China’s Weaponization of Trade

Jul 26, 2017 Brahma Chellaney

China denies mixing business with politics, yet it has long used trade to punish countries that refuse to toe its line. But its leaders deploy their economic weapons carefully, to avoid disruption that could harm China’s own business interests.

NEW DELHI – China denies mixing business with politics, yet it has long used trade to punish countries that refuse to toe its line. China’s recent heavy-handed economic sanctioning of South Korea, in response to that country’s decision to deploy the Terminal High Altitude Area Defense (THAAD) anti-missile system, was just the latest example of the Chinese authorities’ use of trade as a political weapon.

China’s government has encouraged and then exploited states’ economic reliance on it to compel their support for its foreign-policy objectives. Its economic punishments range from restricting imports or informally boycotting goods from a targeted country to halting strategic exports (such as rare-earth minerals) and encouraging domestic protests against specific foreign businesses. Other tools include suspending tourist travel and blocking fishing access. All are used carefully to avoid disruption that could harm China’s own business interests.

Mongolia became a classic case of such geo-economic coercion, after it hosted the Dalai Lama last November. With China accounting for 90% of Mongolian exports, the Chinese authorities set out to teach Mongolia a lesson. After imposing punitive fees on its commodity exports, Chinese Foreign Minister Wang Yi voiced “hope that Mongolia has taken this lesson to heart” and that it would “scrupulously abide by its promise” not to invite the Tibetan spiritual leader again.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Already have an account? Log in

Support High-Quality Commentary

For more than 25 years, Project Syndicate has been guided by a simple credo: All people deserve access to a broad range of views by the world's foremost leaders and thinkers on the issues, events, and forces shaping their lives. At a time of unprecedented uncertainty, that mission is more important than ever – and we remain committed to fulfilling it.

But there is no doubt that we, like so many other media organizations nowadays, are under growing strain. If you are in a position to support us, please subscribe now.

As a subscriber, you will enjoy unlimited access to our On Point suite of long reads, book reviews, and insider interviews; Big Picture topical collections; Say More contributor interviews; Opinion Has It podcast features; The Year Ahead magazine, the full PS archive, and much more. You will also directly support our mission of delivering the highest-quality commentary on the world's most pressing issues to as wide an audience as possible.

By helping us to build a truly open world of ideas, every PS subscriber makes a real difference. Thank you.

Subscribe Now

A Life Lived in Truth PS OnPoint
Billy H.C. Kwok/Getty Images
Subscriber Exclusive

A Life Lived in Truth

Ma Jian examines the work and legacy of his friend and fellow dissident, the Nobel Peace Prize laureate Liu Xiaobo.

0
The Rebirth of the TPP
Saul Loeb/Getty Images

The Rebirth of the TPP

Koichi Hamada explains why the US is likely to regret pulling out of the Trans-Pacific Partnership.

2

new comment has been posted. new comments have been posted.

0 Comments on this paragraph, 11 Comments on this article

Madurai Padmanabhan Jul 31, 2017

This article while contextual fails to suggest a game plan.

While free trade played by rule of law, was never fair trade.; There are big winners and 'poor for a generations' losers.
BC highlights national conundrums, while grassroots realities in polities depending on treaties, such as the unsigned (thankfully) TPP have only shifted the wealth from the pockets of one ally to another. Why a club for the chosen few.
This planet is the property of all.

If China is breaking the rules and bullying, it is perhaps its way of getting a voice at the table,of the rule makers. Simple negotiation trick. Not to mention the psychological vindication for the humiliation suffered over a century at the hands of the mercantilist imperialists.

If others can use foreign policy ( with a very gracious connotation) to fulfill their national interest and claim exceptionaism, a visible and transparent bullying without the strategic manipulation of mass propaganda is perhaps easier to deal with.

In fact the saying , feeding a Monster only makes it stronger, is perhaps Chinese!
A new reply to this comment has been posted.
ROHIT CHANDAVARKER Jul 29, 2017

The Chinese propensity to display naked aggressive behaviour towards virtually every perceived wrong towards itself is consistent with its policy of bullying others into submission. Their outlook towards the world is 'my way or the highway'!
The possibility of stumbling over this arrogant streak might come in the form of India or the unravelling of the North Korea conundrum. The US is bound to impose secondary sanctions of Chinese businesses earning revenues from North Korea. This would rile the Chinese resulting in a bitter tussle between US & China. India has stood up to Chinese belligerence & bullying, so far, much to Beijing's displeasure, rather consternation. India's growing economy along with regional heft has unnerved the Chinese & one could expect the bully to ratchet up troubles for India in myriad ways, in order to stymie its progress. India's growing profile in Asia through its Act East policy, its closeness to US as a valued partner, its ties with Japan &most importantly, China's growing dependence on Indian market will make India that much harder a nut to crack unlike other nations. India's resolute stance on the Sikkim standoff might have unnerved the Chinese & is bound to force Beijing to refashion its ties with India.
Hence China's weaponisation of trade might face an Indian wall &/or Trump's unpredictable opprobrium.
- shanmugham anand Jul 31, 2017
  
  well said!
  A new reply to this comment has been posted.
A new reply to this comment has been posted.
j. von Hettlingen Jul 28, 2017

