Informal Economic Coercion as a Foreign Policy Tool:

Abstract

In the past decade, China used informal measures of economic coercion in various occasions. The increasing use of such means raises the question of China’s strategic choice. As it examines this issue, this research analyzes the use of informal economic coercion as a foreign policy tool, through the case study of the China’s retaliatory act against South Korea following the Terminal High-Altitude Area Defense (THAAD) deployment dispute. The research analysis concludes that china’s use of informal measures of economic coercion is affected by the combination of both security and structural reasons. On one hand, security reasons, emerging from the balance of power between China and the United States, led China to choose the use of economic coercion over alternative coercive methods, such as coercive diplomacy and the use of military force. The China-U.S. regional rivalry and their new balancing strategies toward each other are increasing Chinese concerns regarding its security interests. As war is becoming increasingly ineffective, the main coercion possibilities are coercive diplomacy and economic coercion. However, credibility is an important factor in coercive diplomacy, and empty threats of coercion without implementation, are not credible and therefore, less effective as target states has no visible reason to consider them seriously. In addition, China’s economic power and its multiple interdependent economic relations allows it to apply economic pressure on target states. Therefore, China’s best choice is to use economic coercion in order to base its credibility among states in the international sphere. On the other hand, the international structure, in terms of power distribution in the international system, necessitates China’s use of informal measures in its economic coercion, as its position in the international financial system is relatively small and the use of formal economic coercion will force it to face formal consequences. Simultaneously, China’s domestic political and social structure permit further easier use of informal economic coercive measures. The nature and unique characteristics of its social and political structure allows China to use informal economic coercive measures as a tool to its foreign policy goals; it contributes to the government’s ability to mobilize the Chinese citizens, encourage national boycotts and influence foreign companies’ operations in its territory. Therefore, international and domestic structural reasons led China to Choose the use of informal economic coercive measures in many cases in the past decade. While this research aims to explain the reasons and rationale behind China’s use of informal economic coercion as a tool of foreign policy, further research on informal economic coercion is needed and can be used to develop different strategies in foreign policy to deal with what might be a new phase in the struggle for power in the international system.