China's economic coercion: Evolution, characteristics and countermeasures

Briefing 15-11-2022

Non-military coercion, which means using economic means to achieve political goals, has become an increasingly serious problem for EU governments and businesses. Experts believe that China, traditionally an opponent of economic sanctions, has been deploying coercive economic practices with growing intensity and scope, particularly since the reappointment of Xi Jinping as the country's president in 2018. Frequently deployed to gain leverage on issues such as territorial and maritime disputes, these measures are criticised for the human rights violations they entail and for contributing to the protection of China's security interests. China's tactics have become more sophisticated over time, and a combination of different methods has often been used to amplify the impact. Both governments and companies are subjected to coercion, and the methods used depend on the choice of target. Governments are targeted chiefly through trade restrictions, and companies through general public (popular) boycotts. Other measures include administrative discrimination, investment and tourism restrictions and empty threats. The most frequently targeted sectors are 'symbolic' industries that are easily identifiable with the coerced country, and agricultural and consumer goods and services. A distinct characteristic of Chinese coercion is that it happens 'behind the curtains': the state rarely acknowledges the deployment of measures or the links between them and the country's perceived interest. This makes the task of challenging these practices in forums such as the WTO very difficult or simply impossible, as is often the case. While the short-term effect on affected companies and industries is undoubtedly significant, experts agree that in general China has been rather unsuccessful in changing the long-term stance of targeted countries, and that in the majority of cases it has failed to meaningfully reorient their policies. The EU is currently expanding its toolkit against such practices. One novel tool is the anti-coercion instrument currently under consideration by the European Parliament and the Council. Experts also suggest other measures, such as creating a dedicated EU resilience office or an export bank, and boosting cooperation with like-minded countries facing the same problems.