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Globalisation and Chinese Grand Strategy

https://www.iiss.org/en/publications/survival/sections/2018-9a32/survival--global-politics-and-strategy-february-march-2018-926c/60-1-02-friedberg-35ad

DownloadPDFChina is taking steps intended to reduce its exposure to Western economic coercion, while enhancing its leverage over others.

SURVIVALCHINAGLOBALISATIONTRADEGEO-ECONOMICS

By: Aaron L. Friedberg

Publication: Survival: Global Politics and Strategy February–March 2018

Pages: 7-40

Volume: 60

Edition number: 1

Date: 30 January 2018

Deng Xiaoping’s initiation of the ‘reform and opening up’ programme at the end of 1978 appears in retrospect to be the decisive turning point in the history of modern China. Increasing reliance on market forces, as opposed to state planning, and deeper integration into the global economy, in place of the old policy of self-imposed isolation and virtual autarky, launched China onto a steep growth trajectory. By any measure, economic or strategic, China’s decision to join the world has been an enormous success, raising the standard of living of hundreds of millions of people, enhancing the nation’s influence and prestige, and paving the way for its eventual re-emergence as a regional and global power on a par with the United States.

The decision to reform and open was obviously consequential, but it was also extremely risky, in ways that are sometimes overlooked or downplayed in the West. As they emerged from the chaos of the Cultural Revolution in the 1970s and entered into a period of intensifying geopolitical rivalry with the Soviet Union, Deng and his colleagues were convinced that reform was essential both to national survival and to regime security. Unless it could expand and modernise its economy more rapidly than it had done in previous decades, China would remain poor, weak and vulnerable. And unless it could deliver sustained, meaningful improvements in the quality of life of the Chinese people, the Chinese Communist Party (CCP) would face growing dissatisfaction and the mounting danger of unrest.

The revolution in policy that Deng engineered soon came to be seen as essential to China’s future power and prosperity, and to the survival of the CCP regime. At the same time, however, the opening to the West raised the spectre of ‘spiritual pollution’, an influx of dangerous ‘bourgeois’ ideas about individual liberties, democracy and universal human rights that could eat away at the legitimacy of China’s one-party authoritarian dictatorship. In typically earthy fashion, Deng had acknowledged at the outset that ‘opening the window’ would inevitably bring ‘flies’ as well as fresh air, but despite his seeming insouciance he clearly regarded the threat as a deadly serious one. This was true even before the Tiananmen Square ‘incident’ of June 1989 raised the very real prospect of social revolution and regime collapse. Surveying a volume of 126 speeches by Deng given in the period from September 1982 to January 1992, Christopher Hughes concludes in a 1997 Millennium article that their unifying theme is ‘Deng’s attempt to find the right balance between economic reform and the integration of China into the global economy, on the one hand, while suppressing ideological and cultural influences from abroad, on the other’.1

The regime sought to co-opt its citizens


The resolution to this dilemma, devised by Deng and adhered to with slight variations and embellishments by each of his successors, had three parts. Firstly, the CCP regime sought to co-opt its citizens by permitting them to enjoy the fruits of their labours. Under the new, tacit social contract the Chinese people were promised better lives in return for their continued loyalty, or at least their passive acquiescence. In addition, in the years after Tiananmen, the CCP continued to develop and refine the tools of coercion, spending billions on domestic security forces to detect and suppress the earliest inklings of dissent, as well as on technologies for monitoring and controlling flows of information into and within the country. The windows remained open, but Beijing bought better screens and more precise flyswatters. Finally, from the earliest years of the reform process, the CCP worked hard to inoculate its people against the danger of intellectual and spiritual contamination by launching a series of increasingly sophisticated and wide-ranging ideological campaigns. Especially since the early 1990s, the regime has sought to bind the people to it by promulgating a form of nationalism that highlights the wrongs done to China by aggressive foreign powers, while emphasising the party’s vital role in restoring the nation’s dignity and defending its honour. Starting at an early age, every young person receives a highly nationalistic, CCP-centric ‘patriotic education’ that continues into early adulthood. In recent years, official ideology has also become more explicitly anti-Western, attacking the liberal claim that there are universal values as an affront to China’s unique civilisation and an attack on its distinctive institutions.2

In addition to the danger of internal destabilisation, integration into the global economy also carried with it two additional threats whose locus was largely external. As became more apparent with the passage of time, China’s growing reliance on foreign markets, capital and technology meant that it was increasingly exposed to economic shocks and dislocations originating outside its boundaries. Because of the presumed link between growth and stability, an economic crisis in another country could all too easily become a deadly political problem for Beijing. This danger was driven home by the effects of the 1997 Asian financial crisis, in which sudden outflows of speculative ‘hot money’ destabilised a number of countries that, unlike China, had recently succumbed to Western pressure to deregulate their capital accounts.

Chinese scholars note that, in the aftermath of the 1997 crisis, the term ‘economic security’ became ‘popular in policy speeches and news media analyses in China’,3 and that ‘scholars and policy-makers [began] to reconceptualize the economics–security relationship’.4 Thus, in his address to the 15th Party Congress in September 1997, newly appointed leader Jiang Zemin advised his colleagues that ‘we must correctly handle the relationship of opening up versus independence and self-reliance, and safeguard the economic security of the country’.5 As a practical matter this required advancing cautiously, ‘crossing the river by feeling the stones’, as Deng had put it, rather than running headlong towards ever-deeper integration. As Andrew Nathan and Andrew Scobell explain, even after it entered the World Trade Organisation (WTO) in 2001, China continued to ‘hold something back’, creating ‘a distinctive state-directed yet marketized model that maintained key elements of self-control’. Included among these were a managed exchange rate, an array of state-owned enterprises and an assortment of ‘direct and indirect policy levers [that] gave government the major voice in determining the prices of land, labor, housing, energy, and credit’.6 Far from being temporary aberrations or rearguard actions on the inevitable path to a more fully open, Western-style approach, the retention of these instruments of control has proven to be an enduring feature of a distinctive ‘China model’ for promoting development while providing a degree of insulation from the vicissitudes of globalisation.

A third source of threat is related to the second, in that it involves the inward transmission of a potentially destabilising external shock. While the two are sometimes conflated in Chinese discussions of ‘economic security’, the possibility that a hostile power might seek deliberately to exploit the nation’s dependence on foreign markets, capital, resources and technology in order to pressure it or damage its prospects is conceptually and strategically distinct. As one scholar put it in a 1998 essay: ‘the use of forceful means to terminate economic relationships by one state upon another, including the termination of trade and financial relations, the imposition of embargoes, and the freezing of overseas assets … are very real ways to wage an economic war’.7 In addition to dealing with ‘sudden fluctuations in financial markets’ and ‘global negative downturns’, China must therefore be prepared to cope with deliberate, strategically motivated attempts to engineer a ‘sudden halt in supply or a sudden rise in prices’ of critical raw materials and to insure that its access to ‘global markets, investment opportunities, and related business interests’ remains ‘free from threats’.8

China’s leaders and strategic planners had ample reason to take such threats seriously. Even as they moved warily to embrace a form of capitalism (or ‘socialism with Chinese characteristics’), the nation’s elites remained steeped in a Marxist mindset in which trade between rich and poor nations was seen as an inevitable source of exploitation.9Theory aside, the Opium Wars with which the ‘Century of Humiliation’ began involved nothing less than an attempt by the Western imperialist powers to forcibly impose unfair and unwholesome trading arrangements on a weak and beleaguered empire.10

Such experiences were not confined to the distant past. Since the founding of the People’s Republic, hostile foreign powers had made repeated attempts to pressure, weaken and destabilise it through the use of embargoes and sanctions. Following the CCP’s victory over its Nationalist rivals, the United States imposed a total ban on aid and trade, and for more than two decades declined to engage in commerce with a regime it refused even to recognise.11 Even when trade and diplomatic relations were restored, Washington continued to maintain a system of export controls and to restrict the sale or transfer of high-technology items that could be used to enhance the performance of Chinese weapons systems.12 Nor were the capitalist powers the only ones to target China in this way. After first providing its ideological ally with aid and technical assistance, the Soviet Union abruptly suspended cooperation in the late 1950s, and as relations worsened, trade between the two communist giants dwindled to virtually nothing. Finally, in the early 1990s, the United States and its allies imposed sanctions and an arms embargo on China as punishment for its brutal handling of student demonstrators in Tiananmen Square. Throughout the decade that followed, Washington repeatedly imposed more narrowly targeted sanctions on Chinese companies that it accused of involvement in proliferation and the use of child or prison labour, among other misdeeds.13

Washington imposed targeted sanctions


How could China continue to enjoy the benefits of integration into the global economy while minimising the vulnerabilities and potential security risks associated with it? As compared to the dangers of domestic political instability and the problems of maintaining a degree of insulation and economic-policy autonomy, at least until recently this crucial question appears to have received relatively little direct attention in the open-source writings of Chinese analysts. There may be a number of reasons for this. As one author noted at the turn of the century, the questions of ‘by what means and at what cost’ it might be possible to enhance the nation’s security from economic threats was ‘an area where the Chinese researcher lack [sic] clarity’. Perhaps reflecting a reluctance to question the fundamental direction of official policy, having identified some potential problems, most writers did ‘little more than arguing for continuing the open-door foreign policy orientation’.14 If mitigating the risks of openness required deception and ‘political warfare’ against the West, it may also have been a topic deemed inappropriate for full public discussion, at least in the early stages of reform and opening up.

