China’s Evolving Approach to Economic Diplomacy

Abstract

Although theorists of international relations have long regarded trade interdependence as pacifying,1 recent scholarship has arrived at a more ambivalent conclusion. In Transition Scenarios: China and the United States in the Twenty-First Century, David Rapkin and William Thompson cautioned against the expectation that trade interdependence would necessarily restrain between two great powers. They pointed out that in past instances in which an established system-leading power faced from a rising challenger, competition and tensions have prevailed over the desire to prevent interruptions of commerce.2 The authors further noted that many of these tensions have stemmed from strategies employed by rising powers to catch up to the established powers. Rising powers have frequently adopted centralized strategies, including government intervention and protection, subsidies, and industrial policies, which countries favoring the status quo resent as unfair. Economic development has historically resulted in greater convergence in similar sectors and industries, fueling for markets. Convergence has also heightened for energy and other key resources.The deterioration in the U.S.-China relationship despite deep economic interdependence appears to conform to the pattern of interactions between rising and system-leading status quo powers outlined by Thompson and Rapkin. Tensions have risen sharply in recent years, despite the United States being China's top trade partner and China remaining the second-largest trade partner for the United States (after only Canada). Noting these trends, Thompson and Rapkin argue that economic interdependence will have mixed effects on the U.S.-China rivalry. While such interdependence may produce a pacifying process at the bilateral level, it will likely increase and tension at both the bilateral and systemic levels.3This article explores the role that changes to China's economic foreign policy may have played in exacerbating strategic with the United States. The inspiration for this research project drew from the observation that a general deterioration in relations between China and the United States starting around 2010 coincided with continued increases in bilateral trade and investment. In fact, some of China's economic policies, such as the creation of the Asian Infrastructure Investment Bank (AIIB) in 2013, appear to have heightened tensions. This development is striking when one considers the fact that economic relations have long been regarded as a stabilizing, constructive influence on the U.S.-China relationship.4To understand this paradox, this article traces official and academic treatment of three key Chinese terms related to the intersection of economics and foreign policy: economic diplomacy (jingji waijiao), strong trading power (maoyi qiangguo), and economic security (jingji anquan). Economic diplomacy concerns both the economic dimension of foreign policy and the strategic dimension of economic policy. China's effort to transform itself into a strong trading power capable of greater international economic leadership requires the implementation of tools and ideas associated with economic diplomacy. Finally, the increasing importance placed by senior leaders on the idea of economic security reflects, in part, Chinese anxieties about the political and strategic perils that threaten China's development into a strong trading power.Analysis of these ideas and their associated policies reveals a fundamental ambivalence on the part of Chinese authorities regarding the existing international economic order, an ambivalence that appears to be growing over time. Chinese thinkers and officials appreciate the opportunities offered by the global system of trade, but they have also long regarded this system as unfairly privileging Western countries and thus in need of reform. While initially designed to facilitate the country's integration into the existing economic order, China's approach to economic diplomacy evolved as its power grew and its needs diverged from those of its chief competitor, the United States. …