China’s economic coercion: Jujitsu required

When the Dalai Lama visited Mongolia in 2016, Beijing canceled bilateral economic meetings and later extracted an apology from Ulaanbaatar. That same year, Seoul approved deployment of U.S. THAAD missile batteries to Korea, prompting Beijing to force most Lotte supermarkets in China to close over “fire safety violations.” In 2020, after Canberra called for an investigation into the origin of COVID-19, China restricted imports of Australian wine, beef, and other commodities.

As China has grown economically, so too has its propensity to engage in economic coercion. Yet our study of eight cases of China’s economic coercion since 2010 reveals that the most salient characteristic of China’s economic coercion is that it simply is not very effective. In fact, China’s clumsiness offers an opportunity for the United States and its allies to turn Beijing’s bullying to their advantage.

China’s coercion rarely imposes a substantial macroeconomic cost on the targeted country and has at best mixed results in advancing Beijing’s tactical aims. For example, despite Beijing’s attempts to bully Lithuania for establishing a Taiwan Representative Office in Vilnius, the offending sign remains on the office door.

In fact, China’s economic coercion often harms Beijing’s longer-term strategic interests by turning public opinion in other countries against China and driving them closer to the United States. It has also reinforced efforts to diversify supply chains away from China by revealing Beijing as an unreliable partner. Japan, for example, has reduced its dependence on Chinese rare earths from nearly 90 percent in 2010 to just over half today, while Australia inked the AUKUS trilateral security pact with the United States and the United Kingdom in 2021.

To be sure, China’s use of coercion may have a deterrent effect on other countries by making them afraid to cross Beijing’s red lines — a variation on the old Chinese expression “killing the chickens to scare the monkey.” But this deterrent effect is hard to measure and is contradicted by examples of continued defiance such as the Australian and Lithuanian cases. At the same time, China’s declining popularity due to its bullying should paradoxically make it easier for leaders around the world to stand up to China’s malign behavior.

So, what is the right response for the United States?

Clearly, Washington has an interest in deterring China from its disruptive actions and supporting its allies and partners. Deterrence theory shows there are two basic ways to do this: punishment and denial. We went into our study drawn to the former approach; like Don Corleone in “The Godfather,” we were looking for ways to punch back against China. But by the end of the study, we found ourselves more inspired by Bruce Lee’s advice: “Be like water.”

While tit-for-tat retaliation for China’s coercion is superficially appealing, it faces an acute credibility problem, especially when the threat of punishment is being extended on behalf of allies. The essence of this problem was captured by France’s President De Gaulle’s pithy remark to President Kennedy when he asked if the United States would be willing to trade New York for Paris to deter a Soviet attack on the latter. Fortunately, the stakes are much lower in the economic domain, but would Beijing really believe a U.S. president who threatened to sacrifice Napa Cabernet for Australian Shiraz?

Moreover, U.S. retaliation would arguably help China legitimize its coercion and deprive the United States of the high moral ground. And retaliation is not the response most U.S. partners want, since it is likely that they — rather than the United States — would bear the brunt of any counterretaliation from China.

Fortunately, there is another path to deterrence: denying China its aims. This Washington can do in two ways: first, by helping make partners less vulnerable to coercion — building resilience by helping them find new markets and sources of supply — and second, by offering them relief — financial and otherwise — if they are coerced. The United States has a number of existing tools of resilience and relief that could be deployed to help targeted countries, and others could be created.

Effective public diplomacy is also key to a successful coercion counterstrategy. In response to China’s psychological game of “killing chickens,” the United States can play mind games, too, by shaming China and showing allies and partners that it is on their side.

In essence, deterrence by denial is akin to the traditional Japanese martial art of jujitsu: using the opponent’s own momentum against them and flipping them onto their back by absorbing rather than resisting the attack. As such, deterrence by denial does punish China by amplifying the self-defeating aspects of its behavior, while also raising costs and decreasing the likelihood of success for Beijing. This more nuanced, indirect infliction of punishment has the added benefit of being less escalatory and easier to operationalize than a strategy premised on tit-for-tat retaliation.

However the United States responds, China is likely to continue to act like a bully and coerce U.S. allies and partners for the foreseeable future. But policymaking is often about realistically chipping away at problems rather than solving them outright.

Directly punishing China for its obnoxious behavior may feel good but is less likely to get Beijing to cease and desist. Rather, as George Kennan said at the end of his “Long Telegram,” it is better for the United States to be true to itself and show China up as the main disruptor of the global order.

Matthew P. Goodman is senior vice president and directs the Economics Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Matthew Reynolds is a fellow with the CSIS Economics Program. They are co-authors of a new CSIS report on China’s economic coercion.