not imposed,’ they have had effects as strong as those of actual sanctions (Hirschman, 1980Hirschman, A. O. (1980). National power and the structure of foreign trade (Vol. 105). Berkeley, California: University of California Press. [Google Scholar]; Lacy & Niou, 2004Lacy, D., & Niou, E. (2004). A theory of economic sanctions and issue linkage: The roles of preferences, information, and threats. The Journal of Politics66(1), 25–42.[Crossref][Web of Science ®][Google Scholar]; Morgan, Bapat, & Krustev, 2009Morgan, T. C., Bapat, N., & Krustev, V. (2009). The threat and imposition of economic sanctions, 1971—2000. Conflict Management and Peace Science26(1), 92–110.[Crossref][Web of Science ®][Google Scholar]). Figure 1 summarizes the pattern of China's coercive diplomacy. Columns 1–4 represent different end-results and paths of development. The threat of sanctions is also an integral part of assessing the effectiveness of economic sanctions.

Figure 1. The use of economic sanctions against the targeting states.

Display full size

 

More specifically, China's economic sanctions over the Philippines were confirmed by media coverage from both sides, even though the Chinese government refused to associate the trade restriction to the territorial disputes. The Philippines navy soon withdrew from the disputed waters to avoid further escalation.

In Japan's case, China's export quotas were threatened but never imposed, or executed prior unrelated to this dispute, calls into the need for better measurement of the effectiveness economic sanctions. To the extent of the secrecy of North Korea's politics and limited media coverage, the duration and validity of China's energy leverage over North Korea await more official documents available from both parties. In Norway's case, the Nobel Institute did not change its decision despite China's warning prior to the ceremony. Norway indeed experienced a drop in salmon export to China afterward.

Moreover, China's refusal in admitting the linkage between coercive measures and political disputes with the targeting states points to future work in the measurement of sanction effectiveness, since China as the coercing state is particularly aware of the negative image associated with the sanctions. This study promotes extended thinking about China's management of image and provides perspective on how China's economic statecraft impacts its reputation in Asia and beyond. For example, in preventing the possible collapse of the North Korea regime and its desperate provocation in the near future, Beijing can combine its coercive economic diplomacy with other policy options at the same time. China can establish a channel of communication with the United States, South Korea, and possibly Japan to exchange information under crisis circumstances in the Korean peninsula (Plant & Rhode, 2013Plant, T., & Rhode, B. (2013). China, North Korea and the spread of nuclear weapons. Survival55(2), 61–80.[Taylor & Francis Online][Web of Science ®][Google Scholar]).

Finally, the ambiguous responses from Beijing also call into questions about China's leadership in Asia, as the inconsistency between its rhetoric and behavior may increase the threat perceptions of the smaller countries that are dependent on China's economy. How much China can exert its regional influences hinges on not only its economic development, but also on how China execute economic statecraft in a consistent way between its discourse and grand strategy.

China's peaceful rise discourse does not necessarily contradict China's economic statecraft, so long as Beijing can carefully formulate its strategy with deterrence and assurance at the same time. China's positive foreign reputation should be both supported by image-management strategies and its clever use of economic capabilities. Even though this study focuses on China's coercive economic statecraft in East Asia, it can further examine China's grand strategy and its reputation in a broader context. More specifically, future research on Chinese foreign policy and security studies can devote more effort in investigating under what conditions China's coercive measures can be more effective than others. Future works can also look into how Beijing maintains its image of a peace-loving power given its increasing capabilities vis-à-vis its Asian neighbors. An international aspect of China's foreign narratives and behavior cannot be ignored when accounting for China's statecraft in Asia and beyond.

Acknowledgments

I thank Dr. Andrew Bennett from Georgetown University and two anonymous reviewers for their helpful comments. I also gracefully acknowledge the generous research support from China and the World Program at Princeton University.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. His ‘24 character strategy’ informed later Chinese leaders to ‘observe calmly; secure our position; cope with affairs calmly; hide our capabilities and bide our time; be good at maintaining a low profile; never claim leadership.’

2. Genron NPO. (2014). The 10th Japan–China Public Opinion Poll – Analysis Report on the Comparative Data. Full text available from http://www.genron-npo.net/en/pp/docs/10th_Japan-China_poll.pdf

3. Interview with University Professors in May 2016.

4. ‘In Philippines, banana growers feel effect of South China Sea dispute,’ The Washington Post, June10 2012. More importantly, Stephen Antig, president of the Pilipino Banana Growers and Exporters Association, claimed that ‘the Scarborough Shoal issue may be viewed as political, but it could have a devastating effect on trade relations between the country and China.’ For a detailed coverage, see ‘Banana industry fears loss of China trade over Scarborough row,’ Philippine Inquirer, May 7 2012.

5. Interviews with China's experts in May 2016.

6. Refer to endnote 2.

7. Amid the tensions of territorial disputes and quota on rare earth materials, the Japanese publics are more aware of China's assertiveness and use of economic leverage. For example, in a public opinion poll conducted by Yomiuri Shimbun, 71% of the respondents agreed that Japan ‘should deepen its alliance with the U.S.’ to address its security concerns. Yomiuri Shimbun, October 2010 Telephone Public Opinion Poll. Data available from: http://www.mansfieldfdn.org/backup/polls/2010/poll-10-31.htm

8. ‘Toward a Deeper and Broader U.S.-Japan Alliance: Building on 50 Years of Partnership,’ June 21 2011. It is a joint statement by top government officials from both countries, including Secretary of State Hillary Clinton, Secretary of Defense Robert Gates from the United States, Minister for Foreign Affairs Takeaki Matsumoto, and Minister of Defense Toshimi Kitazawa from Japan. Full text available through http://www.state.gov/r/pa/prs/ps/2011/06/166597.htm

9. Interview with China's experts, May 2016.

10. Alf-Helge Aarskog, chief executive of Marine Harvest, one of the major salmon exports companies in Norway, admitted the link between the Nobel Prize and sanction on salmon exports. He said: ‘It is no secret that declining sales in China are connected to the Nobel Peace Prize. This is a difficult political situation between Norway and China, and not something that can be solved by the industry.’ For a detailed coverage, see ‘Norway sees Liu Xiaobo's Nobel Prize hurt salmon exports to China,’ Financial Times, August 5 2013. ‘A year after Nobel, Norwegian salmon off the menu in China,’ Agence France-Presse, October 5 2011. For original language source, see ‘Fredsprisen ødela for norsk laks i Kina.’ https://www.nrk.no/nordland/mener-dette-odela-for-norsk-laks-i-1.11183004

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