How Effective is China’s Economic Bullying?

• In Event: International Responses to China’s Global Presence

Abstract

Some argue that the true geopolitical threat from a rising China is not from its growing military power but its economic might in the form of asymmetrical trading relationships. This argument frequently points to China’s rare earth minerals (REM) ban on Japan in 2010 and its success in getting the Japanese government to release the Chinese trawler captain. The reality of the event is much less clear. The Japanese released three days earlier than they had initially scheduled, and there was no change in the policy going forward. When a similar incident occurred in 2011, China did not launch a protest. In two later cases: the 2012 dispute with Japan over the Japanese government’s decision to purchase three of the Senkaku/Diaoyu Islands from a private citizen and the 2016 dispute with South Korea over the placement of the US THAAD missile defense system, China was able to cause significant economic harm to both countries yet failed to achieve any of stated goals.
One thing that is apparent from these incidents is that China is unable to sustain its economic pressure on the target countries in order to obtain policy changes in the rival states. Why? In this paper, I conduct three process-tracing case studies of these three incidents—China-Japan 2010, China-Japan 2012, and China-South Korea 2016— highlighting a progressive set of decisions by government officials in both countries and their interaction with business actors and other economic constituents. I also broaden the economic sphere beyond trade to include other important measures such as FDI. In doing so, I show that while businesses’ ability to influence China’s foreign policy is limited, it is sufficient to alter policies that would harm China’s economic growth in the medium to long term. In a broader sense, this work demonstrates the importance of examining domestic level bargaining within the interstate dispute framework. Finally, the use of process tracing illustrates how this technique can be used to study mechanisms that quantitative measures or narrative accounts cannot capture.

Author

• Anita R Kellogg, University of California, Los Angeles