China’s economic statecraft: the use of economic power in an interdependent world

Abstract

ABSTRACT The purpose of this paper is to observe how China’s exercise of economic statecraft changed with the growth of its economic power. While there is a widely accepted consensus that the distribution of economic capabilities has changed in favor of China over the recent decades, it still needs to be examined what effect this has had on China’s actual bargaining behavior within that new power structure. The analysis is built on the framework of complex interdependence, arguing that the expansion of China’s economic capabilities has led to greater levels of interdependence with other countries and has also tilted the power asymmetries in favor of China. The analysis operationalizes the change in China’s exercise of economic statecraft, i.e., the use of economic tools in pursuit of national objectives abroad, as a foreign policy change and observes the quantitative change (how intensively the same economic tools were utilized), the qualitative change (what means specifically were employed) and the change in goals (what national objectives these economic means were aimed at achieving). The analysis demonstrates that China used the same economic tools more intensively as a result of higher capacity. Also, it turned to unilateral economic sanctions more often since 2007. Further, China embraced multilateralism in the exercise of its economic statecraft under the current leadership. The paper concludes that in the interdependent world, a very inertial process of power asymmetry shift to China’s favor has started and China is likely to be increasingly able to translate its economic power into actual influence.