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
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.
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