More than carrots and sticks: Economic statecraft and coercion in China–Taiwan relations from 2000 to 2019
| Author | Christina Lai |
| Published date | 01 August 2022 |
| Date | 01 August 2022 |
| DOI | http://doi.org/10.1177/0263395720962654 |
| Subject Matter | Articles |
https://doi.org/10.1177/0263395720962654
Politics
2022, Vol. 42(3) 410 –425
© The Author(s) 2021
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DOI: 10.1177/0263395720962654
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More than carrots and sticks:
Economic statecraft and
coercion in China–Taiwan
relations from 2000 to 2019
Christina Lai
Institute of Political Science, Academia Sinica, Taiwan
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.
Keywords
China, coercion, economic statecraft, power asymmetry, Taiwan
Received: 11th December 2019; Revised version received: 21st April 2020; Accepted: 25th August 2020
Introduction
China surpassed Japan as the world’s second largest economy in 2010, and in doing so, it
has become one of the most important trading partners for many Asian countries. As
China’s capabilities increase, its use of coercive measures is both growing in frequency
and evolving in scope. For example, China has implemented different coercive measures,
Corresponding author:
Christina Lai, Institute of Political Science, Academia Sinica (Taiwan), 128 Academia Rd, Sec 2, Taiwan.
Emails: jl554@georgetown.edu; clai@gate.sinica.edu.tw
962654POL0010.1177/0263395720962654PoliticsLai
research-article2021
Article
Lai 411
including export quotas, import restrictions, tourism bans, and safety inspections against
many countries. Japan, the Philippines, South Korea, Taiwan, and Norway have all fallen
victim to China’s economic sanctions.1 Indeed, economic cooperation with China pre-
sents inherent risks to a country’s national interests.
Taiwan is at the forefront of China’s economic and military coercion, as Beijing will
not renounce the use of force to deter Taiwan’s independence movement. Private business
actors in Taiwan who are heavily dependent on bilateral trade have a strong interest in
maintaining stable China–Taiwan relations (Kastner, 2006). Therefore, China’s economic
statecraft towards Taiwan best exemplifies the analogy of carrots and sticks, and Beijing’s
use of economic coercion and selective incentives might further shape Taiwan’s policy
options in the future. It also leads to the following empirical puzzles: When can Beijing’s
economic sanctions and incentives achieve their desired outcomes? Why and how do they
often fail? These questions are not only urgent for policymakers in China and Taiwan, but
also essential for scholars in international relations (IR).
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.
Taiwan’s export to China decreased by 8.8%, and its export to the United States grew
17.4% in 2019 when compared to records last year.2 Together, such trends indicate
Taiwan’s trade diversification is supported by the growth of exports to other partners,
such as ASEAN countries and the United States. Taiwan’s lesson points to what is essen-
tial to the asymmetry perspective – the limits of the more powerful by the less powerful
in IR (Womack, 2016: 29).
However, it would take quite a long time for Taiwan to achieve such structural changes.
As of now, Taiwan remains reliant on China’s economy, making it vulnerable to eco-
nomic coercion and political pressure (see Figure 1). By enhancing our understanding of
how and under what conditions economic coercion impact the probability of political
Figure 1. Taiwan’s trade with China, 2000–2018.
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