A statement issued December 12, at the end of the G-7 countries’ Foreign and Development Ministers’ meeting in Liverpool, England, addressed China’s aggressive use of economic power as a tool to exploit or control countries and multinational companies.
“We have been clear at this meeting this weekend that we are concerned about the coercive economic policies of China,” British Foreign Secretary Elizabeth Truss, chair of the summit, said at a G-7 news conference in Liverpool.
The Chinese Embassy in the United Kingdom responded the next day with “strong opposition,” deeming the G-7 comments “irresponsible.”
“The accusation that China implemented ‘coercive economic policies’ is totally groundless,” reads a statement from the embassy.
That is false.
In fact, China has increasingly employed coercive economic measures as a foreign policy tool over the past decade, in the process becoming “the world’s leading practitioner of geoeconomics,” wrote Robert Blackwill and Jennifer Harris in their book, “War by Other Means: Geoeconomics and Statecraft.”
Bonnie Glaser, director of the Asia Program at the German Marshall Fund of the United States, testified at a December 7 U.S. congressional hearing on “How China Uses Economic Coercion to Silence Critics and Achieve its Political Aims Globally.” She noted that coercive economic measures are defined as “a threatened or actual imposition of economic costs by a state on a target with the objective of extracting a policy concession.”
As China rose to become the top trading nation for two-thirds of the world’s countries, then emerged as the world’s largest development financer and second-largest economy and market, its economic importance has provided strong leverage to impose its will.
The “Authoritarian Interference Tracker” maintained by the Alliance for Securing Democracy cites 68 cases of economic coercion by China in the last decade. The tracker reports on Chinese and Russian attempts to undermine democracy by economic and other means.
Since 2010, China has regularly punished countries economically for perceived challenges to its territorial claims, national sovereignty, domestic political system, or other “core interests,” according to the Center for a New American Security (CNAS), a Washington, D.C. think tank.
Following are some recent examples of China’s actions from the Authoritarian Interference Tracker and other sources.
Trade restriction includes the imposition of export and import limits, tariff increases, targeted customs inspections, license denials, informal embargoes, and selective use of international regulations.
On December 3, for example, China removed Lithuania as a country of origin in its customs portal, effectively suspending all imports from or exports to Lithuania. The change came after the Baltic country allowed Taiwan to open an office in Vilnius, Lithuania's capital.
China views self-ruled and democratic Taiwan as its territory under its “One China” principle. On December 9, China stepped up pressure by urging multinational companies to break ties with Lithuania or face losing access to the vast Chinese market.
Since 2020, in response to Australia’s call for an investigation into the origins of the COVID-19 pandemic, China has placed restrictions on a variety of Australian exports to China.
In 2010, China also restricted exports of rare earth elements to Japan after a Chinese fishing boat and a Japanese coast guard ship collided near the disputed Senkaku/Diaoyu islands.
In 2012, China reduced imports of bananas and other fruits from the Philippines amid territorial disputes in the South China Sea.
In 2016, China restricted trade with South Korea after an agreement between Seoul and Washington to deploy a U.S. missile defense system. The same year, China imposed temporary restrictions on cross-border trade with its northern neighbor Mongolia for hosting the Dalai Lama, the Tibetan spiritual leader who Beijing views as a separatist.
Leveraging its large number of outbound tourists, China has inflicted economic pain on foreign governments by suspending package tours organized through state-run travel agencies, issuing official travel warnings, and banning permits for independent travelers, according to a report by the Australian Strategic Policy Institute.
In 2016, Beijing reduced tourism to Taiwan after the election victory of Tsai Ing-wen and her Democratic Progressive Party. According to the CNAS report, the number of Chinese tourists to Taiwan dropped 22% the next year.
In 2017, when China retaliated against Seoul’s deployment of the THAAD missile defense system by imposing trade restrictions on South Korea, it also banned tours there, inflicting an estimated $15.6 billion loss in revenue on the country, according to Hyundai Research Institute. The number of Chinese tourists to South Korea fell from 130,000 per month to fewer than 3,000, CNAS said.
China froze tourism to the Philippines in 2012 amid a dispute over the Scarborough Shoal in the South China Sea. Following protests against China in Manila, China cited “strong anti-China sentiment” as a pretext for suspending indefinitely all tours to the Philippines.
“Tourism appears likely to be an attractive Chinese coercive economic tool in the coming years, given that Chinese tourists are now the world’s largest-spending overseas tourists,” the 2018 CNAS report stated. “Restrictions on tourism are also likely appealing because they can impose meaningful economic costs on target countries with few collateral costs on China.”
Targeting Global Firms
On November 22, Taiwan's Far Eastern Group company and its subsidiaries were fined nearly $14 million for alleged violations at factories in five Chinese provinces, according to China's Taiwan Affairs Office (TAO). The company had donated to Taiwan’s Democratic Progressive Party, which opposes the mainland’s “One China” principle.
Though claiming the fines were based on Chinese laws and regulation, the TAO spokesperson said China “will absolutely not allow people who support Taiwan independence or destroy cross-Taiwan Strait relations, who dare bite the hand that feeds them, to make money in the mainland.”
On November 30, the company’s chairman published an article affirming that he had long opposed Taiwan's independence and supported the “one-China principle.”
In 2019, China canceled digital streaming of Houston Rockets basketball games after the team’s general manager, Daryl Morey, voiced support for Hong Kong pro-democracy movement on Twitter. The NBA issued a public apology, and Daryl Morey left his job.
In 2018, the Civil Aviation Administration of China demanded that international airlines and hotels cease listing Taiwan as a country on their websites or risk facing “disciplinary actions.” All the companies complied, with some apologizing for the listing.
As the German Marshall Fund's Bonnie Glaser noted in her December 7 U.S. congressional testimony, in 2017, following tension over the THAAD anti-missile system, Beijing refused certification of Korean-made batteries for hybrid-electric cars, which effectively banned the sale in China of cars equipped with batteries from LG Chem and Samsung SDI.
China is not the only country that uses economic pressure to advance foreign policy goals and protect “core interests.”
The statement from the Chinese Embassy in London pointed a finger at the United States and said China is the victim of U.S. economic coercion:
“Speaking of ‘coercive economic policies,’ who imposed [an] economic embargo and blockade on China in the 1950s and 1960s, and who waged trade war against China and mounted pressure and restriction on Chinese companies in recent years? The relevant country should answer these questions first and stop putting the blame on the victim!”
China has called the United States “a skillful economic bully with various means,” citing woes about tariffs imposed on two-thirds of Chinese exports to the United States and U.S. sanctions against Chinese tech companies like Huawei.
It also has criticized the United States for “antagoniz[ing] allies and stirred up tensions and disruptions in global trade and supply chains.”
“Besides China, the United States has dragged an array of its partners into trade disputes and technological suppression through a series of coercive tactics,” stated an opinion piece published by China's state-run Xinhua news agency in October.
However, unlike Washington and other Western governments that rely on formal legal sanctions, investment restrictions or trade controls, Beijing mainly uses informal, extralegal approaches.
The Chinese “do not legally link a foreign policy dispute to the coercive measures, creating public deniability and greater optionality for escalation and de-escalation,” a CNAS report said.
It added: “China typically imposes economic costs through informal measures such as selective implementation of domestic regulations, including stepped-up customs inspections or sanitary checks, and uses extralegal measures such as employing state media to encourage popular boycotts and having government officials directly put informal pressure on specific companies.”