With a few notable exceptions, foreign scholars have also paid comparatively little attention to what would seem to be a profound tension at the very heart of China’s post-Maoist grand strategy. Those who have, moreover, appear to have arrived at conclusions that are comforting and even flattering to American policymakers, and congenial to the assumptions of the economists and business executives who dominate discussion of trade, finance and related matters in the West. In this view, there can be little doubt that China’s leaders recognised and were deeply concerned over the strategic risks associated with deepening engagement in the US-led and -dominated international economic system. In the end, however, they felt that they had little choice but to proceed. As Philip Saunders concluded in a 1999 article:

the immediate economic and social challenges that China faces have forced Chinese leaders to accept that increased dependence on the United States is necessary to maintain the high economic growth that they believe will maintain social stability. Pressing short-term challenges have trumped longer-term concern … [China’s leaders] now see integration into the world economy as essential to the maintenance of Party rule.15


In time, moreover, Beijing has supposedly grown more comfortable with what Nathan and Scobell described in 2013 as a condition of ‘shared vulnerability’. The strategic choices made by Deng and his successors have ‘entailed significant sacrifices for China’s security’. Rapid growth has been achieved ‘by means of a deep engagement in the global economy that made China more vulnerable to pressures and influences from the outside world than it had ever been before’. But, even as it has ceded to others a measure of control over its own destiny, China has gained a degree of control over others. Whatever the precise balance may be, the situation is tolerable and sustainable; in any event, it cannot be altered at anything remotely resembling an acceptable cost. ‘In this sense,’ Nathan and Scobell conclude, ‘the engagement policy pursued by the United States since 1972 achieved its key strategic goal of tying China’s interests to the interests of the U.S.-created global order’. Beijing may not be committed to every aspect of the status quo, but ‘it has acquired too large a stake in the stability of the world order and the prosperity of the West’ to launch a frontal assault on that order.16 In the economic domain, as in others (including the environment, public health and the management of the internet), China’s leaders realise that cooperation and compromise provide the only means for managing shared problems.

Recent developments suggest that, even if it was accurate once, this characterisation of Chinese attitudes and policy no longer applies. Instead of simply accepting the constraints and dangers that result from its deep integration into the global trading system, with the continuing growth of its wealth and power Beijing has begun to take steps intended to reduce its exposure to possible Western coercive pressures while enhancing its own ability to exert economic leverage over others. Having passed through a period of extreme vulnerability during the initial stages of reform and opening up, and then through a period of mutual vulnerability, China is now trying to tilt the balance further in its favour, insulating itself and reducing its dependence on rivals and potential enemies while developing tools for conducting economic statecraft and even, if necessary, for waging economic warfare. These developments can best be understood as the third phase in China’s continuing efforts to mitigate the risks of globalisation while continuing to enjoy its benefits.

Phase one: hiding and biding

During the first decade of the reform period, from 1979 to 1989, China’s leaders worried a good deal about ‘spiritual pollution’, and fretted occasionally about their ability to maintain tight control over the national economy. But they had little reason to fear that, at least in the near term, the United States and the other Western powers would seek to exploit their increasing openness in order to punish, pressure or undermine them. To the contrary, during these years Washington and Beijing were presumed to have strategic goals which, if they did not coincide completely, were still highly convergent. While there were limits to what they were willing to do (including transferring so-called ‘offensive’ weapons that might someday be turned against the United States or its regional allies), for the most part the Americans saw it as being in their interest to build up China’s power so that it could contribute more effectively to balancing and containing the Soviet Union.

With this end in view, the US loosened existing restrictions on the export of both commercial and ‘dual-use’ technologies to China and encouraged its allies to do the same; cleared the way for China to expand its exports into the US market by granting it most-favoured-nation trading status; and eased Beijing’s access to investment capital by supporting its membership in the World Bank and the International Monetary Fund. In addition, Washington sought as a matter of official policy to promote China’s long-term economic and technological development by welcoming thousands of its students to study in the United States, most of them in scientific and engineering fields. While there was never any explicit quid pro quo, and no suggestion that Washington would withdraw economic benefits if Beijing did not comply with its wishes, China did take steps to increase strategic pressure on the Soviet Union, including permitting the US to base intelligence-collection facilities on its soil and providing assistance to Afghan guerrilla forces resisting the Soviet invasion and occupation of their country. The United States and China were virtual allies during this period and, while some Chinese observers no doubt realised that this favourable situation could not last forever, there is no indication that they feared its imminent disappearance or worried that, by accepting American largesse, they were setting themselves up for future exploitation.

The US and China were virtual allies


All of this changed drastically in 1989, with the killings at Tiananmen and the initial imposition of Western sanctions, followed in short order by the fall of the Berlin Wall, the unravelling of the Soviet empire in Eastern Europe and the beginning of the end of the Soviet Union itself. In response to these traumatic events, some in the CCP leadership favoured reversing course, abandoning economic liberalisation and pulling back into a posture of defensive self-reliance that would reduce China’s exposure to ideological contamination and minimise its vulnerability to external pressure. For his part, however, Deng was determined to stay the course. In his view, there was no other choice: reverting to autarky and isolation would stunt China’s growth and doom it to a future of weakness and backwardness. China could ride out sanctions. After all, as Deng pointed out, ‘One special feature of China’s development is that it has proceeded under international sanctions for most of the forty years since the founding of the People’s Republic. If there is nothing else we’re good at, we’re good at withstanding sanctions.’17 Deng expressed confidence that the democracies would prove fickle and that the measures put into place by self-righteous Western politicians were unlikely to last longer than a few years.18 Once the storm had passed, he insisted, China ‘should open to the outside world instead of closing our doors’. Indeed, if anything, it should open ‘wider than before’.19

Such expressions of optimism and self-confidence could not obscure the fact that, by the early 1990s, China’s strategic situation was more precarious, and potentially more exposed, than it had appeared only a few years before. Even if normal relations could be restored, the collapse of the Soviet Union and the end of the Cold War removed the geopolitical rationale for continuing deep strategic cooperation between Washington and Beijing. Like one of the crafty and ruthless hegemons from China’s ancient Warring States period, the United States would seek to isolate, weaken and destroy its rivals one by one. Having dispensed with their main opponent, the Americans were now free to turn their full attention to China. Tiananmen Square also brought to a sudden close a nearly two-decade-long interval in which the US had been willing to downplay or overlook its ideological differences with the CCP regime in order to smooth the way for collaboration against a common foe. Thus, even as Beijing sought to resume the process of integrating into the global economy and building deeper ties with the United States, the likelihood that Washington would use these linkages to apply pressure to it appeared to be increasing.

One element in China’s strategy for dealing with these new and more tenuous circumstances was a deliberate campaign to emphasise the mutual benefits to be derived from expanding trans-Pacific flows of trade and investment. In addition, in keeping with the spirit of Deng’s famous admonition that China now needed to ‘hide its capabilities and bide its time’, Beijing also began a concerted effort to shape foreign perceptions of what was happening inside the country in the aftermath of Tiananmen. According to scholar Anne-Marie Brady, the primary thrust of China’s outward-directed propaganda at this time was to ‘talk up the economy’, emphasising its current performance and future prospects ‘despite major problems, such as a non-transparent financial sector, massive and widespread corruption, and severely under-reported unemployment’.20

Brady concludes that parallel efforts to ‘reinvent’ foreign perceptions of the Chinese political system after Tiananmen were largely unsuccessful, but her assessment may be excessively narrow and unduly negative. While the CCP regime could not erase recent reminders of its brutally repressive nature, it was nevertheless able to reinforce the belief, widely shared among Western observers at the time, that political liberalisation was inevitable, and that it would probably come sooner rather than later. According to Michael Pillsbury, Beijing put into place ‘a sophisticated system … to mislead foreigners about what is going on in their country and reconfirm Western biases and wishful thinking’. Above all, the Chinese leadership sought to persuade the world that it was ‘moving in the “right” direction toward freer markets, productive international cooperation and political liberalization’.21

During the 1980s, there were some in the upper ranks of the party who believed that economic reform would have to be accompanied eventually by far-reaching political change. Even before Tiananmen, these erstwhile liberalisers had begun to lose ground to the warier, more conservative elements in the CCP hierarchy; in its wake, most with liberal sympathies were purged, and some were placed under house arrest or driven into exile. Economic reform and opening up would eventually resume in the early 1990s, but it now seems clear that any hope of political liberalisation was extinguished in 1989. In the years that followed, however, China continued to emit signals, like the light from a dying star, that were seized upon by optimistic foreign observers as evidence that meaningful political reform was not only possible but, in fact, already well under way.

