Chinese willingness to use economic leverage to settle international disputes in its favor is a worrisome trend.
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 ASEAN chair, Cambodia, for failing to forge a consensus. Behind Phnom Penh’s passivity, however, was pressure from Beijing to keep any mention of the South China Sea, especially the recent faceoff between China and the Philippines in the Scarborough Shoal, out of the final statement. That the Chinese had sway over Cambodia should not come as a surprise. Beijing has provided billions in aid to Cambodia. In 2011 alone the amount of foreign investment pledged to Phnom Penh by China was 10 times greater than that promised by the United States.
For more than a decade, China has 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. The China-ASEAN FTA, Chinese foreign direct investment, foreign assistance, and trade have all been used to encourage countries to consider Beijing’s interests when formulating policies and eschew actions that China would view as 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 was the Philippines, which on April 10 sent a navy frigate to investigate the sighting of Chinese fishing boats in the lagoon of Scarborough Shoal, well within the Philippines’ 200-nautical mile Exclusive Economic Zone. After an armed 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 Coast Guard Cutter. China dispatched an armed Fishery Law Enforcement Command ship to reinforce its sovereignty claim. The standoff continued for over a month.
Incensed by Manila’s unwillingness to withdraw from the Shoal, China resorted to economic measures to punish the Philippines for encroaching on Chinese sovereignty. Chinese quarantine authorities reportedly blocked hundreds of container vans of Philippine bananas from entering Chinese ports, claiming that the fruit contained pests. The Chinese decision to quarantine the bananas dealt a major blow to the Philippines which exports more than 30 percent of its bananas to China. Subsequently, China began slowing inspections of papayas, mangoes, coconuts, and pineapples from the Philippines. In addition, Chinese mainland travel agencies stopped sending tour groups to the Philippines, allegedly due to concerns for tourists’ safety. In January, China had surpassed Japan to become the third-largest source of tourists for the Philippines. Filipino business leaders pressured the government to abandon its confrontational approach in the Scarborough Shoal, which was precisely the outcome that China hoped for. In early June, Beijing and Manila reached an agreement to simultaneously pull out all vessels in the lagoon. The Philippines abided by that agreement, and then withdrew all its vessels from the Shoal due to bad weather later that month. According to Manila, Chinese fishing vessels remain in the lagoon in violation of the agreement. Reports suggest Chinese ships were recently blocking the entrance of the lagoon, preventing any Philippine ships and fishing vessels from re-entering the area.
A more widely reported case of China using trade as a weapon to force a country to alter its policy occurred in September 2010 when Beijing blocked shipments of rare earth minerals to Japan. The action was taken in retaliation for Japan’s detention of the captain of a Chinese fishing trawler in an incident near the Senkaku Islands, which are under Japanese control but are also claimed by China and Taiwan. China’s customs agency notified companies that they were not permitted to ship to Japan any rare earth oxides, rare earth salts, or pure rare earth metals, although these shipments were still allowed to Hong Kong, Singapore, and other countries. The Chinese subsequently slowed rare earth shipments to the United States and countries in Europe as well, insisting they were attempting to clean up the rare earth mining industry, which has caused severe pollution in some places where the minerals are mined. Beijing’s action alarmed Tokyo and was a major factor in the decision of the Japanese government to release the captain. The embargo was viewed by many experts as evidence of Chinese willingness to use economic leverage to have its way in an international dispute.
China doesn’t just target Asian nations. A third example of China’s use of economic coercion was triggered by the award of the 2010 Nobel Peace Prize to Chinese dissident Liu Xiaobo by the Norwegian Nobel Committee. After the announcement was made in October 2010, the Chinese foreign ministry warned that the decision would harm relations between Beijing and Oslo, despite the fact that the Nobel Committee is independent from the Norwegian government. China also warned foreign diplomats that sending representatives to the Nobel Peace Prize award ceremonies would have adverse consequences. Eighteen countries, mostly nations with poor human rights records of their own, opted to not attend.
In the ensuing months, China froze FTA negotiations with Norway and imposed new veterinary inspections on imports of Norwegian salmon that resulted in a severe cutback. The volume of salmon imports from Norway shrunk 60 percent in 2011, even as the Chinese salmon market grew by 30 percent.
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 cooperation 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 behavior 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 realized, 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 S. Glaser is a senior fellow with the CSIS Freeman Chair in China Studies and a senior associate at Pacific Forum CSIS. This article was originally published by Pacific Forum CSIS PacNet here, and represents the views of the respective author.
Photo Credit: Wikicommons
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jack lee
the US through violence and war to achieve its own national interests all the time, our China through economic means to achieve its own national interests, a contrast to compete with established contractors. As long as a normal person can see who is the threat to the world
intellectual merc
Yes its china. The west may not have a clean past but atleast it presented a form of justification for its actions in terms of iran etc. Whereas China simply claimed its “territory” and outright refuses to present itself to a higher council to settle the dispute and exacerbated the situation by maintaining a significant presence on the area while the issue has yet to be resolved.
lincoln
Only war can shut-off the mouth of any big bully. Let there be war as early as possible and see what the Middle Kingdom can really do with its big mouth. Enough of so much reasons, anyway they won’t listen until you place a missile in their brains.
