Seminar 1 Globalisation and Chinese Grand Strategy

Survival
Global Politics and Strategy
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Globalisation and Chinese Grand Strategy
Aaron L. Friedberg
To cite this article: Aaron L. Friedberg (2018) Globalisation and Chinese Grand Strategy,
Survival, 60:1, 7-40, DOI: 10.1080/00396338.2018.1427362
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Globalisation and Chinese Grand
Strategy
Aaron L. Friedberg
Deng Xiaoping’s initiation of the ‘reform and opening up’ programme at

the end of 1978 appears in retrospect to be the decisive turning point in the
history of modern China. Increasing reliance on market forces, as opposed
to state planning, and deeper integration into the global economy, in place
of the old policy of self-imposed isolation and virtual autarky, launched
China onto a steep growth trajectory. By any measure, economic or strategic,
China’s decision to join the world has been an enormous success, raising the
standard of living of hundreds of millions of people, enhancing the nation’s
influence and prestige, and paving the way for its eventual re-emergence as
a regional and global power on a par with the United States.
The decision to reform and open was obviously consequential, but it was
also extremely risky, in ways that are sometimes overlooked or downplayed
in the West. As they emerged from the chaos of the Cultural Revolution in
the 1970s and entered into a period of intensifying geopolitical rivalry with
the Soviet Union, Deng and his colleagues were convinced that reform was
essential both to national survival and to regime security. Unless it could
expand and modernise its economy more rapidly than it had done in previ-
ous decades, China would remain poor, weak and vulnerable. And unless
it could deliver sustained, meaningful improvements in the quality of life
of the Chinese people, the Chinese Communist Party (CCP) would face
growing dissatisfaction and the mounting danger of unrest.
Aaron L. Friedberg is Professor of Politics and International Affairs at Princeton University.
Survival | vol. 60 no. 1 | February–March 2018 | pp. 7–40DOI 10.1080/00396338.2018.1427362

8 | Aaron L. Friedberg
The revolution in policy that Deng engineered soon came to be seen as

essential to China’s future power and prosperity, and to the survival of the
CCP regime. At the same time, however, the opening to the West raised
the spectre of ‘spiritual pollution’, an influx of dangerous ‘bourgeois’ ideas
about individual liberties, democracy and universal human rights that
could eat away at the legitimacy of China’s one-party authoritarian dicta-
torship. In typically earthy fashion, Deng had acknowledged at the outset
that ‘opening the window’ would inevitably bring ‘flies’ as well as fresh
air, but despite his seeming insouciance he clearly regarded the threat as a
deadly serious one. This was true even before the Tiananmen Square ‘inci-
dent’ of June 1989 raised the very real prospect of
social revolution and regime collapse. Surveying a
The regime volume of 126 speeches by Deng given in the period
from September 1982 to January 1992, Christopher
sought to co-opt Hughes concludes in a 1997 Millennium article that
its citizens their unifying theme is ‘Deng’s attempt to find the
right balance between economic reform and the
integration of China into the global economy, on the one hand, while sup-
pressing ideological and cultural influences from abroad, on the other’.1
The resolution to this dilemma, devised by Deng and adhered to with
slight variations and embellishments by each of his successors, had three
parts. Firstly, the CCP regime sought to co-opt its citizens by permitting
them to enjoy the fruits of their labours. Under the new, tacit social contract
the Chinese people were promised better lives in return for their continued
loyalty, or at least their passive acquiescence. In addition, in the years after
Tiananmen, the CCP continued to develop and refine the tools of coercion,
spending billions on domestic security forces to detect and suppress the
earliest inklings of dissent, as well as on technologies for monitoring and
controlling flows of information into and within the country. The windows
remained open, but Beijing bought better screens and more precise flyswat-
ters. Finally, from the earliest years of the reform process, the CCP worked
hard to inoculate its people against the danger of intellectual and spiritual
contamination by launching a series of increasingly sophisticated and wide-
ranging ideological campaigns. Especially since the early 1990s, the regime
Globalisation and Chinese Grand Strategy | 9
has sought to bind the people to it by promulgating a form of national-

ism that highlights the wrongs done to China by aggressive foreign powers,
while emphasising the party’s vital role in restoring the nation’s dignity and
defending its honour. Starting at an early age, every young person receives
a highly nationalistic, CCP-centric ‘patriotic education’ that continues into
early adulthood. In recent years, official ideology has also become more
explicitly anti-Western, attacking the liberal claim that there are universal
values as an affront to China’s unique civilisation and an attack on its dis-
tinctive institutions.2
In addition to the danger of internal destabilisation, integration into
the global economy also carried with it two additional threats whose
locus was largely external. As became more apparent with the passage
of time, China’s growing reliance on foreign markets, capital and tech-
nology meant that it was increasingly exposed to economic shocks and
dislocations originating outside its boundaries. Because of the presumed
link between growth and stability, an economic crisis in another country
could all too easily become a deadly political problem for Beijing. This
danger was driven home by the effects of the 1997 Asian financial crisis, in
which sudden outflows of speculative ‘hot money’ destabilised a number
of countries that, unlike China, had recently succumbed to Western pres-
sure to deregulate their capital accounts.
Chinese scholars note that, in the aftermath of the 1997 crisis, the term
‘economic security’ became ‘popular in policy speeches and news media
analyses in China’,3 and that ‘scholars and policy-makers [began] to recon-
ceptualize the economics–security relationship’.4 Thus, in his address to
the 15th Party Congress in September 1997, newly appointed leader Jiang
Zemin advised his colleagues that ‘we must correctly handle the relation-
ship of opening up versus independence and self-reliance, and safeguard
the economic security of the country’.5 As a practical matter this required
advancing cautiously, ‘crossing the river by feeling the stones’, as Deng
had put it, rather than running headlong towards ever-deeper integration.
As Andrew Nathan and Andrew Scobell explain, even after it entered the
World Trade Organisation (WTO) in 2001, China continued to ‘hold some-
thing back’, creating ‘a distinctive state-directed yet marketized model that
maintained key elements of self-control’. Included among these were a