Exhibit A for this claim was the programme of ‘village elections’, in which townspeople were permitted to choose local officials from among a slate of CCP candidates. First begun in 1988 and expanded with great fanfare during the 1990s, these elections attracted what appears in retrospect to have been a disproportionate amount of attention from foreign, and especially American, observers. Some, such as the Carter Center, became actively involved, working, as it proudly proclaimed, ‘at the invitation of the Chinese Ministry of Civil Affairs and the National People’s Congress’, to help standardise ‘electoral procedures … in this new democratic environment and foster better governance in local communities’.22

And yet, in the end, the entire exercise amounted to very little. The implementation of village elections did not set in motion a process in which democratic norms and practices took root and then migrated upwards to townships and provinces, and it certainly did not lead to the emergence of competing political parties. In fact, to the contrary, the view among many Western experts is now that local elections were intended primarily to bolster the legitimacy of CCP rule after the Tiananmen debacle by creating very limited and constrained opportunities for political participation.23

Liberalisers had begun to lose ground


Despite its minimal impact on the actual practice of governance in China, the village-election charade did serve another, larger strategic function: at a moment when Beijing was under great scrutiny and potentially vulnerable to renewed economic sanctions and diplomatic isolation, the widely publicised spectacle of local elections convinced foreigners that democratic reforms were already well in train. As James Mann explained in 2007, village elections helped ‘to strengthen the rule of the Chinese Communist Party, by giving outsiders the appearance that democracy [was] spreading across China’.24 Applying pressure to promote change was therefore unnecessary and, if anything, would likely prove counterproductive. In sum, the West’s strategy of engagement was working and, notwithstanding the recent unpleasantness, the tides of history were once again flowing in favour of liberalism and democracy.

Despite mutual allegations of ‘softness’ and periodic squabbles over the details of policy, by the end of the century this was a point on which members of both US political parties could agree. George W. Bush summed up the bipartisan conventional wisdom during the 1999 presidential campaign, when he observed that the United States had only to ‘trade freely with China and time is on our side’.25

Phase two: binding and hedging

Bush was here expressing the widely held view that, for China as for other developing nations before it, trade and greater openness would lead inevitably to accelerating growth, an expanding middle class and irresistible pressures for political liberalisation. China’s Communist Party rulers were well aware of what the United States and its allies had in mind and, behind the screen of village elections, they were working hard to foil the West’s schemes for easing them out of power. By the turn of the century, however, Beijing had reasons of its own for optimism.

When sanctions were first imposed in 1989, Deng had expressed the hope that ‘foreign businesspeople would pressure their governments to improve relations so that they could once again have access to the Chinese market’, and he urged Chinese executives and diplomats to work with ‘foreign friends’ to get sanctions lifted.26 At the time, after only the first decade of reform and opening up, China’s importance as a trade and investment partner for the developed economies was still quite limited, and the ranks of its ‘foreign friends’ were correspondingly thin. Ten years later, the picture had already changed dramatically and, with China’s impending entry into the WTO, the pace of change was set to accelerate even further. An influx of foreign investment and technology, combined with a seemingly limitless supply of low-cost labour, was transforming what had once been a backwards agrarian economy into a global manufacturing and export powerhouse. And, as China’s economy grew, so too did its appetite for goods, services, resources and raw materials from virtually every corner of the earth, including the United States. As trade and investment flows expanded, so too did the coalition of influential American individuals, powerful corporations and well-heeled industry groups that benefited from cultivating commercial ties with China, and who were therefore eager to maintain good relations. Thanks to this virtuous cycle, deep economic engagement had become self-reinforcing and, barring some truly catastrophic crisis or confrontation, it appeared likely to be self-sustaining.

The decisive events in this process were the annual congressional battles over whether to renew China’s status as a most-favoured trading partner in the early 1990s, in spite of continuing concerns about its post-Tiananmen record of human-rights abuses, and the climactic push at the end of the decade to grant Beijing ‘permanent normal trade relations’ in order to clear the way for its entry into the WTO. These struggles demonstrated the growing clout of Beijing’s ‘foreign friends’ and consolidated their power, while also teaching valuable lessons about how to work with them (and, on occasion, to manipulate them) in order to bind the US more closely to China.

As one recent essay by a Chinese analyst on ‘The Application of Attractive Economic Power in China’s Diplomacy’ points out, it is precisely because they have a ‘huge accumulation’ of interests in China that ‘many U.S. multinational companies will actively lobby the Congress and the government, and even on a number of key issues … promote U.S. policy cooperation with China’. The study goes on to credit the aerospace giant Boeing for having ‘fueled’, or ‘played a positive role in promoting’, ‘every step in Sino–U.S. relations’, including Washington’s eventual decision to ‘give China MFN [most-favoured-nation] treatment, the development of permanent normal trade relations between the two countries [and] China’s accession to the World Trade Organization’. Among its other contributions, Boeing hired public-relations specialists to ‘deal with media events’ before the 2000 House vote on permanent normal trade relations; its CEO ‘personally participated in the public relations campaign’; and it contributed hundreds of thousands of dollars from its corporate coffers to help fund a multi-industry lobbying and advertising effort aimed at winning support from Congress.27

Boeing contributed hundreds of thousands of dollars


For their part, the Chinese authorities used a mixture of inducements and thinly veiled threats to encourage Boeing (and other US corporations) in their efforts. Thus, during the run-up to the crucial 1994 vote on whether to drop the linkage between human rights and MFN status, president Jiang Zemin made a highly publicised visit to Boeing’s headquarters in Seattle, where he urged the removal of ‘all the negative factors and artificially imposed obstacles’ between the US and China. Meanwhile, at almost the same moment, a delegation of German business executives was visiting Beijing where, among other things, it received an order for six planes to be manufactured by Boeing’s principal rival, Airbus.28 The message was clear: if Boeing did not exert itself to the utmost in persuading Washington to grant MFN, it could lose significant business to its competitors.

These tactics were part of a larger pattern. James Mann notes that ‘by early 1994, the Chinese government began openly and unabashedly turning up the commercial pressure in its dealings with the Clinton administration’. Indeed, by this point, such pressure, delivered in Washington by American corporations, had become ‘the linchpin of China’s entire strategy for circumventing Clinton’s human rights conditions’.29 The end result of Beijing’s efforts was an unmitigated defeat for the advocates of linkage and a turning point in the evolution of US–China relations. Prior to the 1994 vote, US threats to suspend trade, cut off loans, impose sanctions or otherwise take advantage of China’s growing economic dependence to apply pressure to it were plausible and, from Beijing’s perspective, deeply worrisome. Afterwards, while not completely beyond the realm of possibility, they had lost much of their credibility and, with the passage of time, would become even more difficult to conceive.

Philip Saunders quotes a senior analyst at one of China’s leading think tanks as saying that, as the 1994 showdown approached, ‘we began to realize that economic interests were deepening and started to think that the U.S. wouldn’t dare to cancel MFN’.30 Growing recognition that the increasing importance of their own interests had ‘reduced the willingness of the industrialized democracies to follow through on economic threats’ helped to ease ‘Chinese fears about the political vulnerabilities that flow from economic integration’. As Saunders rightly notes, however, ‘this shift from one-sided dependence toward interdependence’ was not simply ‘a natural by-product of economic interactions’. Rather it was the result, at least in part, of ‘conscious Chinese efforts to create a balance of dependence that limits the ability of the United States to apply economic pressure’.31

In addition to its obvious economic benefits, engaging with the United States and the other Western powers bound them more tightly to China, thereby reducing the risk that they would seek to exploit for strategic purposes their still substantial advantages as providers of capital, technology and markets. But this was not the only danger associated with China’s increasing integration into the global economy. As growth compounded, so too did consumption of a variety of critical inputs to the productive process, including energy, minerals and other raw materials, and food. With demand outstripping domestic supply, over the course of the 1990s and into the early 2000s China went from rough self-reliance to being a major importer of many of these items. China became a net importer of oil in 1993, and its imports grew rapidly thereafter.32 With the boom in the construction of buildings, roads, rail lines, and power-generation and transmission equipment, imports of iron ore, copper, nickel and aluminium also expanded dramatically after the turn of the century, in each case growing to account for between 40% and 50% of total national consumption by the mid-2000s.33 Rising incomes and improving diets also led to increasing demand for imported fish and meat, as well as more foreign-grown grain needed to feed domestic livestock.