Do something now before it’s really late, the bully is getting stronger because of the greedy profiteers.
nirvana
@lincoln,
I am sorry, but I disagree with you. I would rather agree with "A Teaspoon Is Not A Spade".
The PRC has certainly big mouth and is certainly arrogant. But it is not a sufficient reason to wage war, not in this century. You can't use war to solve today's conflicts and you don't win war AND HAVE PEACE if you don't have the full support of your populace and a certain support of THEIRS.
Check righteousness on your side first. Then open the eyes of the Chinese. You will get both peace and avoid war
You may need to be ready for war though, as they will test your will and may act erratically too.
Hosni
@nirvana — You are SO right! If the Chinese people were informed and permitted to speak openly about issues, they would move behave more like a democratic government and treat their neighbors with more respect.
That really is the key to dealing successfully with China. The censorship and internet blackout policies of the Chinese leaders telegraph their own internal belief that their grip on power is insecure. (Who would know better than they?) The policies also reveal what the Chinese leaders fear most: facts in the hands of the public, discussion, truth.
Rather than focusing so intently on 'tactical' day-to-day issues with China, which is all about gaining narrow advantages on narrow issues, we should take a more strategic approach and FOCUS OUR FOREIGN POLICY toward China on advocating free speech as the fundamental right of the Chinese people. (It is #1 in our own Bill of Rights.) If any nation's people cannot speak openly, they cannot inform their government about abuses and public problems; and if they cannot inform the government about such issues, the government cannot address them; and if the government does not address them, it is not legitimate.
The Gipper recognized its economy as the Soviet Union's Achilles heel and challenged its leaders to an arms race that wrecked the underpinnings of their empire.
The U.S. president who deals successfully with China will seize on the fundamental conflict between the exploitative regime's need for secrecy and misinformation in an age of smartphones and other information technologies. Let's hope our leaders know — as Nirvana did, above — that China's rulers don't fear economic sanctions or any diplomatic/military pressure from outside even half as much as they fear an informed and outspoken Chinese citizenry.
John Chan
@lincoln,
Can’t tolerate different opinion? Freedom of speech is for the Whiteman only? You surly have picked up the bad habit of Lincoln, using war to suppress anyone does not agree with him.
Unless you will put your life on the line, calling war on somebody's expenses is cowardice, besides Americans have never stop bombing and killing to suppress when somebody does not agree with them. Nobody believes a minute the US will not start another war when the time is rip. Peace is not in the American dictionary.
A Teaspoon Is Not A Spade
This article is too selective where China is concerned. What about America's blatant protectionist hike in import tariffs against Chinese products on grounds of "anti-dumping", subsidies to exporter-suppliers, national security, sub standard, health, etc…. What about its prohibition of export of hi-tech goods to China? What about the U.S. led sanctions against iran, N Korea, Syria, Cuba?
Putting the matter in balance, what Beijing does in relation to Manila is nothing compared to what Washington does. Washington is an elephant to the mosquito countries it penalises and punishes via it economic sanctions or protections. Beijing cannot even begin to be compared.
So, my dear bonnie glaser, let's not make mountain out of a molehill or a storm in a teacup, shall we? it's a little unfair, no?
The-right-balance
henry ford
This paper is about China and its claim of " peaceful rise ", yet often uses and causes non-peaceful consequences. If you want to see analysis of selected US diplomacy, there are plenty articles to read elsewhere. You don't have blindly defend China to make it look better. People of the free world are smarter than you seem to understand.
Moreover, two wrongs don't make a right!
Flam
I agree to the author and I can say it is really true! China’s rise on power and economy is not “peaceful” as they say instead it creates conflicts andtp troubles among neighbor countries because of countless illegal activities, piracy, and such atrocities to favor on China’s side to expand her territories in imperialistic manner. All neighbor countries and especially those are against in chinese thinking pattern must be vigilant over the action of China because there will be a great implication someday that will change the people lives into worst.
vic
Think. Everyone has the power to spend his money. Since China is earning your cash and has such a big surplus then by definition you must agree to what China has given you. The debit and credit on accounts are "peaceful" transactions; there is no coercion in voluntary transactions. Can we say then that China's rise is peaceful. You voted with your money. QED.
Flam
@vic
I’m going to disagree with you China uses her money thru loans and investment in form what they say “aid” to gain trust form other countries like Cambodia to support its own interest regardless its true purpose which I believe it is qmbigous and conspicous . We can’t say that China giving aid to those poor countries meaning “peaceful rise” I this is just a major step to gain more support for its “Core Interest” that will be used for imperialism and expansionism plans over the waters, shoals, and lands that not belong to them.
flim
@flam, if you are not here to debate but to make scurrilous remarks,please get lost!