managed exchange rate, an array of state-owned enterprises and an assort-
ment of ‘direct and indirect policy levers [that] gave government the major
voice in determining the prices of land, labor, housing, energy, and credit’.6
Far from being temporary aberrations or rearguard actions on the inevitable
path to a more fully open, Western-style approach, the retention of these
instruments of control has proven to be an enduring feature of a distinc-
tive ‘China model’ for promoting development while providing a degree of
insulation from the vicissitudes of globalisation.
A third source of threat is related to the second, in that it involves the
inward transmission of a potentially destabilising external shock. While the
two are sometimes conflated in Chinese discussions of ‘economic security’,
the possibility that a hostile power might seek deliberately to exploit the
nation’s dependence on foreign markets, capital, resources and technology
in order to pressure it or damage its prospects is conceptually and strategi-
cally distinct. As one scholar put it in a 1998 essay: ‘the use of forceful means
to terminate economic relationships by one state upon another, including
the termination of trade and financial relations, the imposition of embar-
goes, and the freezing of overseas assets … are very real ways to wage an
economic war’.7 In addition to dealing with ‘sudden fluctuations in financial
markets’ and ‘global negative downturns’, China must therefore be pre-
pared to cope with deliberate, strategically motivated attempts to engineer
a ‘sudden halt in supply or a sudden rise in prices’ of critical raw materials
and to insure that its access to ‘global markets, investment opportunities,
and related business interests’ remains ‘free from threats’.8
China’s leaders and strategic planners had ample reason to take such
threats seriously. Even as they moved warily to embrace a form of capi-
talism (or ‘socialism with Chinese characteristics’), the nation’s elites
remained steeped in a Marxist mindset in which trade between rich and
poor nations was seen as an inevitable source of exploitation.9 Theory
aside, the Opium Wars with which the ‘Century of Humiliation’ began
involved nothing less than an attempt by the Western imperialist powers
to forcibly impose unfair and unwholesome trading arrangements on a
weak and beleaguered empire.10
Such experiences were not confined to the distant past. Since the found-
ing of the People’s Republic, hostile foreign powers had made repeated
attempts to pressure, weaken and destabilise it through the use of embar-
goes and sanctions. Following the CCP’s victory over its Nationalist rivals,
the United States imposed a total ban on aid and trade, and for more than
two decades declined to engage in commerce with a regime it refused even
to recognise.11 Even when trade and diplomatic relations were restored,
Washington continued to maintain a system of export controls and to
restrict the sale or transfer of high-technology items that could be used
to enhance the performance of Chinese weapons systems.12 Nor were the
capitalist powers the only ones to target China in
this way. After first providing its ideological ally
with aid and technical assistance, the Soviet Union Washington
abruptly suspended cooperation in the late 1950s,
and as relations worsened, trade between the two
imposed targeted
communist giants dwindled to virtually nothing. sanctions
Finally, in the early 1990s, the United States and
its allies imposed sanctions and an arms embargo on China as punishment
for its brutal handling of student demonstrators in Tiananmen Square.
Throughout the decade that followed, Washington repeatedly imposed
more narrowly targeted sanctions on Chinese companies that it accused of
involvement in proliferation and the use of child or prison labour, among
other misdeeds.13
How could China continue to enjoy the benefits of integration into the
global economy while minimising the vulnerabilities and potential security
risks associated with it? As compared to the dangers of domestic political
instability and the problems of maintaining a degree of insulation and
economic-policy autonomy, at least until recently this crucial question
appears to have received relatively little direct attention in the open-source
writings of Chinese analysts. There may be a number of reasons for this.
As one author noted at the turn of the century, the questions of ‘by what
means and at what cost’ it might be possible to enhance the nation’s security
from economic threats was ‘an area where the Chinese researcher lack [sic]
clarity’. Perhaps reflecting a reluctance to question the fundamental direction
of official policy, having identified some potential problems, most writers

did ‘little more than arguing for continuing the open-door foreign policy
orientation’.14 If mitigating the risks of openness required deception and
‘political warfare’ against the West, it may also have been a topic deemed
inappropriate for full public discussion, at least in the early stages of reform
and opening up.
With a few notable exceptions, foreign scholars have also paid com-
paratively little attention to what would seem to be a profound tension
at the very heart of China’s post-Maoist grand strategy. Those who have,
moreover, appear to have arrived at conclusions that are comforting and
even flattering to American policymakers, and congenial to the assump-
tions of the economists and business executives who dominate discussion
of trade, finance and related matters in the West. In this view, there can be
little doubt that China’s leaders recognised and were deeply concerned over
the strategic risks associated with deepening engagement in the US-led and
-dominated international economic system. In the end, however, they felt
that they had little choice but to proceed. As Philip Saunders concluded in
a 1999 article:
the immediate economic and social challenges that China faces have forced
Chinese leaders to accept that increased dependence on the United States
is necessary to maintain the high economic growth that they believe will
maintain social stability. Pressing short-term challenges have trumped
longer-term concern … [China’s leaders] now see integration into the
world economy as essential to the maintenance of Party rule.15
In time, moreover, Beijing has supposedly grown more comfortable

with what Nathan and Scobell described in 2013 as a condition of ‘shared
vulnerability’. The strategic choices made by Deng and his successors have
‘entailed significant sacrifices for China’s security’. Rapid growth has been
achieved ‘by means of a deep engagement in the global economy that made
China more vulnerable to pressures and influences from the outside world
than it had ever been before’. But, even as it has ceded to others a measure
of control over its own destiny, China has gained a degree of control over
others. Whatever the precise balance may be, the situation is tolerable and
sustainable; in any event, it cannot be altered at anything remotely resem-
bling an acceptable cost. ‘In this sense,’ Nathan and Scobell conclude, ‘the
engagement policy pursued by the United States since 1972 achieved its
key strategic goal of tying China’s interests to the interests of the U.S.-
created global order’. Beijing may not be committed to every aspect of the
status quo, but ‘it has acquired too large a stake in the stability of the world
order and the prosperity of the West’ to launch a frontal assault on that
order.16 In the economic domain, as in others (including the environment,
public health and the management of the internet), China’s leaders realise
that cooperation and compromise provide the only means for managing
shared problems.
Recent developments suggest that, even if it was accurate once, this
characterisation of Chinese attitudes and policy no longer applies. Instead
of simply accepting the constraints and dangers that result from its deep
integration into the global trading system, with the continuing growth of
its wealth and power Beijing has begun to take steps intended to reduce
its exposure to possible Western coercive pressures while enhancing its
own ability to exert economic leverage over others. Having passed through
a period of extreme vulnerability during the initial stages of reform and
opening up, and then through a period of mutual vulnerability, China is
now trying to tilt the balance further in its favour, insulating itself and
reducing its dependence on rivals and potential enemies while developing
tools for conducting economic statecraft and even, if necessary, for waging
economic warfare. These developments can best be understood as the third
phase in China’s continuing efforts to mitigate the risks of globalisation
while continuing to enjoy its benefits.
Phase one: hiding and biding

During the first decade of the reform period, from 1979 to 1989, China’s
leaders worried a good deal about ‘spiritual pollution’, and fretted occasion-
ally about their ability to maintain tight control over the national economy.
But they had little reason to fear that, at least in the near term, the United
States and the other Western powers would seek to exploit their increasing
openness in order to punish, pressure or undermine them. To the contrary,

during these years Washington and Beijing were presumed to have strategic
goals which, if they did not coincide completely, were still highly convergent.
While there were limits to what they were willing to do (including transfer-
ring so-called ‘offensive’ weapons that might someday be turned against the
United States or its regional allies), for the most part the Americans saw it as
being in their interest to build up China’s power so that it could contribute
more effectively to balancing and containing the Soviet Union.
With this end in view, the US loosened existing restrictions on the export
of both commercial and ‘dual-use’ technologies to China and encouraged its
allies to do the same; cleared the way for China to expand its exports into the
US market by granting it most-favoured-nation trading
status; and eased Beijing’s access to investment capital
The US and by supporting its membership in the World Bank and the
International Monetary Fund. In addition, Washington
China were sought as a matter of official policy to promote China’s
virtual allies long-term economic and technological development by
welcoming thousands of its students to study in the United
States, most of them in scientific and engineering fields. While there was
never any explicit quid pro quo, and no suggestion that Washington would
withdraw economic benefits if Beijing did not comply with its wishes, China
did take steps to increase strategic pressure on the Soviet Union, including
permitting the US to base intelligence-collection facilities on its soil and pro-
viding assistance to Afghan guerrilla forces resisting the Soviet invasion and
occupation of their country. The United States and China were virtual allies
during this period and, while some Chinese observers no doubt realised
that this favourable situation could not last forever, there is no indication
that they feared its imminent disappearance or worried that, by accepting
American largesse, they were setting themselves up for future exploitation.
All of this changed drastically in 1989, with the killings at Tiananmen
and the initial imposition of Western sanctions, followed in short order by
the fall of the Berlin Wall, the unravelling of the Soviet empire in Eastern
Europe and the beginning of the end of the Soviet Union itself. In response
to these traumatic events, some in the CCP leadership favoured reversing
course, abandoning economic liberalisation and pulling back into a posture