Demand outstripped domestic supply


China’s growing dependence on imports created a new form of potential vulnerability. Whether they were caused by sudden shifts in global market conditions, political instability at the point of origin or attempts by hostile powers to interfere with shipments of vital materials en route to China, disruptions in supply could cause serious economic dislocation. And as always, it was all too easy for the CCP leadership in Beijing to imagine that economic crises could lead to social unrest and political instability.

How to guard against these eventualities? Expanding domestic output might be desirable and possible in some areas (such as grain production), but as was evident by the early 2000s if not before, in no area was it sufficient to reverse the overall trend toward increasing dependence on imports.34 Another possible way of mitigating the risks associated with import dependence would be to acquire armed forces sufficient to secure supplies of critical materials at their source, and to defend the lines of transport and communication over which they would travel back to China. Since the turn of the century the country has, in fact, begun to develop some of the power-projection capabilities that it would need to carry out these missions. But most observers believe that several decades will be required to build the blue-water naval forces, overseas bases, long-range air-lift and expeditionary ground forces necessary to the task.35

A third possibility, and one that seems like the most logical, obvious and cost-effective solution to many Americans, would simply be to embrace globalisation, relying on the forces of supply and demand to satisfy China’s growing need for food, energy and raw materials. This is, after all, what other large, advanced, market-economy countries with similar needs have chosen to do.36 As a recent analysis of China’s evolving food-security policies points out: ‘Most countries that must import food, such as Japan, count on a deep, competitive world market to supply their needs. But that’s not secure enough for China.’37

The reasons for the difference are obvious on brief reflection. Unlike their democratically elected counterparts, China’s leaders are deeply concerned about the perceived legitimacy and prospects for survival of their entire regime. They seem genuinely to fear that a shortage of pork or an increase in gasoline prices could lead, not to electoral defeat, as might be the case in a democracy, but to social unrest and political revolution. In part for this reason they are reluctant to entrust their careers, and possibly even their lives, to a global economic system that they know from experience is subject to periodic crises and shocks, and which they perceive still to be managed and controlled primarily by, and for the benefit of, the United States. Unlike Tokyo, Beijing also knows that, if all else fails, it cannot depend on the Americans to use their command of the global commons to ensure that shipments of critical materials will find their way to China’s shores. To the contrary, behind all the happy talk from CCP leaders about the wonders of globalisation, the spectre of blockades, embargoes, supply disruptions and possible economic strangulation continue to haunt the dreams of Chinese strategists.

The response to these circumstances that has emerged over the past two decades is complex, costly and multifaceted, but also partial, imperfect and incomplete. China has not, and realistically could not, build an airtight defence against all threats to its import lifelines. What it has done instead is to hedge, purchasing what amounts to an insurance policy against an array of contingencies up to, but not at present including, the most extreme possibility of a hot, global war against the United States.

This strategy has three components. Firstly, across a range of commodities, principally energy, minerals and, most recently, food, Beijing has sought to gain ownership of the physical means of production by buying mines, oil wells and farms in foreign countries. Since the announcement of the so-called ‘going out’ policy in 2001, Chinese state-owned enterprises, with support from government-controlled banks and sovereign wealth funds, have been on an extended shopping spree, buying equity stakes in oilfields in Sudan, Bangladesh, Venezuela and Canada, copper mines in Chile and Peru, and farmland suitable for growing soybeans and other crops in Kazakhstan, Pakistan and Malawi.38

Chinese firms pay top dollar


Some Western observers suggest that after a buying frenzy lasting more than a decade, Chinese companies have recently become more selective in their natural-resource investments, less willing to pay huge premiums to gain physical control over commodity supplies, and more interested in diversifying their portfolios with purchases of high-technology companies and real estate as well as resources.39 But this appears to represent a refinement of existing strategy rather than its abandonment. Chinese firms continue to pay top dollar to gain control of resources at their point of origin. Thus, in a deal described at the time as China’s ‘biggest and boldest grab for overseas energy resources yet’, the state-run oil giant CNOOC paid $15 billion in 2012 to buy the Canadian firm Nexen.40 This transaction gave China control over billions of barrels of oil in the Alberta oil sands, thought to be the world’s third-largest source of reserves.41 Five years later, in a deal nearly three times as large, another state-owned enterprise (the China National Chemical Corporation) paid $43bn to acquire Syngenta, a Swiss-based leader in the development of seeds and insecticides. As one assessment of the deal explained, ‘China’s new strategy for food security includes controlling its global supply chain from beginning to end, and the chain begins with seeds’.42

Nor are Chinese state-owned enterprises content merely to purchase individual companies, no matter the price tag. In some cases they appear willing to buy or build entire, integrated production and infrastructure networks necessary to supply China’s needs. Recently published accounts describe, for example, an ambitious programme of agricultural investments in the China–Pakistan Economic Corridor. According to an article in the Pakistani newspaper Dawn, these will extend ‘from one end of the supply chain all the way to the other. From provision of seeds and other inputs, like fertilizer, credit and pesticides, Chinese enterprises will also operate their own farms, processing facilities for fruits and vegetables and grain. Logistics companies will operate a large storage and transportation system for agrarian produce.’43

In addition to expanding its ownership of the means of production, since the turn of the century China has also moved to gain control over key portions of the maritime transportation system through which it receives the vast majority of its imported energy, grain and minerals. With backing from the Bank of China, the massive state-owned company COSCO has taken advantage of a worldwide shipping slump to buy up rivals and expand its share of the global container industry. COSCO’s recent acquisition of the Orient Overseas Container Line company made it the world’s third-largest carrier.44 Chinese-owned shipping lines now deliver more containers than those of any other country and, although the statistics are not readily available, it seems certain that a substantial and growing share of China’s seaborne trade is carried on vessels owned and operated (and built) by Chinese firms.45

China’s companies have also invested heavily in buying, building and expanding port facilities, both along its own coasts and on foreign soil. Of the latter, many are located in East and South Asia, but an increasing number are in Africa, the Middle East and Europe, including Spain, Greece and the Netherlands. By one estimate, Chinese port operators now handle 39% of all container traffic worldwide, and fully 67% of container traffic at the 50 biggest ports passes through facilities that are either Chinese-owned or in which Chinese companies have a significant investment.46

Many shipping-industry analysts agree that, as one put it, China’s purchases of ships and ports ‘are driven by a long-term push for control of strategic assets, which trumps the desire for near-term efficiency and reduced debt burdens’.47In addition to whatever purely economic logic may underlie them, these investments reflect ‘a recognition of the need to deal with Chinese vulnerability, particularly in respect of protecting the flow of commodity imports, especially energy’.48 This protection is not absolute; owning vessels and facilities cannot provide a complete guarantee that China will always be able to receive the imports it needs to keep its economy running, regardless of circumstances. In the event of war, the United States could always sink Chinese container ships and bomb or blockade ports. But in anything short of such a catastrophe, physical control can be extremely valuable. In a crisis, nationally owned shipping companies and port operators can be relied upon to give priority to Chinese cargo. Unlike their foreign counterparts (some of which might be owned by US allies such as Denmark, Germany, France or South Korea), they would also be less susceptible to threats and blandishments from hostile powers.

Nationally owned companies can be relied upon


The third and final piece of Beijing’s strategy is related to but distinct from the second. As one Chinese observer notes, given the ‘pressures and challenges’ on China’s maritime development, ‘the concept of “strategic hedging” – that is, pursuit of and investment in policies meant to protect the nation against the effects of geopolitical and economic uncertainty – has emerged’.49 Although the vast bulk of its imports and exports still moves by sea, in the past 15 years China has sought to diversify its supply networks by starting to build roads, rail links and pipelines that will extend across Eurasia from east to west and north to south. When complete, these will enable delivery of at least a portion of China’s anticipated demand for some critical commodities, including oil and natural gas, via routes that run entirely overland from source to market, or, at a minimum, have the benefit of shortening ocean voyages and bypassing critical choke points.

