China’s Economic Statecraft in the Taiwan Strait

• In Event: China and Taiwan: Challenges and Opportunities

Abstract

Economic statecraft is the use of economic tools to achieve political goals. This paper assesses the effectiveness of China’s economic statecraft toward Taiwan. As China grows increasingly powerful, economic statecraft and coercive strategies are becoming key components of China’s diplomatic tools. Since the early 2000s, China has embarked upon a “hearts and minds” strategy aimed at winning over Taiwan voters to support unification with China. Beijing adopts a two-pronged strategy. First, Beijing seeks to cultivate economic interdependence across the Taiwan Strait, hoping that the benefits of trade will spill over to political negotiation over the terms of unification. This economic strategy resulted in the landmark Economic Cooperation Framework Agreement (ECFA) in 2010. Second, Beijing promotes cultural exchanges and people-to-people contacts across the Strait to cultivate a shared sense of “Chineseness” with Taiwanese people. China’s economic statecraft, however, has been ineffective. Polls consistently show declining support for unification among Taiwanese people and a rising tide of Taiwanese identity. Economic statecraft is likely to become more prominent as the US-China security competition intensifies. Employing the literature on economic statecraft, this paper assesses China’s policy toward Taiwan and analyzes reasons for its failure.

Author

• Yuan-kang Wang, Western Michigan University