of defensive self-reliance that would reduce China’s exposure to ideological
contamination and minimise its vulnerability to external pressure. For his
part, however, Deng was determined to stay the course. In his view, there
was no other choice: reverting to autarky and isolation would stunt China’s
growth and doom it to a future of weakness and backwardness. China could
ride out sanctions. After all, as Deng pointed out, ‘One special feature of
China’s development is that it has proceeded under international sanctions
for most of the forty years since the founding of the People’s Republic. If
there is nothing else we’re good at, we’re good at withstanding sanctions.’17
Deng expressed confidence that the democracies would prove fickle and
that the measures put into place by self-righteous Western politicians were
unlikely to last longer than a few years.18 Once the storm had passed, he
insisted, China ‘should open to the outside world instead of closing our
doors’. Indeed, if anything, it should open ‘wider than before’.19
Such expressions of optimism and self-confidence could not obscure the
fact that, by the early 1990s, China’s strategic situation was more precari-
ous, and potentially more exposed, than it had appeared only a few years
before. Even if normal relations could be restored, the collapse of the Soviet
Union and the end of the Cold War removed the geopolitical rationale for
continuing deep strategic cooperation between Washington and Beijing.
Like one of the crafty and ruthless hegemons from China’s ancient Warring
States period, the United States would seek to isolate, weaken and destroy
its rivals one by one. Having dispensed with their main opponent, the
Americans were now free to turn their full attention to China. Tiananmen
Square also brought to a sudden close a nearly two-decade-long interval in
which the US had been willing to downplay or overlook its ideological dif-
ferences with the CCP regime in order to smooth the way for collaboration
against a common foe. Thus, even as Beijing sought to resume the process
of integrating into the global economy and building deeper ties with the
United States, the likelihood that Washington would use these linkages to
apply pressure to it appeared to be increasing.
One element in China’s strategy for dealing with these new and more
tenuous circumstances was a deliberate campaign to emphasise the mutual
benefits to be derived from expanding trans-Pacific flows of trade and invest-

ment. In addition, in keeping with the spirit of Deng’s famous admonition
that China now needed to ‘hide its capabilities and bide its time’, Beijing
also began a concerted effort to shape foreign perceptions of what was hap-
pening inside the country in the aftermath of Tiananmen. According to
scholar Anne-Marie Brady, the primary thrust of China’s outward-directed
propaganda at this time was to ‘talk up the economy’, emphasising its
current performance and future prospects ‘despite major problems, such as
a non-transparent financial sector, massive and widespread corruption, and
severely under-reported unemployment’.20
Brady concludes that parallel efforts to ‘reinvent’ foreign perceptions
of the Chinese political system after Tiananmen were largely unsuccessful,
but her assessment may be excessively narrow and unduly negative. While
the CCP regime could not erase recent reminders of its brutally repressive
nature, it was nevertheless able to reinforce the belief, widely shared among
Western observers at the time, that political liberalisation was inevitable, and
that it would probably come sooner rather than later. According to Michael
Pillsbury, Beijing put into place ‘a sophisticated system … to mislead for-
eigners about what is going on in their country and reconfirm Western
biases and wishful thinking’. Above all, the Chinese leadership sought to
persuade the world that it was ‘moving in the “right” direction toward freer
markets, productive international cooperation and political liberalization’.21
During the 1980s, there were some in the upper ranks of the party who
believed that economic reform would have to be accompanied eventually
by far-reaching political change. Even before Tiananmen, these erstwhile
liberalisers had begun to lose ground to the warier, more conservative ele-
ments in the CCP hierarchy; in its wake, most with liberal sympathies were
purged, and some were placed under house arrest or driven into exile.
Economic reform and opening up would eventually resume in the early
1990s, but it now seems clear that any hope of political liberalisation was
extinguished in 1989. In the years that followed, however, China continued
to emit signals, like the light from a dying star, that were seized upon by
optimistic foreign observers as evidence that meaningful political reform
was not only possible but, in fact, already well under way.
Exhibit A for this claim was the programme of ‘village elections’, in

which townspeople were permitted to choose local officials from among
a slate of CCP candidates. First begun in 1988 and expanded with great
fanfare during the 1990s, these elections attracted what appears in retro-
spect to have been a disproportionate amount of attention from foreign, and
especially American, observers. Some, such as the Carter Center, became
actively involved, working, as it proudly proclaimed, ‘at the invitation of
the Chinese Ministry of Civil Affairs and the National People’s Congress’,
to help standardise ‘electoral procedures … in this new democratic environ-
ment and foster better governance in local communities’.22
And yet, in the end, the entire exercise amounted to
very little. The implementation of village elections did
not set in motion a process in which democratic norms Liberalisers
and practices took root and then migrated upwards to
townships and provinces, and it certainly did not lead
had begun to
to the emergence of competing political parties. In fact, lose ground
to the contrary, the view among many Western experts
is now that local elections were intended primarily to bolster the legitimacy
of CCP rule after the Tiananmen debacle by creating very limited and con-
strained opportunities for political participation.23
Despite its minimal impact on the actual practice of governance in China,
the village-election charade did serve another, larger strategic function: at a
moment when Beijing was under great scrutiny and potentially vulnerable to
renewed economic sanctions and diplomatic isolation, the widely publicised
spectacle of local elections convinced foreigners that democratic reforms were
already well in train. As James Mann explained in 2007, village elections helped
‘to strengthen the rule of the Chinese Communist Party, by giving outsiders
the appearance that democracy [was] spreading across China’.24 Applying
pressure to promote change was therefore unnecessary and, if anything,
would likely prove counterproductive. In sum, the West’s strategy of engage-
ment was working and, notwithstanding the recent unpleasantness, the tides
of history were once again flowing in favour of liberalism and democracy.
Despite mutual allegations of ‘softness’ and periodic squabbles over
the details of policy, by the end of the century this was a point on which
members of both US political parties could agree. George W. Bush summed

up the bipartisan conventional wisdom during the 1999 presidential cam-
paign, when he observed that the United States had only to ‘trade freely
with China and time is on our side’.25
Phase two: binding and hedging