In a world without strategic risk, such projects – which now comprise the ‘belt’ portion of the so-called Belt and Road Initiative or BRI – might be difficult to justify. It comes as no surprise, therefore, that some Western analysts have dismissed the BRI as a wasteful boondoggle or, at best, a full-employment plan for China’s overbuilt metal and construction industries. In light of Beijing’s anxieties about seaborne-import dependence, and its feelings of vulnerability due to America’s continued naval supremacy, these investments can be better understood as a form of insurance against contingencies which, although very unlikely, would nevertheless be devastating if they were ever to occur. The premiums Beijing is presently paying are no doubt high, but if properly applied they may yet provide a meaningful measure of protection against disruptions in maritime supply. While the assumptions on which they are based are open to question, some rough calculations of projected supply and demand suggest that within 20 years China could get most of the oil and natural gas it needs from Russia, Central Asia and Iran.50

Phase three: shape and restructure

As China’s economy has continued to grow, so too has its relative importance to other countries, and its potential ability to use trade and investment to exert leverage over them. With the passage of time, China has progressed from trying simply to bind others to it in order to deter them from applying pressure, to actively contemplating and beginning to experiment with the use of its own economic instruments for purposes of shaping the preferences and policies of some of its trading partners. This process has been under way for some time, but it has accelerated markedly in the wake of the global financial crisis.

The crisis, which reached its peak in 2009, and the subsequent downturn in Sino-US relations associated with the Obama administration’s 2010–11 ‘pivot’ to Asia, caused Chinese analysts and policymakers to rethink the role of economic policy in their grand strategy.51 On the one hand, the evident failure of the much-vaunted American model of capitalist development, and the relative weakening of the West’s prospects for future growth, created an opportunity for China to raise its profile, expand its influence and increase its role in moulding the global economy and the entire international system. A study conducted by the Ministry of Commerce in 2009–10 highlighted these new realities by noting that the time had come for China to become a ‘strong trading nation’ rather than merely a ‘big’ one. In short, China needed to find ways ‘to exercise international influence commensurate with its status as the world’s second-largest economy’.52 Meanwhile, as seen from Beijing, the Americans were trying to compensate for their recent economic setbacks by stirring up trouble among China’s neighbours, encouraging them, among other things, to resist its attempts to assert control over disputed islands, waters and resources in the East and South China seas.

To cope with this challenge, Chinese strategists urged their government to make more ambitious and effective use of the various trade and financial instruments at its disposal. Rather than confronting the United States directly, and engaging in a head-to-head power–political competition that risked frightening and antagonising others, China should seek to draw its neighbours to its side with promises of market access and investment capital. According to one analyst, ‘until 2009, there was harmony’ between China’s efforts to promote better regional economic relations and ongoing US attempts to build up bilateral security ties with its regional allies. Now Washington was seeking actively to promote tensions and to alienate China from its neighbours. Under these new and more menacing conditions, the role of ‘China’s economic diplomacy’ was to ‘relieve the pressure and the dilemma presented by America’s “pivot to Asia”’ by reassuring others about its intentions and making clear how much they stood to gain from its continuing growth and rising prosperity. Through its offers of openness and ‘win–win cooperation’ Beijing should seek to ensure that ‘as many surrounding countries as possible adopt neutrality between the US and China as opposed to following the US to balance China’s strength’.53

In addition to stepping up its use of what some analysts refer to as ‘attractive economic power’, in the past decade China has also begun to experiment with a variety of ways of employing its growing clout for coercive purposes. This is not an entirely new approach. As we have seen, in the 1990s Beijing had already used the threat of lost procurement contracts to induce American corporations to pressure the Clinton administration to grant it most-favoured-nation status. Since the onset of the financial crisis, however, according to a study by an Australian think tank, Beijing has begun to use economic statecraft ‘more frequently, more assertively, and in more diverse fashion than ever before’.54 A number of examples may illustrate this trend.55

Following its entry into the WTO in 2001, China started to run massive trade surpluses with the United States, exporting far more than it imported from the US and accepting Treasury bills and other dollar-denominated assets to cover the gap. China’s willingness to proceed in this way fuelled its own export-driven growth, but it also enabled the US government to finance its large and growing annual budget deficits at relatively low cost. In 2008–09, Beijing sought to use the threat that it might slow or stop its acquisition of US debt (thereby driving up interest rates and pushing the American economy deeper into recession) to extract policy concessions from Washington. While these efforts met with only limited success, they marked a major advance in China’s willingness to use its emerging position as a major creditor nation to achieve its strategic objectives.56

China slashed imports


On the heels of its initial attempts to exert financial leverage over Washington, in 2010 Beijing opened a new front in its ongoing struggle with the US over Taiwan by threatening for the first time to impose trade sanctions on any American companies involved in arms sales to the beleaguered island. As in the financial domain, the follow-through and end results of this particular gambit were underwhelming: despite its public posturing, Beijing does not appear to have cancelled any contracts or ceased doing business with the major US aerospace firms involved in selling weapons to Taiwan.57 But, once again, China displayed a new-found willingness to consider coercive techniques that it had not previously employed and which, in fact, it had previously denounced on principle as unjust and immoral.

Rather than follow the legalistic American formula for applying sanctions, Beijing has begun to develop and apply its own distinctive techniques, including avoiding formal declarations, quietly targeting individual companies and, in some cases, using threats, rather than the actual imposition of punishment, in order to modify behaviour.58 One of China’s preferred gambits has been to punish an offending trading partner by constricting or cutting off access to its increasingly large and important domestic market. Thus, after the Norwegian Nobel committee awarded the 2010 Peace Prize to dissident Liu Xiaobo, China slashed imports of fish from Norway by more than half. Instead of a formal order restricting imports, the Chinese government issued ‘stringent new food safety regulations that’, in the words of one Washington Post article, ‘mysteriously targeted Norwegian fish’. Two years later, in the midst of a dispute over islands in the South China Sea, Beijing similarly claimed to have found dozens of harmful organisms in bananas from the Philippines, effectively halting imports of the fruit, imposing hardship on Filipino farmers and applying indirect pressure to the government in Manila.59

Not content to pick on relatively poor and weak countries, or those whose prosperity is heavily dependent on a handful of exports, China is now seeking to apply pressure to some of the world’s most advanced industrial economies. Following Seoul’s 2016 decision to permit the stationing of the THAAD missile-defence system on its soil, Beijing expressed its displeasure by, among other measures, cutting back on large, free-spending Chinese tour groups seeking to travel to South Korea, blocking the import of South Korean music, television programmes and luxury items, and using alleged safety violations to justify the closure of dozens of South Korean department stores in China. Not coincidently, these stores were owned by the Lotte Group, a large and influential conglomerate that had agreed to a request from Seoul to cede control of land needed for the deployment of THAAD.60

Starting in 2010, China also began to toy with the possible use of export bans, as well as import restrictions, as a strategic tool. In response to escalating tensions over contested islands in the East China Sea, at the end of 2010 Beijing allegedly suspended shipments of rare earth minerals to Japan.61 These materials are critical to the manufacture of high-end electronic components and, thanks to a combination of favourable natural endowments and loose environmental regulations, China had managed to establish itself as the world’s only active producer of several of them. Despite some initial expressions of panic over its possible effectiveness, within a few years the development of alternative sources of supply had helped to reduce the likely impact of China’s rare earth ‘weapon’.62 Once again, what is notable here is not so much the immediate results as the demonstration of intent and the willingness to experiment with novel techniques for translating wealth into power.

Beyond simply looking for ways to use trade and financial instruments to more reliably shape the behaviour of other states on specific issues, Chinese strategists have also begun to contemplate broader and more ambitious uses of their growing economic power. Since the financial crisis, analysts and policymakers have spoken often of the need for China to step up and play a more active role in restructuring the entire global economic system. As one author notes, China now faces ‘the historically unprecedented choice’ of either ‘accepting and assimilating into the international system under Western leadership, or using its own economic resources as a great power to seek changes, in order to bring about a system more advantageous to China’.63

What exactly a ‘more advantageous’ system would look like and how it could be created is not always entirely clear. In the last several years, however, a number of analysts have described a world in which, as a result of some combination of long-term material trends and deliberate policy choices, the entire structure of global production has been transformed. Among its other appealing features, the resulting new system will enable China to greatly reduce its dependence on, and vulnerability to, the United States (and perhaps Japan as well) while at the same time increasing its ability to exert leverage over others.