Brahma Chellaney accuses China of weaponsing its trade to achieve political goals. As the world's second largest economy, Beijing is aware of its clout and doesn't hestitate to use tools to inflict enormous costs on the targeted countries. "All are used carefully to avoid disruption that could harm China’s own business interests."
Nothing infuriates Beijing more than hosting Dalai Lama. China objects to foreign leaders meeting the exiled Tibetan spiritual leader, because they see him as a separatist. In December 2016 Mongolia bowed to Beijing's pressure following a visit by Dalai Lama a month earlier. Beijing imposed "punitive fees on its commodity exports," with Chinese Foreign Minister Wang Yi hoping that Mongolia had learned a lesson and that it would not to allow future visits by Dalai Lama. In 2015 Obama was criticised for meeting the spiritual leader, calling him a "good friend". Relations between China and Britian cooled, after Dalai Lama was given a warm reception in 2012.
Since the US deployed the Terminal High Altitude Area Defense (THAAD) system to South Korea to guard against North Korea's shorter-range missiles, it has drawn criticism from China, which claims the powerful radar can monitor its military activities. In retaliation Beijing launched a trade war that targeted South Korea’s tourism, consumer goods, and entertainment industries etc.
The recent death of China's most prominent dissient Liu Xiaobo hasn't prompted condemnation from world leaders, although Beijing refused to let Liu travel abroad for medical treatment. The international community is wary of China's "trade reprisals." After the 2010 Nobel Peace Prize was awarded to the jailed Liu, Norway's salmon exports to China "collapsed."
Countries like Japan and the Philippines that are embroiled in territorial disputes with China in the East and South China Seas have eqaully learned a hard lesson from Beijing. Their imports to China suffered, and Chinese travel agencies boycotted destinations to these countries. Other punitive actions range from restricting or boycotting imports from a "targeted country." As China produces more than 85% of the global supply of rare earths, it holds a trump card in trade, like halting export to countries that don't "toe its line."
What infuraites the author is China's "trade cudgel" against his country, India, following "the current Sino-Indian troop standoff at the border where Tibet, Bhutan, and the Indian state of Sikkim meet." Due to trade imbalance - Chinese exports to India are "more than five times higher" than imports - the author says China didn't cut trade ties, "which could invite Indian economic reprisals." Instead it "cut off Indian pilgrims’ historical access to sacred sites in Tibet." He resents the US for helping Beijing develop "its trade muscle" and playing "a key role in China's economic rise by shunning sanctions and integrating it into global institutions."
It's not true that the US "has the heft to hit back hard" should China decide to punish Washington for deploying the THAAD to South Korea. Beijing holds trillions of dollars in US debt and Trump has limited options "to end China’s free ride on trade" and take actions against a country he calls "a trade cheater." A disruption of trade with China could lead to massive price increases in the low-cost products, on which many Americans rely.
It saddens the author that "Trump is helping make China great again," like shelving the Trans-Pacific Partnership (TPP) and reducing the US presence in the Asia-Pacific region. He urges the international community not to endorse "China’s weaponization of trade" and hopes that "a concerted international strategy," would revive the TPP and compel China’s leaders "to play by the rules." It remains to be seen how long the current political system in China sustains. For the moment its most powerful weapon is trade. But money can only buy China so much, the rest is about winning the hearts and minds of the international community.
A new reply to this comment has been posted.
Steve Hurst Jul 27, 2017

This is as old as the hills
A new reply to this comment has been posted.
Stan Sorscher Jul 27, 2017

1. China was not in TPP
2. TPP expanded rules that shifted US domestic manufacturing to China.
3. TPP's failed neoliberal approach is exactly the weakness that China has exploited so successfully.
4. If the US wants to rediscover its national interest and pursue it, then we would drop TPP like a hot potato.
A new reply to this comment has been posted.
Ariel Tejera Jul 26, 2017

In October 1949, Mao and the PRC entered Beijing and established Communist China (while the USSR suitably entertained the West powers with the Berlin siege, and with a first atom bomb test). That tilted the balance of power to the Communist side, overall. However, in 1972, Nixon ably turned the tables and pulled the PRC to integrate with Capitalist economies (in a decades-long process), perhaps himself convinced that such a thing would never really work, but would certainly weaken the USSR. Alas, what do you know ... it worked.

And now we have a Communist China with a capitalist-state-driven massive economy, somehow becoming more competitive than traditionally Capitalist nations .. what do you know.
- Carlos De Souza Jul 30, 2017
  
  China is not Communist but Dictatorial. Any editor referring to China as Communist China is outdated. Instead the reference should be to Dictatorial China.
  A new reply to this comment has been posted.
A new reply to this comment has been posted.
Marc Laventurier Jul 26, 2017

You forgot to blame the PRC for the US opioid epidemic. But as they say, turnaround is fair play.
- Gordon h Jul 31, 2017
  
  Fair play isn't a description that can be used in any context about the Party, even caustic humour. Look at Jinping's latest round of repression and the cavalier dismissal of their Hong Kong commitments. Despite all the appalling problems in the USA, it's not the 1950s and they don't have a 'great dream' that allows any, contemptuous treatment of 'small nations'.
  A new reply to this comment has been posted.
A new reply to this comment has been posted.
vivek iyer Jul 26, 2017

Well written.
A new reply to this comment has been posted.

https://prosyn.org/VScBw0I

China’s Weaponization of Trade

To continue reading, subscribe now.

Support High-Quality Commentary

A Life Lived in Truth

The Rebirth of the TPP

New Comment

Email this piece to a friend

Contact us

Handpicked to read next

Deciphering China’s Economic Resilience

Log in/Register

China’s Weaponization of Trade

To continue reading, subscribe now.

Support High-Quality Commentary

Handpicked to read next

Edit Newsletter Preferences

Set up Notification