Bush was here expressing the widely held view that, for China as for other
developing nations before it, trade and greater openness would lead inevi-
tably to accelerating growth, an expanding middle class and irresistible
pressures for political liberalisation. China’s Communist Party rulers were
well aware of what the United States and its allies had in mind and, behind
the screen of village elections, they were working hard to foil the West’s
schemes for easing them out of power. By the turn of the century, however,
Beijing had reasons of its own for optimism.
When sanctions were first imposed in 1989, Deng had expressed the hope
that ‘foreign businesspeople would pressure their governments to improve
relations so that they could once again have access to the Chinese market’, and
he urged Chinese executives and diplomats to work with ‘foreign friends’
to get sanctions lifted.26 At the time, after only the first decade of reform and
opening up, China’s importance as a trade and investment partner for the
developed economies was still quite limited, and the ranks of its ‘foreign
friends’ were correspondingly thin. Ten years later, the picture had already
changed dramatically and, with China’s impending entry into the WTO,
the pace of change was set to accelerate even further. An influx of foreign
investment and technology, combined with a seemingly limitless supply of
low-cost labour, was transforming what had once been a backwards agrar-
ian economy into a global manufacturing and export powerhouse. And, as
China’s economy grew, so too did its appetite for goods, services, resources
and raw materials from virtually every corner of the earth, including the
United States. As trade and investment flows expanded, so too did the
coalition of influential American individuals, powerful corporations and
well-heeled industry groups that benefited from cultivating commercial
ties with China, and who were therefore eager to maintain good relations.
Thanks to this virtuous cycle, deep economic engagement had become self-
reinforcing and, barring some truly catastrophic crisis or confrontation, it

appeared likely to be self-sustaining.
The decisive events in this process were the annual congressional battles
over whether to renew China’s status as a most-favoured trading partner
in the early 1990s, in spite of continuing concerns about its post-Tiananmen
record of human-rights abuses, and the climactic push at the end of the
decade to grant Beijing ‘permanent normal trade relations’ in order to
clear the way for its entry into the WTO. These struggles demonstrated the
growing clout of Beijing’s ‘foreign friends’ and consolidated their power,
while also teaching valuable lessons about how to work with them (and, on
occasion, to manipulate them) in order to bind
the US more closely to China.
As one recent essay by a Chinese analyst on Boeing contributed
‘The Application of Attractive Economic Power
in China’s Diplomacy’ points out, it is pre-
hundreds of
cisely because they have a ‘huge accumulation’ thousands of dollars
of interests in China that ‘many U.S. multina-
tional companies will actively lobby the Congress and the government, and
even on a number of key issues … promote U.S. policy cooperation with
China’. The study goes on to credit the aerospace giant Boeing for having
‘fueled’, or ‘played a positive role in promoting’, ‘every step in Sino–U.S.
relations’, including Washington’s eventual decision to ‘give China MFN
[most-favoured-nation] treatment, the development of permanent normal
trade relations between the two countries [and] China’s accession to the
World Trade Organization’. Among its other contributions, Boeing hired
public-relations specialists to ‘deal with media events’ before the 2000
House vote on permanent normal trade relations; its CEO ‘personally par-
ticipated in the public relations campaign’; and it contributed hundreds of
thousands of dollars from its corporate coffers to help fund a multi-industry
lobbying and advertising effort aimed at winning support from Congress.27
For their part, the Chinese authorities used a mixture of inducements
and thinly veiled threats to encourage Boeing (and other US corporations)
in their efforts. Thus, during the run-up to the crucial 1994 vote on whether
to drop the linkage between human rights and MFN status, president Jiang
Zemin made a highly publicised visit to Boeing’s headquarters in Seattle,

where he urged the removal of ‘all the negative factors and artificially
imposed obstacles’ between the US and China. Meanwhile, at almost the
same moment, a delegation of German business executives was visiting
Beijing where, among other things, it received an order for six planes to be
manufactured by Boeing’s principal rival, Airbus.28 The message was clear:
if Boeing did not exert itself to the utmost in persuading Washington to
grant MFN, it could lose significant business to its competitors.
These tactics were part of a larger pattern. James Mann notes that ‘by
early 1994, the Chinese government began openly and unabashedly turning
up the commercial pressure in its dealings with the Clinton administra-
tion’. Indeed, by this point, such pressure, delivered in Washington by
American corporations, had become ‘the linchpin of China’s entire strategy
for circumventing Clinton’s human rights conditions’.29 The end result of
Beijing’s efforts was an unmitigated defeat for the advocates of linkage and
a turning point in the evolution of US–China relations. Prior to the 1994
vote, US threats to suspend trade, cut off loans, impose sanctions or oth-
erwise take advantage of China’s growing economic dependence to apply
pressure to it were plausible and, from Beijing’s perspective, deeply wor-
risome. Afterwards, while not completely beyond the realm of possibility,
they had lost much of their credibility and, with the passage of time, would
become even more difficult to conceive.
Philip Saunders quotes a senior analyst at one of China’s leading think
tanks as saying that, as the 1994 showdown approached, ‘we began to
realize that economic interests were deepening and started to think that
the U.S. wouldn’t dare to cancel MFN’.30 Growing recognition that the
increasing importance of their own interests had ‘reduced the willingness
of the industrialized democracies to follow through on economic threats’
helped to ease ‘Chinese fears about the political vulnerabilities that flow
from economic integration’. As Saunders rightly notes, however, ‘this shift
from one-sided dependence toward interdependence’ was not simply ‘a
natural by-product of economic interactions’. Rather it was the result, at
least in part, of ‘conscious Chinese efforts to create a balance of dependence
that limits the ability of the United States to apply economic pressure’.31
In addition to its obvious economic benefits, engaging with the United