Niu Xinchun has described how, in the early stages of the reform and opening process, a still-underdeveloped China stood at the periphery of the global economy while the United States occupied its centre. During this period China was heavily dependent on the United States for virtually everything, relying on it as both its ‘primary export market and an important source of incoming capital, technology, and management experience’.64 China was able to use ‘large quantities of low-cost labour and resource consumption to manufacture products to sell to the United States, and earn large quantities of foreign reserves’.65 At first, most of its exports were low-end, labour-intensive manufactured commodities, but these were followed in time by more sophisticated consumer electronics and other products.

As China has continued to advance, and as other, less-developed countries have followed in its wake, the structure of the global economy has started to change. According to one observer, the international economic system has gradually shifted ‘from the monocycle of “center–periphery” to the pattern of a “bicyclic figure eight”’. In this configuration, ‘the United States, Europe and Japan’ are still ‘situated upstream on the industrial chain’; the ‘developing countries of Asia, Africa and Latin America are situated downstream’, while China is at the centre, acting as ‘a connecting link in the international economic and trade system’.66

Of course, in economics as in the natural world, the process of evolution never comes to a full stop – and, in fact, there is reason to believe that the pace of change is accelerating. Xu Jian has noted that China is in the midst of transforming its own development model, moving from a heavy reliance on investments in infrastructure and basic industries, and exports of low-end manufactured products, to ‘an innovation-oriented, technology-intensive and cost-effective model that relies more on domestic demand’.67 Progress up the value-added chain will be propelled in part by well-funded industrial-policy programmes which aim to make Chinese companies the world leaders in high-end semiconductors, artificial intelligence and robotic ‘fourth generation’ manufacturing technologies.68

Change is accelerating 


As China experiences this industrial upgrading, the nature of its commercial interactions with the rest of the world will change. On the one hand, China’s economic relationship with the United States and other advanced industrial countries will shift ‘from complementarity … to competitiveness’, according to Professor Jin Canrong of Renmin University. Instead of continuing to export ‘furniture, hardware and toys’, China will increasingly manufacture and sell the most advanced products, including supercomputers, self-driving cars, ‘heavy machinery and large aircraft’. Provided that the US is willing ‘to adapt to this … US–China trade can develop positively, otherwise it may take a sharply negative turn’. In general, however, China would be well advised to ‘change the current situation in which we seriously depend on the United States in the aspects of foreign reserves, export need, and technical importation’.69 For strategic as well as economic reasons, China should strive to reduce its reliance on the markets of those advanced industrial countries that it regards as fundamentally hostile. Here Chinese analysts appear to distinguish between the nations of central and western Europe, on the one hand, and the US and Japan on the other. Thus, according to one author, ‘Greater efforts should be made to increase market share in the EU, Asia-Pacific region, Africa, Latin America and the Middle East, appropriately reducing dependency on the market in the United States and Japan.’70

Even as it relies less on the United States and Japan, a more highly advanced China will become more deeply intertwined with the countries following behind it on the development path. In fact, China’s old model of labour-intensive, low- to middle-tech manufacturing is, according to Niu Xinchun, ‘very suitable for the further industrialization of Asia, Africa and Latin America’; its ‘vast capital and mature industrial system can be shifted to developing countries’.71 Much as the United States once did for China, so too should China now provide developing countries with the capital, technology and know-how they need to become manufacturing powers in their own right, taking China’s place on the lower rungs of the value-added ladder while it moves towards the top.

Together with China’s own rapidly expanding consumer base, the developing countries will provide an increasing share of the market for its advanced industrial products. At the same time, Chinese consumers will buy many of the less sophisticated, mass-market consumer goods that the developing countries will produce in increasing volumes. As its growth continues, ‘China will become a big market for imported goods worth $10 trillion’, says Gao Zuigui,72 and, if it plays its cards right, it should be able to use the vast gravitational pull of its market for strategic purposes. ‘China should consciously purchase more final consumer goods’, advises one author, in order to gain diplomatic leverage; it should ‘use the final consumer goods market to increase China’s influence’ over the behaviour of its trading partners.73Especially in its own neighbourhood, China should aim ‘to further replace the United States, Europe and Japan, becoming the most important final consumer products market in East Asia’. Its

strategic objective should be to help expand the domestic demand level of the whole region by absorbing the final consumer product production capacity of East Asian countries, so that East Asia gradually develops into an interdependent and relatively independent production chain. China can then use this asymmetric dependence for political influence.74


Although some of the discussion of a future economic order is couched in terms of levels of development and envisions China at the vanguard of a global group of emerging nations, as the preceding quote suggests, much recent commentary has a strong geographical component. Especially in the context of discussions of the BRI, Chinese analysts paint a picture of a future in which their country stands at the centre of a vast Eurasian regional system, tied together physically by road, rail and pipeline, integrated economically in a set of overlapping free-trade areas, or perhaps eventually a single, large trading zone, as well as through the increasingly widespread use of the renminbi as a medium of exchange.

While the physical boundaries of this system are not always specified (or agreed upon by various authors), at a minimum it clearly includes the countries immediately contiguous to China.75 Many analysts appear to envision a web of interconnections that would extend west, across Central Asia, into the heart of Europe, southwest into the Middle East (and perhaps to Africa and beyond) and south into portions of the Indian subcontinent and continental Southeast Asia. Some also discuss the possibility of using economic means to draw in ‘strategic fulcrum countries’ from China’s maritime periphery, including some that may be aligned with, or friendly towards, the United States. As one academic explains,

South Korea is a strategic pivot that can be used. If China and South Korea have successful discussions about a free-trade area, the one that will feel the greatest pressure will be Japan. The competition between South Korea and Japan in terms of economic structure is still high … Now, if China were to give its market to South Korea, the pressure on Japan’s industry and commerce would be intense.


Fearful of being ‘marginalised’, Japan itself might have to reconsider the nature of its relations with China.76 Indonesia and Thailand have been identified as potential ‘models or demonstrations’ whose close economic integration could aid ‘China’s neutralisation of the US Asia-Pacific alliance system’.77

Some of the BRI’s most enthusiastic boosters have gone so far as to describe a continent-spanning agglomeration of dozens of countries that would together account for 4.4bn people (more than 60% of the world total) and a combined GDP of $21trn, or nearly 30% of world GDP.78 Even if these projections prove fanciful, Beijing clearly believes that it stands to gain strategically as well as economically from a more integrated and developed Eurasia. Such an entity would provide China with more secure, overland access to a larger portion of the energy, food and resources that it needs to keep its economy going, reducing if not eliminating its vulnerability to supply disruptions or embargoes. The members of this emergent Eurasian system would consume a growing fraction of China’s exports, making it less susceptible to protectionism or boycotts by the advanced industrial nations. If an increasing portion of the trade among China and its Eurasian partners were conducted in renminbi rather than dollars, those taking part would also have less to fear from American financial sanctions.79

An integrated regional system of the sort Chinese planners appear to have in mind might not constitute a full-blown ‘Fortress Eurasia’ within which Beijing could shelter while continuing to prosper. But China’s wary rulers may see it as offering a compromise between the certain self-impoverishment of a return to autarky and the unacceptable risks associated with ever-deeper incorporation into a truly global economy.

Acknowledgements

The author wishes to thank Nadège Rolland and David Stack for their assistance with Chinese-language sources.

Notes

1 Christopher Hughes, ‘Globalisation and Nationalism: Squaring the Circle in Chinese International Relations Theory’, Millennium, vol. 26, no. 1, 1997, p. 104.

2 For a discussion of one of the early campaigns, see Thomas B. Gold, ‘“Just in Time!”: China Battles Spiritual Pollution on the Eve of 1984’, Asian Survey, vol. 24, no. 9, September 1984, pp. 947–74.

3 Daojiong Zha, ‘Chinese Considerations of “Economic Security”’, Journal of Chinese Political Science, vol. 5, no. 1, March 1999, p. 69. For a review and summary of some of this literature, see Benjamin Yeung, ‘China in the Era of Globalization: The Emergence of the Discourse on Economic Security’, Pacific Review, vol. 21, no. 5, December 2008, pp. 635–60.

4 Wang Zhengyi, ‘Conceptualizing Economic Security and Governance: China Confronts Globalization’, Pacific Review, vol. 17, no. 4, 2004, p. 528.

5 Philip C. Saunders, ‘Supping with a Long Spoon: Dependence and Interdependence in Sino-American Relations’, China Journal, no. 43, January 2000, p. 70.

6 Andrew J. Nathan and Andrew Scobell, ‘Globalization as a Security Strategy: Power and Vulnerability in the “China Model”’, Political Science Quarterly, vol. 131, no. 2, 2016, pp. 319–20.

