CWP Alumni Chi-hung Wei reviews William Norris new book - From Wealth to Power: State-Business Relations and Chinese Economic Statecraft

Tuesday, Nov 14, 2017

While United States economic engagement with China has received considerable scholarly attention since the mid-1990s (e.g., Wei 2015), little work has examined China's use of economic instruments as a foreign policy tool. While China's (potential) use of military force has been the subject of academic inquiry (e.g., Fravel 2007/08), much less attention has been given to the economic dimensions of China's grand strategy.

William Norris's Chinese Economic Statecraft fills the gap. The book is a timely contribution not only because economic statecraft has featured prominently in Chinese foreign policy since the 1980s but primarily because Beijing has recently proposed the establishment of a “new silk road economic belt” and “the 21st century maritime silk road” as means of creating a Sino-centric regional order. The book offers useful insights not only for those interested in economic statecraft and international political economy but also for scholars and policymakers who are concerned about the implications of Beijing's “dollar diplomacy” for the regional or global balance of power.

How well is China able to wield its rising economic capabilities? The literature has suggested two opposing views: one, that China is still a communist country and therefore capable of marshalling its wealth for strategic objectives and the other, that economic reform and globalization have weakened Beijing's ability to control business communities. Norris, by contrast, argues that one can neither assume state capabilities nor overestimate societal autonomy. He focuses on state-business relations and examines five factors crucial for state control (or lack thereof) over commercial actors: (1) goal compatibility or conflict between policymakers and businesses; (2) the number of commercial actors; (3) bureaucratic division or unity; (4) whether commercial actors are state-owned; and (5) the relative distribution of resources between the state and businesses.

Norris's focus on state-business relations is innovative. The economic statecraft literature does explore state-society relations, but much attention is paid to how the target state mobilizes societal groups to adjust its economic structures or to “rally around the flag” (e.g., Wei 2013). Norris, by contrast, shifts attention to sender countries and thus suggests a broader application of state-society relations to the study of economic statecraft. Indeed, President Bill Clinton's 1994 decision to delink human rights conditions from China's most-favored-nation status was largely attributed to America's pluralist form of state-business relations, in which policymaking was penetrated by business lobbying.

Norris examines three areas of Chinese economic statecraft: the global search for strategic raw materials, sovereign wealth funds, and economic engagement with Taiwan. These three areas involve different forms of exchange: investment, finance, and trade. Each also involves different commercial actors: state-owned enterprises, economic officials, and private-sector Taiwanese firms. This research design is persuasive, as it offers a systematic account of how economic statecraft operates via different forms of exchange and actors. Equally persuasive is Norris's case selection strategy. Each area includes both the success and failure of state attempts to control commercial actors. Other things being equal, the five factors shaping state-business relations determine the degree of state control. For the reader's convenience, Norris summarizes causal relations through tables and figures in each chapter.

The way Norris conceptualizes economic statecraft is problematic, however. First, economic statecraft was traditionally referred to as sanctions during the Cold War, given that sanctions constituted the bulk of economic statecraft. Indeed, David Baldwin's Economic Statecraft (1985) primarily analyzed sanctions. Since the 1990s, however, engagement has become an important part of international politics, although sanctions remain active (Mastanduno 1998, 844−50). It is in this context that Chinese Economic Statecraft focuses primarily on China's growing economic involvement in foreign countries. However, while Baldwin's association of economic statecraft with sanctions was contextually reasonable, it is currently inappropriate to equate economic statecraft with engagement, given that (Chinese) economic statecraft includes both negative and positive forms.1 Norris's definition of economic statecraft as “the state's intentional manipulation of economic interaction” (13) is ambiguous about what kinds of manipulation, negative or positive, are under investigation.

Second, resource extraction and sovereign wealth funds seem to fit within foreign economic policy rather than economic statecraft. Scholars of sanctions have traditionally asked whether sanctioners can coerce the target into compliance. Similarly, scholars of engagement have analyzed whether the extension of carrots can coax the target to cooperate. Indeed, Norris offers an excellent analysis of how China proffers economic inducements to Taiwanese people in order to moderate their pro-independence stances. In the other two cases, however, he discusses how Beijing satisfies its demands for energy security and boosts its global investments in real and financial assets. While these two economic activities serve national interests, what is missing in Norris's analyses is an explicit target, like Taiwan, which Beijing attempts to influence. In scholarly analyses, raw materials investments and overseas purchases of assets are usually studied as cases of foreign economic policy (e.g., Krasner 1978). The difference between economic statecraft and foreign economic policy may be slight, but it is not clear why resource extraction, sovereign wealth funds, and China-Taiwan relations are lumped together as cases of economic statecraft.

Norris also overestimates the utility of Chinese economic engagement. He argues that carrots allow Beijing to establish a reputation as a responsible power and to assure other states that a rising China is not a threat. In the China-Taiwan case, he accordingly argues that China's efforts to buy off the Taiwanese have had the desired political results. However, one cannot overlook Taiwan's displeasure with the economic problems caused by China-Taiwan trade, including unemployment, inequality, and rising housing prices. The Taiwanese also fear that China's economic infiltration will have averse political consequences for Taiwan's democracy and de facto independence. In 2014, these factors produced a student movement that saw Taiwanese students occupy the legislature to oppose a trade agreement with China. In 2016, the pro-independence Democratic Progressive Party won the presidential election, an outcome contrary to Norris's argument about the success of China's Taiwan policy.

Chinese carrots have also backfired in Hong Kong, as evidenced by the 2014 “Umbrella Movement.” Similarly, China's economic presence in America has produced United States perceptions of China as a security threat (Nyman 2014). To the extent that Beijing is concerned about its image (Johnston 2008), carrots are counterproductive. Future research, I would like to suggest, could assess the image implications of Chinese carrots by applying Baldwin's conception of social power (1985). Scholars could also explore how Beijing legitimizes its economic expansionism to relevant audiences (e.g., Goddard 2008/09, 141−42). These two steps would offer a meaningful contribution to the small number of constructivist works on economic statecraft (e.g., Klotz 1995Wei 2015).

1

Cases of Chinese sanctions abound, including the export ban on rare earth minerals to Japan in 2010 and the travel ban on Chinese tourists to South Korea in retaliation for Seoul's deployment of the THAAD missile defense system in 2017.

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From Wealth to Power: State-Business Relations and Chinese Economic Statecraft

Norris William J. .2016 Chinese Economic Statecraft: Commercial Actors, Grand Strategy, and State Control - Ithaca, NY: Cornell University Press.  303p., $39.95 hardcover (ISBN: 978-0-8014-5449-3).

Chi-hung Wei International Studies Review, vix044, https://doi.org/10.1093/isr/vix044

Published: 07 November 2017