States and the other Western powers bound them more tightly to China,
thereby reducing the risk that they would seek to exploit for strategic pur-
poses their still substantial advantages as providers of capital, technology and
markets. But this was not the only danger associated with China’s increasing
integration into the global economy. As growth compounded, so too did con-
sumption of a variety of critical inputs to the productive process, including
energy, minerals and other raw materials, and food. With demand outstrip-
ping domestic supply, over the course of the 1990s and into the early 2000s
China went from rough self-reliance to being a major importer of many of
these items. China became a net importer of oil in 1993,
and its imports grew rapidly thereafter.32 With the
boom in the construction of buildings, roads, rail lines, Demand
and power-generation and transmission equipment,
imports of iron ore, copper, nickel and aluminium also
outstripped
expanded dramatically after the turn of the century, domestic supply
in each case growing to account for between 40% and
50% of total national consumption by the mid-2000s.33 Rising incomes and
improving diets also led to increasing demand for imported fish and meat, as
well as more foreign-grown grain needed to feed domestic livestock.
China’s growing dependence on imports created a new form of potential
vulnerability. Whether they were caused by sudden shifts in global market
conditions, political instability at the point of origin or attempts by hostile
powers to interfere with shipments of vital materials en route to China,
disruptions in supply could cause serious economic dislocation. And as
always, it was all too easy for the CCP leadership in Beijing to imagine that
economic crises could lead to social unrest and political instability.
How to guard against these eventualities? Expanding domestic output
might be desirable and possible in some areas (such as grain production),
but as was evident by the early 2000s if not before, in no area was it
sufficient to reverse the overall trend toward increasing dependence on
imports.34 Another possible way of mitigating the risks associated with
import dependence would be to acquire armed forces sufficient to secure
supplies of critical materials at their source, and to defend the lines of
transport and communication over which they would travel back to China.
Since the turn of the century the country has, in fact, begun to develop some
of the power-projection capabilities that it would need to carry out these
missions. But most observers believe that several decades will be required
to build the blue-water naval forces, overseas bases, long-range air-lift and
expeditionary ground forces necessary to the task.35
A third possibility, and one that seems like the most logical, obvious and
cost-effective solution to many Americans, would simply be to embrace glo-
balisation, relying on the forces of supply and demand to satisfy China’s
growing need for food, energy and raw materials. This is, after all, what
other large, advanced, market-economy countries with similar needs have
chosen to do.36 As a recent analysis of China’s evolving food-security poli-
cies points out: ‘Most countries that must import food, such as Japan, count
on a deep, competitive world market to supply their needs. But that’s not
secure enough for China.’37
The reasons for the difference are obvious on brief reflection. Unlike their
democratically elected counterparts, China’s leaders are deeply concerned
about the perceived legitimacy and prospects for survival of their entire
regime. They seem genuinely to fear that a shortage of pork or an increase
in gasoline prices could lead, not to electoral defeat, as might be the case in a
democracy, but to social unrest and political revolution. In part for this reason
they are reluctant to entrust their careers, and possibly even their lives, to a
global economic system that they know from experience is subject to periodic
crises and shocks, and which they perceive still to be managed and con-
trolled primarily by, and for the benefit of, the United States. Unlike Tokyo,
Beijing also knows that, if all else fails, it cannot depend on the Americans to
use their command of the global commons to ensure that shipments of criti-
cal materials will find their way to China’s shores. To the contrary, behind
all the happy talk from CCP leaders about the wonders of globalisation, the
spectre of blockades, embargoes, supply disruptions and possible economic
strangulation continue to haunt the dreams of Chinese strategists.
The response to these circumstances that has emerged over the past two
decades is complex, costly and multifaceted, but also partial, imperfect and
incomplete. China has not, and realistically could not, build an airtight
defence against all threats to its import lifelines. What it has done instead is
to hedge, purchasing what amounts to an insurance policy against an array
of contingencies up to, but not at present including, the most extreme pos-
sibility of a hot, global war against the United States.
This strategy has three components. Firstly, across a range of commodi-
ties, principally energy, minerals and, most recently, food, Beijing has sought
to gain ownership of the physical means of production by buying mines, oil
wells and farms in foreign countries. Since the announcement of the so-called
‘going out’ policy in 2001, Chinese state-owned enterprises, with support
from government-controlled banks and sovereign wealth funds, have been
on an extended shopping spree, buying equity stakes in
oilfields in Sudan, Bangladesh, Venezuela and Canada,
copper mines in Chile and Peru, and farmland suitable Chinese firms
for growing soybeans and other crops in Kazakhstan,
Pakistan and Malawi.38
pay top dollar
Some Western observers suggest that after a buying
frenzy lasting more than a decade, Chinese companies have recently
become more selective in their natural-resource investments, less willing
to pay huge premiums to gain physical control over commodity supplies,
and more interested in diversifying their portfolios with purchases of high-
technology companies and real estate as well as resources.39 But this appears
to represent a refinement of existing strategy rather than its abandonment.
Chinese firms continue to pay top dollar to gain control of resources at their
point of origin. Thus, in a deal described at the time as China’s ‘biggest
and boldest grab for overseas energy resources yet’, the state-run oil giant
CNOOC paid $15 billion in 2012 to buy the Canadian firm Nexen.40 This
transaction gave China control over billions of barrels of oil in the Alberta oil
sands, thought to be the world’s third-largest source of reserves.41 Five years
later, in a deal nearly three times as large, another state-owned enterprise
(the China National Chemical Corporation) paid $43bn to acquire Syngenta,
a Swiss-based leader in the development of seeds and insecticides. As one
assessment of the deal explained, ‘China’s new strategy for food security
includes controlling its global supply chain from beginning to end, and the
chain begins with seeds’.42
Nor are Chinese state-owned enterprises content merely to purchase

individual companies, no matter the price tag. In some cases they appear
willing to buy or build entire, integrated production and infrastructure
networks necessary to supply China’s needs. Recently published accounts
describe, for example, an ambitious programme of agricultural investments
in the China–Pakistan Economic Corridor. According to an article in the
Pakistani newspaper Dawn, these will extend ‘from one end of the supply
chain all the way to the other. From provision of seeds and other inputs,
like fertilizer, credit and pesticides, Chinese enterprises will also operate
their own farms, processing facilities for fruits and vegetables and grain.
Logistics companies will operate a large storage and transportation system
for agrarian produce.’43
In addition to expanding its ownership of the means of production, since
the turn of the century China has also moved to gain control over key portions
of the maritime transportation system through which it receives the vast
majority of its imported energy, grain and minerals. With backing from the
Bank of China, the massive state-owned company COSCO has taken advantage
of a worldwide shipping slump to buy up rivals and expand its share of the
global container industry. COSCO’s recent acquisition of the Orient Overseas
Container Line company made it the world’s third-largest carrier.44 Chinese-
owned shipping lines now deliver more containers than those of any other
country and, although the statistics are not readily available, it seems certain
that a substantial and growing share of China’s seaborne trade is carried on
vessels owned and operated (and built) by Chinese firms.45
China’s companies have also invested heavily in buying, building and
expanding port facilities, both along its own coasts and on foreign soil.
Of the latter, many are located in East and South Asia, but an increasing
number are in Africa, the Middle East and Europe, including Spain, Greece
and the Netherlands. By one estimate, Chinese port operators now handle
39% of all container traffic worldwide, and fully 67% of container traffic at
the 50 biggest ports passes through facilities that are either Chinese-owned
or in which Chinese companies have a significant investment.46
Many shipping-industry analysts agree that, as one put it, China’s pur-
chases of ships and ports ‘are driven by a long-term push for control of
strategic assets, which trumps the desire for near-term efficiency and
reduced debt burdens’.47 In addition to whatever purely economic logic
may underlie them, these investments reflect ‘a recognition of the need to
deal with Chinese vulnerability, particularly in respect of protecting the
flow of commodity imports, especially energy’.48 This protection is not abso-
lute; owning vessels and facilities cannot provide a complete guarantee that
China will always be able to receive the imports it needs to keep its economy
running, regardless of circumstances. In the event of war, the United States
could always sink Chinese container ships and bomb or blockade ports. But
in anything short of such a catastrophe, physical control can be extremely
valuable. In a crisis, nationally owned shipping companies and port opera-
tors can be relied upon to give priority to Chinese
cargo. Unlike their foreign counterparts (some
of which might be owned by US allies such as Nationally owned
Denmark, Germany, France or South Korea), they
would also be less susceptible to threats and blan-
companies can be
dishments from hostile powers. relied upon
The third and final piece of Beijing’s strategy
is related to but distinct from the second. As one Chinese observer notes,
given the ‘pressures and challenges’ on China’s maritime development,
‘the concept of “strategic hedging” – that is, pursuit of and investment
in policies meant to protect the nation against the effects of geopoliti-
cal and economic uncertainty – has emerged’.49 Although the vast bulk
of its imports and exports still moves by sea, in the past 15 years China
has sought to diversify its supply networks by starting to build roads,
rail links and pipelines that will extend across Eurasia from east to west
and north to south. When complete, these will enable delivery of at least
a portion of China’s anticipated demand for some critical commodities,
including oil and natural gas, via routes that run entirely overland from
source to market, or, at a minimum, have the benefit of shortening ocean
voyages and bypassing critical choke points.
In a world without strategic risk, such projects – which now comprise
the ‘belt’ portion of the so-called Belt and Road Initiative or BRI – might
be difficult to justify. It comes as no surprise, therefore, that some Western
analysts have dismissed the BRI as a wasteful boondoggle or, at best, a full-
employment plan for China’s overbuilt metal and construction industries.
In light of Beijing’s anxieties about seaborne-import dependence, and its
feelings of vulnerability due to America’s continued naval supremacy,
these investments can be better understood as a form of insurance against
contingencies which, although very unlikely, would nevertheless be
devastating if they were ever to occur. The premiums Beijing is presently
paying are no doubt high, but if properly applied they may yet provide a
meaningful measure of protection against disruptions in maritime supply.
While the assumptions on which they are based are open to question, some
rough calculations of projected supply and demand suggest that within 20
years China could get most of the oil and natural gas it needs from Russia,
Central Asia and Iran.50
Phase three: shape and restructure

