On the fungibility of economic power: China’s economic rise and the East Asian security order
| Author | Robert S. Ross |
| Published date | 01 March 2019 |
| Date | 01 March 2019 |
| DOI | http://doi.org/10.1177/1354066118757854 |
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https://doi.org/10.1177/1354066118757854
European Journal of
International Relations
2019, Vol. 25(1) 302 –327
© The Author(s) 2018
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DOI: 10.1177/1354066118757854
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On the fungibility of
economic power: China’s
economic rise and the East
Asian security order
Robert S. Ross
Boston College, USA
Abstract
China is now second only to the US as a world economic power. Its economic rise
has challenged US ability to fundamentally shape the world trade order. However, the
importance of the rise of the Chinese economy for international security affairs is less
clear. The key analytical issue for international politics and for an understanding of
the sources of power is whether economic power is fungible in international security
affairs, whether it can independently determine the strategic alignments of small states.
This is also the key question in assessing the implications of China’s economic rise
for the East Asian security order. The political-economy literature argues that trade
dependence can lead small states to realign within great power politics, regardless of
the military balance. However, poor case selection challenges this prior literature. By
using contemporary East Asia as a source of multiple bilateral case studies, I argue that
the economic dependence of a small state on a great economic power is insufficient
to influence independently small state strategic alignment preferences and that China’s
rising economic power is not fungible in East Asian security affairs.
Keywords
Alignment policy, economic dependence, fungibility of power, rise of China
Introduction
From the onset of China’s post-Mao economic reforms following the December 1978
third plenum of the 11th Central Committee of the Chinese Communist Party through
Corresponding author:
Robert S. Ross, Boston College, Commonweath Avenue, Chestnut Hill, Massachusetts 02467, USA.
Email: rossrb@bc.edu
757854EJT0010.1177/1354066118757854European Journal of International RelationsRoss
research-article2018
Article
Ross 303
2010, Chinese gross domestic product (GDP) grew at approximately 10% per year.
Although, since 2011, China’s growth rate has slowed to approximately 7% per year,
China continues to grow far faster than the US and any of its neighbors in East Asia. In
2010, Chinese GDP surpassed Japanese GDP and China became the world’s second-
largest economy. China’s nominal GDP is expected to surpass US GDP within the next
10 years. Using purchasing power parity, in October 2014, the International Monetary
Fund (IMF) calculated that Chinese GDP was larger than US GDP. In 2013, China
became the world’s largest trader in goods, surpassing the US (Anderlini and Hornby,
2014; The Economist, 2014). Many countries now depend on the Chinese market for
economic growth.
China is now second only to the US as a world economic power. China’s economic
rise has challenged US ability to fundamentally shape the world trade order as the world’s
dominant economic power. With the US, China now shapes the course of World Trade
Organization negotiations (Bergsten, 2008; Brzezinski, 2009; Drezner, 2014). China is
also emerging as an influential actor in the IMF and in international energy politics. In
East Asia, China is a major driver of regional trade arrangements, using its continental-
size market as a regional trade hub. In 2004, it concluded the China–ASEAN (Association
of Southeast Asian Nations) Free Trade Agreement, which came into full force in 2010.
In a rivalry with the US economic initiative for a Trans-Pacific Partnership, since 2012,
China has been leading the negotiations for a Regional Comprehensive Economic
Partnership, which promises to significantly expand China’s role as a regional trade hub
(Kassim, 2012). In October 2014, China concluded free trade agreements with South
Korea and Australia. China has also used its wealth to establish the Asian Infrastructure
Investment Bank, challenging the World Bank and the Asian Development Bank as the
primary source of aid for developing countries and eliciting US concerns over Chinese
regional influence. Beyond East Asia, China promoted the establishment of the New
Development Bank, which may also challenge the World Bank and the IMF (Coorey and
Murray, 2014; Financial Times, 2014; Perlez, 2014b).
China is an economic great power that wields growing influence over the interna-
tional economic order. However, the importance of the rise of the Chinese economy for
international security affairs is less clear. Observers have argued that the rise of China’s
international economic influence will enable Beijing to challenge the regional strategic
order and US security (Friedberg, 2000: 17–26; Hoge, 2004: 5; Palley, 2012; Wright,
2017: 147). This issue has taken on greater significance since China launched its “Belt
and Road Initiative” initiative for developing a China-based regional economic order.
Scholars and foreign policy analysts have argued that this initiative will expand China’s
strategic influence in Asia and generate greater US–China security competition (Arase,
2015; Fallon, 2015; Rolland, 2015; Flynt Leverett and Wu Bingbing, 2017).
These expectations are frequently grounded in the international political economy
(IPE) literature on the effect of trade dependence on security relations. There is a consen-
sus in the IPE literature on the fungibility of economic power in security affairs and the
importance of economic dependence for secondary state alignment decisions. The secu-
rity studies literature agrees that, in important respects, economic capabilities are fungi-
ble. It stresses that a country’s economy is a critical foundation of its national military
power; economic power can be converted into military power (Art, 1996; Morgenthau,
1978; Organski, 1968).
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