7 Quoted in Yeung, ‘China in the Era of Globalization’, p. 638.

8 Ibid., p. 645.

9 Saunders, ‘Supping with a Long Spoon’, pp. 55–6.

10 On the lasting impact of these experiences see Manjaris Chatterjee Miller, Wronged by Empire: Post-Imperial Ideology and Foreign Policy in India and China (Stanford, CA: Stanford University Press, 2013).

11 See Shu Guang Zhang, Economic Cold War: America’s Embargo Against China and the Sino-Soviet Alliance, 1949–1963 (Stanford, CA: Stanford University Press, 2001).

12 See Hugo Meijer, Trading with the Enemy: The Making of US Export Control Policy Toward the People’s Republic of China (Stanford, CA: Stanford University Press, 2016).

13 See Dianne E. Rennack, China: U.S. Economic Sanctions (Washington DC: Congressional Research Service, 1997).

14 Zha, ‘Economic Security’, p. 83.

15 Saunders, ‘Supping with a Long Spoon’, pp. 75–6.

16 Nathan and Scobell, ‘Globalization as a Security Strategy’, p. 314.

17 Deng Xiaoping, ‘China Will Never Allow Other Countries to Interfere in Its Internal Affairs’, 11 July 1990, https://dengxiaopingworks.wordpress.com/2013/03/18/china-will-never-allow-other-countries-to-interfere-in-its-internal-affairs/.

18 Ezra F. Vogel, Deng Xiaoping and the Transformation of China(Cambridge, MA: Harvard University Press, 2011), p. 643.

19 Ibid., p. 641.

20 Anne-Marie Brady, Marketing Dictatorship: Propaganda and Thought Work in Contemporary China (Lanham, MD: Rowman and Littlefield, 2008), p. 170.

21 Michael Pillsbury, The Hundred-Year Marathon: China’s Secret Strategy to Replace America as the Global Superpower (New York: Henry Holt, 2015), p. 115.

22 See Carter Center, ‘Final Report of the Carter Center Limited Assessment Mission: March 2010 Villagers Committee Elections in Yunnan Province, China’, May 2010, p. 4, https://www.cartercenter.org/resources/pdfs/peace/china/2010-china-village-elections-rpt.pdf.

23 See, for example, Bryan Ho, ‘Village Democracy Shrugs in Rural China’, East Asia Forum, 22 July 2014.

24 James Mann, The China Fantasy: How Our Leaders Explain Away Chinese Repression (New York: Viking, 2007), pp. 19–20.

25 Quoted in Aaron L. Friedberg, A Contest for Supremacy: China, America and the Struggle for Mastery in Asia (New York: Norton, 2011), p. 94.

26 Vogel, Deng Xiaoping and the Transformation of China, p. 643.

27 Chang Lulu and Chen Zhimin, ‘Xiyinxing jingji quanli zai Zhongguo waijiao zhong de yunyong’ [The Application of Attractive Economic Power in China’s Diplomacy], Waijiao Pinglun [Foreign Affairs Review], vol. 3, 2014, pp. 1–16.

28 James Mann, About Face: A History of America’s Curious Relationship with China, from Nixon to Clinton (New York: Knopf, 1999), pp. 292–3.

29 Ibid., p. 296.

30 Saunders, ‘Supping with a Long Spoon’, p. 78.

31 Ibid.

32 Sergei Troush, ‘China’s Changing Oil Strategy and Its Foreign Policy Implications’, Brookings Institution, 1 September 1999, https://www.brookings.edu/articles/chinas-changing-oil-strategy-and-its-foreign-policy-implications/.

33 Aaron L. Friedberg, ‘Going Out’: China’s Pursuit of Natural Resources and Implications for the PRC’s Grand Strategy (Seattle, WA: National Bureau of Asian Research, 2006), pp. 21–2.

34 For a discussion of China’s success in increasing grain production, but its failure to reach a target of supplying 95% of demand from domestic supply, see Gregory Veeck, ‘China’s Food Security: Past Success and Future Challenges’, Eurasian Geography and Economics, vol. 54, no. 1, 2013, pp. 42–56.

35 For a discussion of the opening stages in this process, see Jonas Parello-Plesner and Mathieu Duchatel, China’s Strong Arm: Protecting Citizens and Assets Abroad (Abingdon: Routledge for The International Institute for Strategic Studies, 2015).

36 Some Chinese analysts agree. For example, one professor of agricultural economics has recently argued that the traditional notion that ‘food supply for the world’s largest population should not be controlled by foreign countries’ is now unrealistic, and that ‘China should … abandon its self-sufficiency targets … Rather, food security should be ensured by increasing the income of the Chinese people.’ In this view, ‘food security will no longer be an important issue for a rich China’. This optimistic assessment does not appear to be shared by others in the Chinese system, especially those involved in the making of national-security policy. Xiaohua Yu, ‘Food Security in China’, China Policy Institute: Analysis, 13 December 2016, https://cpianalysis.org/2016/12/13/food-security-in-china/.

37 Geoff Colvin, ‘Inside China’s $43 Billion Bid for Food Security’, Fortune, 21 April 2017, http://fortune.com/2017/04/21/chemchina-syngenta-acquisition-deal/.

38 Some of the early manifestations of the ‘going out’ policy and its impact are described in James Kynge, China Shakes the World: A Titan’s Rise and Troubled Future – and the Challenge for America (New York: Houghton Mifflin, 2006). China’s activities in the energy and mineral domain are discussed in William J. Norris, Chinese Economic Statecraft: Commercial Actors, Grand Strategy, and State Control (Ithaca, NY: Cornell University Press, 2016), pp. 67–106.

39 See Elizabeth Economy and Michael Levi, ‘By All Means Necessary: How China’s Resource Quest Is Changing the World’, All China Review, 3 July 2015, http://www.allchinareview.com/by-all-means-necessary-how-chinas-resource-quest-is-changing-the-world/. Economy and Levi cite a study estimating that China ‘typically has paid 20 percent more for oil and gas assets than the industry average’. This could be seen either as a measure of the inefficiency and wastefulness of the Chinese approach to acquiring energy resources, or as an indication of the size of the premium Beijing has been willing to pay in order to gain whatever additional security it believes it derives from physical ownership of sources of supply.

40 Michael J. de la Merced and Ian Austen, ‘Chinese Oil Company Bids $15 Billion for Canadian Producer’, New York Times, 23 July 2013, https://dealbook.nytimes.com/2012/07/23/cnooc-to-buy-nexen-for-15-billion/?_r=0.

41 Euan Rocha, ‘CNOOC Closes $15.1 Billion Acquisition of Canada’s Nexen’, Reuters, 25 February 2013, http://www.reuters.com/article/us-nexen-cnooc-idUSBRE91O1A420130225.

42 Colvin, ‘Inside China’s $43 Billion Bid for Food Security’.

43 Khurram Husain, ‘Exclusive: CPEC Master Plan Revealed’, Dawn, 21 June 2017, https://www.dawn.com/news/1333101. It is not entirely clear from this account how much of the new agricultural production will be consumed in Pakistan as opposed to being sent back to China.

44 Costas Paris, ‘China’s Cosco Agrees to Buy Shipping Rival OOCL’, Wall Street Journal, 8 July 2017, https://www.wsj.com/articles/chinas-cosco-agrees-to-buy-shipping-rival-oocl-1499523063.

45 James Kynge, Chris Campbell, Amy Kazmin and Farhan Bohari, ‘How China Rules the Waves’, Financial Times, 12 January 2017. See also Cambiaso Risso Group, ‘China-Owned Ships: Fleet Expansion Accelerates’, 15 March 2016, http://www.cambiasorisso.com/china-owned-ships-fleet-expansion-accelerates/.

46 Kynge et al., ‘How China Rules the Waves’.

47 Ben Bland, ‘Why China’s Global Shipping Ambitions Will Not Easily Be Contained: Push for Control of Strategic Assets Trumps Short-Term Commercial Logic’, Financial Times, 17 July 2017, https://www.ft.com/content/7065b5dc-6ada-11e7-bfeb-33fe0c5b7eaa?mhq5j=e3.

48 Mercy A. Kuo, ‘The Power of Ports: China’s Maritime March’, Diplomat, 8 March 2017, http://thediplomat.com/2017/03/the-power-of-ports-chinas-maritime-march/.

49 Wu Zhengyu, ‘Toward “Land” or Toward “Sea”? The High-Speed Railway and China’s Grand Strategy’, Naval War College Review, vol. 66, no. 3, Summer 2013, p. 53.

50 Samir Tata, ‘Deconstructing China’s Energy Security Strategy’, Diplomat, 14 January 2017, http://thediplomat.com/2017/01/deconstructing-chinas-energy-security-strategy.com&utm_campaign=buffer.