As China’s economy has continued to grow, so too has its relative impor-
tance to other countries, and its potential ability to use trade and investment
to exert leverage over them. With the passage of time, China has progressed
from trying simply to bind others to it in order to deter them from applying
pressure, to actively contemplating and beginning to experiment with the
use of its own economic instruments for purposes of shaping the prefer-
ences and policies of some of its trading partners. This process has been
under way for some time, but it has accelerated markedly in the wake of the
global financial crisis.
The crisis, which reached its peak in 2009, and the subsequent downturn
in Sino-US relations associated with the Obama administration’s 2010–11
‘pivot’ to Asia, caused Chinese analysts and policymakers to rethink the role
of economic policy in their grand strategy.51 On the one hand, the evident
failure of the much-vaunted American model of capitalist development, and
the relative weakening of the West’s prospects for future growth, created an
opportunity for China to raise its profile, expand its influence and increase its
role in moulding the global economy and the entire international system. A
study conducted by the Ministry of Commerce in 2009–10 highlighted these
new realities by noting that the time had come for China to become a ‘strong
trading nation’ rather than merely a ‘big’ one. In short, China needed to find
ways ‘to exercise international influence commensurate with its status as
the world’s second-largest economy’.52 Meanwhile, as seen from Beijing, the
Americans were trying to compensate for their recent economic setbacks by
stirring up trouble among China’s neighbours, encouraging them, among
other things, to resist its attempts to assert control over disputed islands,
waters and resources in the East and South China seas.
To cope with this challenge, Chinese strategists urged their government
to make more ambitious and effective use of the various trade and finan-
cial instruments at its disposal. Rather than confronting the United States
directly, and engaging in a head-to-head power–political competition that
risked frightening and antagonising others, China should seek to draw
its neighbours to its side with promises of market access and investment
capital. According to one analyst, ‘until 2009, there was harmony’ between
China’s efforts to promote better regional economic relations and ongoing
US attempts to build up bilateral security ties with its regional allies. Now
Washington was seeking actively to promote tensions and to alienate China
from its neighbours. Under these new and more menacing conditions, the
role of ‘China’s economic diplomacy’ was to ‘relieve the pressure and the
dilemma presented by America’s “pivot to Asia”’ by reassuring others
about its intentions and making clear how much they stood to gain from
its continuing growth and rising prosperity. Through its offers of openness
and ‘win–win cooperation’ Beijing should seek to ensure that ‘as many sur-
rounding countries as possible adopt neutrality between the US and China
as opposed to following the US to balance China’s strength’.53
In addition to stepping up its use of what some analysts refer to as
‘attractive economic power’, in the past decade China has also begun to
experiment with a variety of ways of employing its growing clout for coer-
cive purposes. This is not an entirely new approach. As we have seen, in
the 1990s Beijing had already used the threat of lost procurement contracts
to induce American corporations to pressure the Clinton administration to
grant it most-favoured-nation status. Since the onset of the financial crisis,
however, according to a study by an Australian think tank, Beijing has
begun to use economic statecraft ‘more frequently, more assertively, and in
more diverse fashion than ever before’.54 A number of examples may illus-
trate this trend.55
Following its entry into the WTO in 2001, China started to run massive
trade surpluses with the United States, exporting far more than it imported
from the US and accepting Treasury bills and other dollar-denominated
assets to cover the gap. China’s willingness to proceed in this way fuelled its
own export-driven growth, but it also enabled the US government to finance
its large and growing annual budget deficits at relatively low cost. In 2008–
09, Beijing sought to use the threat that it might slow or stop its acquisition
of US debt (thereby driving up interest rates and pushing the American
economy deeper into recession) to extract policy con-
cessions from Washington. While these efforts met with
China slashed only limited success, they marked a major advance in
China’s willingness to use its emerging position as a
imports major creditor nation to achieve its strategic objectives.56
On the heels of its initial attempts to exert financial leverage over
Washington, in 2010 Beijing opened a new front in its ongoing struggle with
the US over Taiwan by threatening for the first time to impose trade sanc-
tions on any American companies involved in arms sales to the beleaguered
island. As in the financial domain, the follow-through and end results of
this particular gambit were underwhelming: despite its public posturing,
Beijing does not appear to have cancelled any contracts or ceased doing
business with the major US aerospace firms involved in selling weapons to
Taiwan.57 But, once again, China displayed a new-found willingness to con-
sider coercive techniques that it had not previously employed and which, in
fact, it had previously denounced on principle as unjust and immoral.
Rather than follow the legalistic American formula for applying sanc-
tions, Beijing has begun to develop and apply its own distinctive techniques,
including avoiding formal declarations, quietly targeting individual com-
panies and, in some cases, using threats, rather than the actual imposition
of punishment, in order to modify behaviour.58 One of China’s preferred
gambits has been to punish an offending trading partner by constricting or
cutting off access to its increasingly large and important domestic market.
Thus, after the Norwegian Nobel committee awarded the 2010 Peace Prize
to dissident Liu Xiaobo, China slashed imports of fish from Norway by more
than half. Instead of a formal order restricting imports, the Chinese govern-
ment issued ‘stringent new food safety regulations that’, in the words of one
Washington Post article, ‘mysteriously targeted Norwegian fish’. Two years
later, in the midst of a dispute over islands in the South China Sea, Beijing
similarly claimed to have found dozens of harmful organisms in bananas
from the Philippines, effectively halting imports of the fruit, imposing hard-
ship on Filipino farmers and applying indirect pressure to the government
in Manila.59
Not content to pick on relatively poor and weak countries, or those
whose prosperity is heavily dependent on a handful of exports, China
is now seeking to apply pressure to some of the world’s most advanced
industrial economies. Following Seoul’s 2016 decision to permit the sta-
tioning of the THAAD missile-defence system on its soil, Beijing expressed
its displeasure by, among other measures, cutting back on large, free-
spending Chinese tour groups seeking to travel to South Korea, blocking
the import of South Korean music, television programmes and luxury
items, and using alleged safety violations to justify the closure of dozens
of South Korean department stores in China. Not coincidently, these stores
were owned by the Lotte Group, a large and influential conglomerate that
had agreed to a request from Seoul to cede control of land needed for the
deployment of THAAD.60
Starting in 2010, China also began to toy with the possible use of export
bans, as well as import restrictions, as a strategic tool. In response to esca-
lating tensions over contested islands in the East China Sea, at the end
of 2010 Beijing allegedly suspended shipments of rare earth minerals to
Japan.61 These materials are critical to the manufacture of high-end elec-
tronic components and, thanks to a combination of favourable natural
endowments and loose environmental regulations, China had managed
to establish itself as the world’s only active producer of several of them.
Despite some initial expressions of panic over its possible effectiveness,
within a few years the development of alternative sources of supply had
helped to reduce the likely impact of China’s rare earth ‘weapon’.62 Once
again, what is notable here is not so much the immediate results as the
demonstration of intent and the willingness to experiment with novel

