China’s communist government is engaged in a strategy of economic coercion that threatens to undermine the rules-based international order, according to a U.S. Air Force analysis.
The report, “The War of the Yuan: Weaponizing the World’s Second Largest Economy,” outlines what the authors say is a Chinese economic pressure campaign targeting South Korea, Philippines and Australia, designed “to send a message to U.S. partners refusing to fold to its demands.”
“Now established as a major player in the global economy, the [People’s Republic of China] has weaponized its market share through economic statecraft designed to coerce and punish nations that stand up to malign Chinese influence,” states a report by the Pacific Air Force’s Strategic Competition Team.
“As the PRC continues to employ its economic might in harmful ways, it is vitally important that the United States maintain a unified front with its allies and partners, provide a viable alternative to the PRC’s debt-trap diplomacy, and continue to champion adherence to established and agreed-upon international rules and norms,” the report concludes
China boasts a $14 trillion gross domestic product (GDP) after its economy was first opened in 1978 and is the only major world economy to grow during the pandemic in 2020, the report said.
Against South Korea in 2016, the report said Beijing launched a campaign of economic intimidation that cost Seoul an estimated $7.5 billion – a loss of .05% of the country’s GDP. The economic attack came in response to South Korea’s decision to host the Pentagon’s Terminal High Altitude Area Defense (THAAD) missile defense system.
In retaliation, the Chinese government stopped group tours to South Korea, refused to give licenses for Korean video games in China, halted K-pop concerts and shut down Chinese locations of the South Korea Lotte supermarket chain.
China’s government also used its economic clout against the Philippines in 2012, in the midst of a standoff over Beijing’s claims to Scarborough Shoal in the South China Sea. Chinese authorities refused to permit Filipino produce to be sold in Chinese markets, leaving produce to be destroyed or left to rot, severely impacting Manila’s agriculture industry.
“The PRC is angered by this quest for truth, as well as the banning of controversial Chinese telecom giant Huawei from building the Australian 5G network,” the report said. “The PRC once again employed its economic weapons, taking advantage of its place as Australia’s biggest trading partner to sanction goods such as wine and beef, and causing Chinese investment in Australia to plummet by 61% in 2020.”
The report warned that “China’s reach continues to grow in an increasingly globalized economy, weakened by a global pandemic. Even countries outside the Indo-Pacific region, like Germany and Norway, are feeling the effects of the PRC’s predatory economic statecraft.”
The report is included in the May edition of the monthly “State of the Game” newsletter and published by the Air Force’s China Aerospace Studies Institute, a think tank at the Air University at Maxwell AFB, Alabama.
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