51 For useful surveys of recent Chinese thinking on this topic, see Matt Ferchen, ‘How New and Crafty Is China’s “New Economic Statecraft”?’, working paper, 22 March 2016, https://www.linkedin.com/pulse/how-new-crafty-chinas-economic-statecraft-so-much-i-argue-ferchen; Timothy R. Heath, ‘China’s Evolving Approach to Economic Diplomacy’, Asia Policy, no. 22, July 2016, pp. 175–91; Audrye Wong, ‘Chinese Perspectives on Economic Diplomacy’, Asan Forum, 22 September 2016, http://www.theasanforum.org/chinese-perspectives-on-economic-diplomacy/; and Zhang Xiaotong and James Keith, ‘From Wealth to Power: China’s New Economic Statecraft’, Washington Quarterly, vol. 40, no. 1, Spring 2017, pp. 185–203.

52 Heath, ‘China’s Evolving Approach to Economic Diplomacy’, pp. 175–6.

53 Gao Cheng, ‘Cong Zhongguo jingji waijiao zhuanxing de shijiao kan “Yidai Yilu” de zhanlüe xing’ [‘One Belt One Road’ from the Perspective of China’s Economic Diplomacy] Guoji Guancha [International Observer], no. 4, 2015, pp. 35–48.

54 James Reilly, ‘China’s Economic Statecraft: Turning Wealth into Power’, Lowy Institute, 27 November 2013, https://www.lowyinstitute.org/publications/chinas-economic-statecraft-turning-wealth-power.

55 For an interesting attempt to categorise the various ways in which China has sought to use economic leverage, see Evan A. Feigenbaum, ‘Is Coercion the New Normal in China’s Economic Statecraft?’, Carnegie Endowment for International Peace, 25 July 2017, http://carnegieendowment.org/2017/07/25/is-coercion-new-normal-in-china-s-economic-statecraft-pub-72632.

56 Regarding Chinese efforts to pressure the US, see the analysis in Daniel W. Drezner, ‘Bad Debts: Assessing China’s Financial Influence in Great Power Politics’, International Security, vol. 34, no. 2, Fall 2009, pp. 7–45. Beijing has recently used similar techniques, albeit on a smaller scale and against less formidable targets, to silence European critics of its human-rights policies. In 2014 the Spanish government blocked efforts by human-rights activists to bring charges against Chinese officials in Spanish courts. At the time, China reportedly held 20% of Spain’s public debt, and Madrid reportedly feared that ‘Beijing could unleash a new surge in borrowing costs by suddenly selling its titles’. Diego Torres, ‘Why the West Treats China with Kid Gloves’, Politico, 21 June 2017, http://www.politico.eu/article/china-europe-trade-why-the-west-treats-with-kid-gloves/.

57 Keith Bradsher, ‘U.S. Deal with Taiwan Has China Retaliating’, New York Times, 30 January 2010; Elaine Kurtenbach, ‘China’s Interests May Limit Sanctions on US Firms’, San Diego Union-Tribune, 1 February 2010, http://www.sandiegouniontribune.com/sdut-chinas-interests-may-limit-sanctions-on-us-firms-2010feb01-story.html.

58 See James Reilly, ‘China’s Unilateral Sanctions’, Washington Quarterly, vol. 35, no. 4, Fall 2012, pp. 121–33; Clay Jian, ‘Is China an Emerging Sanctioning State?’, ResearchGate, December 2012, https://www.researchgate.net/publication/282298631_Is_China_an_Emerging_Sanctioning_State.

59 Andrew Higgins, ‘In Philippines, Banana Growers Feel Effect of South China Sea Dispute’, Washington Post, 10 June 2012, https://www.washingtonpost.com/world/asia_pacific/in-philippines-banana-growers-feel-effect-of-south-china-sea-dispute/2012/06/10/gJQA47WVTV_story.html?utm_term=.31d4d6e788a5.

60 ‘S Korea Complains to WTO About China Over Thaad’, BBC, 20 March 2017, http://www.bbc.com/news/business-39324536; Jethro Mullen and Sol Han, ‘One Company is Bearing the Brunt of China’s Anger Over U.S. Missile System’, CNN, 7 March 2017, http://money.cnn.com/2017/03/07/news/china-lotte-thaad-south-korea-tensions/index.html.

61 Keith Bradsher, ‘Amid Tension, China Blocks Vital Exports to Japan’, New York Times, 22 September 2010, http://www.nytimes.com/2010/09/23/business/global/23rare.html.

62 See Alan Beattie, ‘Rare Earths and China’s Self-Correcting Folly’, Financial Times, 8 January 2015, https://www.ft.com/content/17085d7c-78b1-3ddc-9ba0-4bcde804da39; and Eugene Gholz, Rare Earth Elements and National Security (New York: Council on Foreign Relations, October 2014).

63 Niu Xinchun, ‘Zhongguo waijiao xuyao zhanlüe zhuanxing’ [China’s Diplomacy Needs a Strategic Transformation], Xiandai Guoji Guanxi[Contemporary International Relations], 13 January 2013.

64 Ibid.

65 Ibid.

66 Ibid.

67 Xu Jian, ‘Rethinking China’s Period of Strategic Opportunity’, China Institute of International Studies, 28 May 2014, http://www.ciis.org.cn/english/2014-05/28/content_6942258.htm.

68 See, for example, Jost Wubbeke et al., Made in China 2025: The Making of a High-Tech Superpower and Consequences for Industrial Countries (Berlin: Mercator Institute for China Studies, December 2016); and US Chamber of Commerce, Made in China 2025: Global Ambitions Built on Local Protections (Washington DC: US Chamber of Commerce, 2017).

69 Professor Jin Canrong of Renmin University, quoted in Deng Yuan and Xiong Zhengyan, ‘Zhong-Mei xinxing daguo guanxi: guang you gainian yuanyuan bu gou’ [China–US New Type of Great-Power Relationship: A Mere Concept Is Not Enough], Guoji Xianqu Daobao[International Pioneer], 30 September 2014. This assessment is not unique to Chinese observers. For an interesting recent analysis arguing similarly that China’s movement towards a consumption-driven economy will result in a ‘shift from complementarity to competition’, see William J. Norris, Geostrategic Implications of China’s Twin Economic Challenges (New York: Council on Foreign Relations, June 2017), especially pp. 7–8.

70 Huang Zhiling, ‘Zhongguo yi jinzao tiaozheng duiwai jingji zhanlüe’ [China Should Adjust Its Foreign Economic Strategy as Soon as Possible], Jingji Cankao Bao [Economic Information Daily], 24 February 2014.

71 Niu, ‘Chinese Diplomacy Needs a Strategic Transformation’.

72 Gao Zugui, ‘Zhongguo guoji huanjing suzao jinru xin jueduan’ [China Has Entered a New Stage for Shaping the International Environment], Liaowang [Lookout], vol. 45, 2013.

73 Gao Cheng, ‘“One Belt One Road” from the Perspective of China’s Economic Diplomacy’.

74 Gao Cheng, ‘Zhongguo jueqi beijing xia de zhoubian geju bianhua yu zhanlüe tiaozheng’ [China’s Rise, Structural Evolution of Its Neighbouring Regions, and Its Strategic Adjustment], Guoji Jingji Pinglun [International Economic Review], no. 2, 2014.

75 See the discussion in Yan Xuetong, ‘Zhengti de “zhoubian” bi Meiguo geng zhongyao’ [The Overall ‘Periphery’ Is More Important than the United States], Huangqiu Shibao [Global Times], 13 January 2015.

76 Li Wei, Xu Jin and Gao Cheng, ‘Dazao Zhongguo zhoubian anquan de “zhanlüe zhidian” guojia’ [Building ‘Strategic Fulcrum’ Countries for China’s Peripheral Security], Shijie Zhishi [World Knowledge], 15 August 2014.

77 Gao Cheng, ‘“One Belt One Road” From the Perspective of China’s Economic Diplomacy’.

78 See the discussion in Nadège Rolland, China’s Eurasian Century? Political and Strategic Implications of the Belt and Road Initiative (Seattle, WA: National Bureau of Asian Research, 2017), p. 96.

79 Todd Williamson, ‘Too Big to Sanction: How the Internationalization of China’s Currency Hurts Washington’s Ability to Punish Human Rights Violators’, Foreign Policy, 18 March 2016. See also Christer Ljungwall and Viking Bohman, ‘Mending Vulnerabilities to Isolation’, RUSI Journal, vol. 162, no. 5, 2017, pp. 26–33.

Aaron L. Friedberg is Professor of Politics and International Affairs at Princeton University

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