techniques for translating wealth into power.
Beyond simply looking for ways to use trade and financial instruments to
more reliably shape the behaviour of other states on specific issues, Chinese
strategists have also begun to contemplate broader and more ambitious
uses of their growing economic power. Since the financial crisis, analysts
and policymakers have spoken often of the need for China to step up and
play a more active role in restructuring the entire global economic system.
As one author notes, China now faces ‘the historically unprecedented choice’
of either ‘accepting and assimilating into the international system under
Western leadership, or using its own economic resources as a great power to
seek changes, in order to bring about a system more advantageous to China’.63
What exactly a ‘more advantageous’ system would look like and how
it could be created is not always entirely clear. In the last several years,
however, a number of analysts have described a world in which, as a result
of some combination of long-term material trends and deliberate policy
choices, the entire structure of global production has been transformed.
Among its other appealing features, the resulting new system will enable
China to greatly reduce its dependence on, and vulnerability to, the United
States (and perhaps Japan as well) while at the same time increasing its
ability to exert leverage over others.
Niu Xinchun has described how, in the early stages of the reform and
opening process, a still-underdeveloped China stood at the periphery of
the global economy while the United States occupied its centre. During
this period China was heavily dependent on the United States for virtually
everything, relying on it as both its ‘primary export market and an impor-
tant source of incoming capital, technology, and management experience’.64
China was able to use ‘large quantities of low-cost labour and resource con-
sumption to manufacture products to sell to the United States, and earn
large quantities of foreign reserves’.65 At first, most of its exports were low-
end, labour-intensive manufactured commodities, but these were followed
in time by more sophisticated consumer electronics and other products.
As China has continued to advance, and as other, less-developed coun-
tries have followed in its wake, the structure of the global economy has
started to change. According to one observer, the international economic

system has gradually shifted ‘from the monocycle of “center–periphery” to
the pattern of a “bicyclic figure eight”’. In this configuration, ‘the United
States, Europe and Japan’ are still ‘situated upstream on the industrial
chain’; the ‘developing countries of Asia, Africa and Latin America are situ-
ated downstream’, while China is at the centre, acting as ‘a connecting link
in the international economic and trade system’.66
Of course, in economics as in the natural world, the process of evolution
never comes to a full stop – and, in fact, there is reason to believe that the
pace of change is accelerating. Xu Jian has noted that China is in the midst
of transforming its own development model, moving from a heavy reliance
on investments in infrastructure and basic industries, and
exports of low-end manufactured products, to ‘an inno-
vation-oriented, technology-intensive and cost-effective Change is
model that relies more on domestic demand’.67 Progress
up the value-added chain will be propelled in part by
accelerating
well-funded industrial-policy programmes which aim to make Chinese
companies the world leaders in high-end semiconductors, artificial intel-
ligence and robotic ‘fourth generation’ manufacturing technologies.68
As China experiences this industrial upgrading, the nature of its com-
mercial interactions with the rest of the world will change. On the one hand,
China’s economic relationship with the United States and other advanced
industrial countries will shift ‘from complementarity … to competitive-
ness’, according to Professor Jin Canrong of Renmin University. Instead of
continuing to export ‘furniture, hardware and toys’, China will increasingly
manufacture and sell the most advanced products, including supercomput-
ers, self-driving cars, ‘heavy machinery and large aircraft’. Provided that
the US is willing ‘to adapt to this … US–China trade can develop positively,
otherwise it may take a sharply negative turn’. In general, however, China
would be well advised to ‘change the current situation in which we seriously
depend on the United States in the aspects of foreign reserves, export need,
and technical importation’.69 For strategic as well as economic reasons, China
should strive to reduce its reliance on the markets of those advanced indus-
trial countries that it regards as fundamentally hostile. Here Chinese analysts
appear to distinguish between the nations of central and western Europe, on

the one hand, and the US and Japan on the other. Thus, according to one
author, ‘Greater efforts should be made to increase market share in the EU,
Asia-Pacific region, Africa, Latin America and the Middle East, appropriately
reducing dependency on the market in the United States and Japan.’70
Even as it relies less on the United States and Japan, a more highly
advanced China will become more deeply intertwined with the countries
following behind it on the development path. In fact, China’s old model of
labour-intensive, low- to middle-tech manufacturing is, according to Niu
Xinchun, ‘very suitable for the further industrialization of Asia, Africa and
Latin America’; its ‘vast capital and mature industrial system can be shifted
to developing countries’.71 Much as the United States once did for China,
so too should China now provide developing countries with the capital,
technology and know-how they need to become manufacturing powers in
their own right, taking China’s place on the lower rungs of the value-added
ladder while it moves towards the top.
Together with China’s own rapidly expanding consumer base, the
developing countries will provide an increasing share of the market for its
advanced industrial products. At the same time, Chinese consumers will
buy many of the less sophisticated, mass-market consumer goods that the
developing countries will produce in increasing volumes. As its growth
continues, ‘China will become a big market for imported goods worth $10
trillion’, says Gao Zuigui,72 and, if it plays its cards right, it should be able
to use the vast gravitational pull of its market for strategic purposes. ‘China
should consciously purchase more final consumer goods’, advises one
author, in order to gain diplomatic leverage; it should ‘use the final con-
sumer goods market to increase China’s influence’ over the behaviour of its
trading partners.73 Especially in its own neighbourhood, China should aim
‘to further replace the United States, Europe and Japan, becoming the most
important final consumer products market in East Asia’. Its
strategic objective should be to help expand the domestic demand level

of the whole region by absorbing the final consumer product production
capacity of East Asian countries, so that East Asia gradually develops into
an interdependent and relatively independent production chain. China

can then use this asymmetric dependence for political influence.74
Although some of the discussion of a future economic order is couched

