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Politics & Law

China’s use of economic stick is troubling

Countries must push back against Beijing’s troubling tendency to use China’s ports, natural resources and overall economic strength to force rivals to bring policies in line with its interests.

When the 10 member nations of Asean failed to reach agreement on the wording of a joint communiqué for the first time in 45 years, most pundits blamed this year’s chair of the regional co-operation group, Cambodia.

Behind Phnom Penh’s passivity, however, was pressure from Beijing to keep out of the final statement any mention of the South China Sea, especially the recent face-off between China and the Philippines over the Scarborough Shoal.

That the Chinese hold sway over Cambodia should come as no surprise. Beijing has provided over US$10 billion in aid to Cambodia. Last year alone, China pledged 10 times more foreign investment to Phnom Penh than the United States, which also participated in the talks. Cambodia’s economic dependence on Beijing is symbolised by the Peace Palace, which was built with Chinese funding and served as the venue for the Association of Southeast Asian Nations‘ summit.

For more than a decade, China pursued a strategy in Southeast Asia that relied heavily on economic carrots to increase the stake of the Southeast Asian countries in maintaining good relations with China. Direct investment, aid and trade, including the China-Asean Free Trade Area, have all been used to encourage countries to consider Beijing’s interests and eschew actions it might find objectionable.

In the past few years, however, China has directly used economic relations to compel target countries to alter their policies. And this growing trend is worrisome.

The most recent target of the employment of economic measures by China for coercive purposes is the Philippines. On April 10, Manila sent a navy frigate to investigate eight Chinese fishing boats sighted in the lagoon of Scarborough Shoal, an uninhabited outcrop well within the Philippines’ 200-nautical-mile exclusive economic zone.

After an armed Filipino boarding party discovered giant clams, coral and live sharks aboard the boats, an attempt to arrest the fisherman was thwarted by two civilian China Maritime Surveillance vessels that arrived on the scene. The Philippines withdrew the frigate and replaced it with a coastguard cutter.

China dispatched an armed Fisheries Law Enforcement Command ship to reinforce its sovereignty claim. The stand-off continued for more than a month.

Incensed by Manila’s unwillingness to withdraw, Beijing resorted to economic measures to punish the Philippines for encroaching on what it viewed as its sovereign territory. Quarantine authorities reportedly blocked hundreds of container vans of Philippine bananas from entering Chinese ports, claiming that the fruit contained pests.

The decision to quarantine the bananas dealt a major blow to the Philippines which exports more than 30 per cent of its bananas to China. Subsequently, China began slowing inspections of Philippine papayas, mangoes, coconuts and pineapples. Mainland travel agencies also stopped sending tour groups to the Philippines, ostensibly due to safety concerns.

Philippine business leaders pressured leaders in Manila to abandon their confrontational approach to the Scarborough Shoal dispute – precisely the outcome that Beijing had hoped for. In early June, the two nations reached an agreement to simultaneously pull out all vessels in the lagoon.

A more widely reported case of China using trade as a weapon to force a country to alter policy changes occurred in September 2010, when Beijing blocked shipments of rare earth minerals to Japan. The action came in retaliation for Japan’s detention of a Chinese captain in an incident near the Senkaku Islands, which are under Tokyo’s control but claimed by Beijing and Taipei.

China doesn’t just target its neighbours. Beijing also used economic coercion against Norway after the Norwegian Nobel Committee decided in 2010 to award its Nobel Peace Prize to mainland dissident Liu Xiaobo.

In the ensuing months, China froze free-trade negotiations with Norway and imposed new inspections requirements on imports of Norwegian salmon, even though the prize committee is independent from the Oslo government. Imports of Norwegian salmon fell 60per cent last year, even as the Chinese salmon market grew by 30 per cent. More than a year and a half after the prize ceremony, Chinese Foreign Ministry officials continue to refuse to meet representatives of Norway’s government to discuss international developments.

China has become a critically needed engine of growth for the global economy. In addition, China’s economic largesse has provided benefits to many countries around the world. It is increasingly clear, however, that economic co-operation with China has inherent risks. Countries should be mindful of Beijing’s increasing propensity to use economic means to compel target nations to alter their policies in line with Chinese interests. Excessive dependence on China may increase countries’ vulnerability to such pressure.

In the Asia-Pacific region and beyond, nations are closely observing Chinese behaviour as it remerges as a great power. Most remain hopeful that as China rises, it will adhere to international and regional norms and strengthen the prevailing international system from which it has benefited in recent decades.

If such a positive scenario is to be realised, however, countries will have to push back against China’s growing willingness to employ economic leverage to coerce countries to modify their policies in accordance with Beijing’s wishes.

Bonnie Glaser is senior fellow with the Centre for Strategic Studies Freeman Chair in China Studies and senior associate at the Pacific Forum.
South China Morning Post

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5 thoughts on “China’s use of economic stick is troubling

  1. Reblogged this on OyiaBrown.


    Posted by OyiaBrown | July 31, 2012, 4:47 pm
  2. Reblogged this on The Universe of Lord Vito the Ninth and commented:
    I deeply believe in free trade and open diplomacy. If this is true,and i have no reason for it not to be unless any of you can guide me otherwise,this is concerning. China must ensure they do not make the same moral errors that the USA made.


    Posted by lordvito9 | July 31, 2012, 5:36 pm


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