More than carrots and sticks: Economic statecraft and coercion in China–Taiwan relations from 2000 to 2019

Abstract

China has become one of the most important trading partners for many Asian countries, and Taiwan is at the forefront of China’s economic coercion. It also leads to the following empirical puzzle: When can Beijing’s economic sanctions and incentives achieve their desired outcomes? Why and how do they often fail? Given the power asymmetry between China and Taiwan, how Taiwan resists China’s coercive measures contributes significantly to theoretical development in international relations. Taiwan has responded to Chinese economic pressure by diversifying its trade with and investment in Southeast Asian and South Asian countries to lessen dependence on China. It also securitizes China–Taiwan relations by raising public awareness about over-reliance on China’s market. Taiwan is not only a target of China’s coercion, but an active actor in its own right as well. This article re-evaluates the literature on East Asian politics and economic statecraft. First, it highlights the salience of power asymmetry to the field of economic statecraft. Second, it offers a three-level analysis of when and how China exercised economic coercion and incentives towards Taiwan. Third, it examines how Taiwan addressed Beijing’s sanctions on Chinese group tourists starting in 2016. The final section discusses some conclusions that can be drawn and suggests some avenues for future research.