Is China weaponizing its economy? Recent events show Beijing using economic pressure against countries like Taiwan and Japan. Understanding these tactics is vital for nations to defend their interests. How can the U.S., Japan, and Taiwan effectively coordinate against this growing threat to global stability?
Understanding and countering the escalating phenomenon of China economic coercion is paramount for global stability, particularly as the United States, Japan, and Taiwan seek to coordinate effective strategies against this formidable threat. Beijing’s increasing willingness to weaponize its vast economic influence to achieve specific political objectives poses a significant challenge to the international rules-based order and the sovereignty of nations within the Indo-Pacific security landscape.
The People’s Republic of China (PRC) has consistently utilized its economic leverage as a core component of its economic statecraft, a strategic approach that gained sharper focus during the Trump administration’s characterization of Beijing as a “revisionist power” engaging in “predatory economics.” This strategy extends to controversial practices like “debt diplomacy,” where substantial infrastructure investments under initiatives like the Belt and Road Initiative create dependencies, potentially swaying political decisions in recipient nations, often to the detriment of Taiwan’s diplomatic recognition.
Amidst intensifying US-PRC strategic competition and the unpredictable nature of US foreign policy, Taiwan faces heightened vulnerability to Beijing’s assertive attempts at reunification. The complexities of tariff negotiations and the economic decoupling between major powers could inadvertently diminish the avenues through which the United States might exert its own economic pressure on mainland China, leaving Taiwan more exposed to coercive measures aimed at achieving political ends.
At its foundation, China economic coercion is a politically charged term describing state actions that exploit economic policies to attain specific political outcomes. Definitions from bodies like the G7 and the EU highlight these incidents as attempts to “exploit economic vulnerabilities and dependencies” or “pressure the EU or a Member State into making a particular choice” through trade or investment measures. This paper frames it as the “weaponization of economic dependencies,” distinct from traditional trade policy by its pursuit of non-trade related political objectives.
The PRC’s deployment of coercive measures, frequently coupled with military and diplomatic pressure, has surged over the past decade, with over 100 documented cases. Beijing’s tactics are often reactive and punitive, targeting specific sectors of an economy where it holds an asymmetric advantage. Examples include temporary halts on rare earth exports to Japan, import bans on Philippine bananas, and customs blockages against Lithuanian exports. These informal, non-transparent actions are typically triggered by perceived violations of China’s “red lines,” aiming not just to alter target behavior but also to send a clear message to other potential dissenters in the broader geopolitics of the region.
While the direct macroeconomic impact of China economic coercion can be debated, the “chilling effect” it generates is undeniably significant. This subtle yet powerful influence leads targeted governments to forego certain actions due to fear of retaliation, a factor that is difficult to quantify but profoundly shapes international relations. To counter this, deterrence theories offer valuable frameworks: deterrence by denial (reducing asymmetric dependencies, building resilience) and deterrence by punishment (issuing condemnations, imposing sanctions). Both direct and extended deterrence, as well as general and immediate deterrence, present different strategic avenues for nations to safeguard their interests and those of their allies.
Developing effective countermeasures against this complex form of economic statecraft necessitates robust coordination among key stakeholders, including nations vulnerable to coercion and major economic powers willing to lead. A collective approach requires a shared understanding of what constitutes economic coercion and a consensus on appropriate punitive measures of varying severity. Without such prior coordination, responding effectively once coercive actions are underway becomes exceedingly difficult, if not impossible, particularly for smaller economies.
However, the path to establishing a practical framework for collective action is fraught with challenges. Nations possess diverse economic structures and varying levels of dependence on China, leading to significant divergences in their willingness to respond to coercive measures. Crisis simulations have revealed that countries often have different tolerances for perceived provocations, complicating efforts to agree on specific countermeasures and their timing. Furthermore, the unpredictability of major powers, such as the “America First” stance of a previous U.S. administration, can undermine multilateral efforts and alienate allies, making US-Taiwan-Japan cooperation in this domain even more intricate.
Despite these complexities, maintaining open, unofficial dialogue among the U.S., Taiwan, and Japan across a broad spectrum of policy areas, including international economic policy, remains crucial. A thorough assessment of each party’s economic vulnerabilities vis-à-vis China, perhaps through working-level consultations or Track 2 dialogues, can lay the groundwork for building consensus on collective responses to cross-Strait issues. Moreover, engaging broader international partners like Europe, Australia, and South Korea to diversify economic relationships and reduce reliance on China can elevate awareness of Beijing’s coercive practices, thereby increasing the reputational cost for China economic coercion on the global stage, solidifying Indo-Pacific security through stronger alliances.