Flam
@flim
I am not making scurrilious remarks here I just making my own reaction over the article that I have read above and I made my stand clear about this topic. If you want to say something say it nicely.
Afghan
We like China and we want more investment of China in Afghanistan. Chinese are loyal and committed in areas they invest and proved everywhere to be productive.
Frank Wall
In fairness, you really can't compare the China/Philippines dispute with the situation between the west and Iran. The west has no territorial claim on Iranian waters – both parties must respect that the strait of Hormuz has to be kept open. Even before China started bullying the Philippines, statistics showed that a worldwide poll felt China's trading practices were distinctly unfair compared to the EU and US: http://www.statista.com/statistics/182598/opinion-on-the-fairness-in-trade-of-china-the-us-and-the-eu/
vic
Everyone makes his choice when he buys. To buy or not to buy, that is the consumer's choice. Since Chinese trade figures end with a financial surplus, this means that people voluntarily bought Chinese goods, and they still continue to buy. The consumers do not think it is unfair, otherwise they would not be buying. People voted with their money. Politicians still don't get this when they go around shouting unfair trade.
nirvana
The question of trade fairness it not as simple as an opinion poll posted on the Internet, or freedom of choice for the consumers. Look at the following aspects, for example:
a) Is there any disguised protection behind health and environmental control criteria?
b) Is there any manipulation of currency?
c) Is there any unfair exploitation of cheap labour, illegal labour (children)?
d) Is there government subsidies, price dumping, collusion on price?
e) Is there discriminatory pricing based on political agenda?
In an ideal world, everybody use the same currency, abide to the same quality control criteria, have the same social protection for workers, have reliable anti-trust monitoring agencies, have a clear separation between business, military and government authorities. Then end-user price is the ultimate criterion of fairness. Otherwise, price distortion is the rule.
vic
Yes, the price is determined by the intersection of demand curve and supply curve. China determines the supply curve, and the importing country (e.g. US) determines the demand curve. All the factors that you mentioned are encapsulated in these curves. Presto, the end result is the market price. Your barking is meaningless.
nirvana
Barking? Did I say something offending above?
You, on the other hand have shown that you lack basic understanding of the words "politeness", "democracy", "consensus",…
Vale
@vic
Don't tell me you missed these sentences below the pages selection and above the comment panel:
Please note, no comments that include abusive or inflammatory remarks
aimed at writers or other commenters will be accepted.
We're intellectual individuals with manners commenting the article wroted by other intelletual. Unless you admit that you're not one of us. You should not use those offensive word/phrase. You do owe Nirvana an apology for that matter, not the article/political point-of-view.
rst
The author seemed to defame China as much as could citing ludicrous examples. It's a natural phenomenon that every country look for their interests. If there interests are harmed than they naturally use many tactics to keep their interests intact. We should view the things that whether such measures harm the international peace or justice as a whole. If we look the attitudes of western countries towards eastern and middle east no one is confused that hegemonies showed by the western is far greater than the China. This article also is guided by anti-china motive and wanted to contain the prosperity of china by charging one after another concocted allegations.
Flam
@rst
I’m going to disagree with you evry country has own interest but in case between China and Philippines are different China’s interest are exceeded on what really they must have, they expand their border on whole south china sea and conquered aggressively without presenting sufficient and pertinent evidences and legal claims that can be verify through arbitration. If you are saying that the “west” has a problem in attitude towards east particularly China I can say also that east particlualry “China” has a problem in attitude towards “west” and this is true when you just open your eyes and be unbiased on your belief.
ImperiumVita
You can argue that China has only done what any nation would, and you can voice your full agreement and support for its actions.
But you cannot call the incidents listed in the article "concocted allegations," as each one has been well documented and is a factual and objective representation of the actions taken by China.
If you continue to insist the allegations are unfair, one is forced to doubt your intellectual objectivity, and rigor.
davida
replace the name" china" in this article with 'USA" and it might make it sound more credible, haa….
tocharian
China is a land of 3 C's: Coercion, Corruption and Control.
China's strategy is to break up ASEAN into a bunch of weak and obedient Chinese Vassal States by using the 2B technique (Bribery and Bullying). Bribing is how the Chinese are "handling" the corrupt ruling class in very poor countries like Cambodia and Laos (and until very recently in "Myanmar"). Bullying is what China is trying to do with Vietnam and Philippines. Whether China will succeed in its Grand Hegemonial Scheme called the "String of Pearls Strategy" of controlling Southeast Asia remains to be seen. It's not just the USA that is worried about this. No one in the world really likes a bully even if you are "coerced" into doing what the bully wants. It's not just about the US trying to "containing China". It's more about bullies behaving badly (sorry there were 3B's lol).