in terms of levels of development and envisions China at the vanguard of
a global group of emerging nations, as the preceding quote suggests, much
recent commentary has a strong geographical component. Especially in
the context of discussions of the BRI, Chinese analysts paint a picture of a
future in which their country stands at the centre of a vast Eurasian regional
system, tied together physically by road, rail and pipeline, integrated eco-
nomically in a set of overlapping free-trade areas, or perhaps eventually a
single, large trading zone, as well as through the increasingly widespread
use of the renminbi as a medium of exchange.
While the physical boundaries of this system are not always specified
(or agreed upon by various authors), at a minimum it clearly includes the
countries immediately contiguous to China.75 Many analysts appear to envi-
sion a web of interconnections that would extend west, across Central Asia,
into the heart of Europe, southwest into the Middle East (and perhaps to
Africa and beyond) and south into portions of the Indian subcontinent and
continental Southeast Asia. Some also discuss the possibility of using eco-
nomic means to draw in ‘strategic fulcrum countries’ from China’s maritime
periphery, including some that may be aligned with, or friendly towards,
the United States. As one academic explains,
South Korea is a strategic pivot that can be used. If China and South Korea
have successful discussions about a free-trade area, the one that will feel
the greatest pressure will be Japan. The competition between South Korea
and Japan in terms of economic structure is still high … Now, if China
were to give its market to South Korea, the pressure on Japan’s industry
and commerce would be intense.
Fearful of being ‘marginalised’, Japan itself might have to reconsider the

nature of its relations with China.76 Indonesia and Thailand have been
identified as potential ‘models or demonstrations’ whose close economic
integration could aid ‘China’s neutralisation of the US Asia-Pacific alli-

ance system’.77
Some of the BRI’s most enthusiastic boosters have gone so far as to
describe a continent-spanning agglomeration of dozens of countries that
would together account for 4.4bn people (more than 60% of the world total)
and a combined GDP of $21trn, or nearly 30% of world GDP.78 Even if these
projections prove fanciful, Beijing clearly believes that it stands to gain stra-
tegically as well as economically from a more integrated and developed
Eurasia. Such an entity would provide China with more secure, overland
access to a larger portion of the energy, food and resources that it needs
to keep its economy going, reducing if not eliminating its vulnerability to
supply disruptions or embargoes. The members of this emergent Eurasian
system would consume a growing fraction of China’s exports, making it less
susceptible to protectionism or boycotts by the advanced industrial nations.
If an increasing portion of the trade among China and its Eurasian partners
were conducted in renminbi rather than dollars, those taking part would
also have less to fear from American financial sanctions.79
An integrated regional system of the sort Chinese planners appear to
have in mind might not constitute a full-blown ‘Fortress Eurasia’ within
which Beijing could shelter while continuing to prosper. But China’s
wary rulers may see it as offering a compromise between the certain self-
impoverishment of a return to autarky and the unacceptable risks associated
with ever-deeper incorporation into a truly global economy.
Acknowledgements
The author wishes to thank Nadège Rolland and David Stack for their assistance with
Chinese-language sources.
Notes
1 Christopher Hughes, ‘Globalisation 2 For a discussion of one of the early
and Nationalism: Squaring the Circle campaigns, see Thomas B. Gold, ‘“Just
in Chinese International Relations in Time!”: China Battles Spiritual
Theory’, Millennium, vol. 26, no. 1, Pollution on the Eve of 1984’, Asian
1997, p. 104. Survey, vol. 24, no. 9, September 1984,
pp. 947–74. Enemy: The Making of US Export

3 Daojiong Zha, ‘Chinese Control Policy Toward the People’s
Considerations of “Economic Republic of China (Stanford, CA:
Security”’, Journal of Chinese Political Stanford University Press, 2016).
Science, vol. 5, no. 1, March 1999, p. 69. 13 See Dianne E. Rennack, China: U.S.
For a review and summary of some Economic Sanctions (Washington DC:
of this literature, see Benjamin Yeung, Congressional Research Service, 1997).
‘China in the Era of Globalization: 14 Zha, ‘Economic Security’, p. 83.
The Emergence of the Discourse on 15 Saunders, ‘Supping with a Long
Economic Security’, Pacific Review, vol. Spoon’, pp. 75–6.
21, no. 5, December 2008, pp. 635–60. 16 Nathan and Scobell, ‘Globalization as
4 Wang Zhengyi, ‘Conceptualizing a Security Strategy’, p. 314.
Economic Security and Governance: 17 Deng Xiaoping, ‘China Will Never
China Confronts Globalization’, Pacific Allow Other Countries to Interfere
Review, vol. 17, no. 4, 2004, p. 528. in Its Internal Affairs’, 11 July
5 Philip C. Saunders, ‘Supping with 1990, https://dengxiaopingworks.
a Long Spoon: Dependence and wordpress.com/2013/03/18/china-will-
Interdependence in Sino-American never-allow-other-countries-to-inter-
Relations’, China Journal, no. 43, fere-in-its-internal-affairs/.
January 2000, p. 70. 18 Ezra F. Vogel, Deng Xiaoping and the
6 Andrew J. Nathan and Andrew Transformation of China (Cambridge,
Scobell, ‘Globalization as a Security MA: Harvard University Press, 2011),
Strategy: Power and Vulnerability in p. 643.
the “China Model”’, Political Science 19 Ibid., p. 641.
Quarterly, vol. 131, no. 2, 2016, pp. 20 Anne-Marie Brady, Marketing
319–20. Dictatorship: Propaganda and Thought
7 Quoted in Yeung, ‘China in the Era of Work in Contemporary China (Lanham,
Globalization’, p. 638. MD: Rowman and Littlefield, 2008), p.
8 Ibid., p. 645. 170.
9 Saunders, ‘Supping with a Long 21 Michael Pillsbury, The Hundred-Year
Spoon’, pp. 55–6. Marathon: China’s Secret Strategy
10 On the lasting impact of these experi- to Replace America as the Global
ences see Manjaris Chatterjee Miller, Superpower (New York: Henry Holt,
Wronged by Empire: Post-Imperial 2015), p. 115.
Ideology and Foreign Policy in India 22 See Carter Center, ‘Final Report
and China (Stanford, CA: Stanford of the Carter Center Limited
University Press, 2013). Assessment Mission: March 2010
11 See Shu Guang Zhang, Economic Cold Villagers Committee Elections in
War: America’s Embargo Against China Yunnan Province, China’, May 2010,
and the Sino-Soviet Alliance, 1949–1963 p. 4, https://www.cartercenter.org/
(Stanford, CA: Stanford University resources/pdfs/peace/china/2010-
Press, 2001). china-village-elections-rpt.pdf.
12 See Hugo Meijer, Trading with the 23 See, for example, Bryan Ho, ‘Village
Democracy Shrugs in Rural China’, see Gregory Veeck, ‘China’s Food

East Asia Forum, 22 July 2014. Security: Past Success and Future
24 James Mann, The China Fantasy: How Challenges’, Eurasian Geography and
Our Leaders Explain Away Chinese Economics, vol. 54, no. 1, 2013, pp.
Repression (New York: Viking, 2007), 42–56.
pp. 19–20. 35 For a discussion of the opening stages
25 Quoted in Aaron L. Friedberg, A in this process, see Jonas Parello-
Contest for Supremacy: China, America Plesner and Mathieu Duchatel, China’s
and the Struggle for Mastery in Asia Strong Arm: Protecting Citizens and
(New York: Norton, 2011), p. 94. Assets Abroad (Abingdon: Routledge
26 Vogel, Deng Xiaoping and the for The International Institute for
Transformation of China, p. 643. Strategic Studies, 2015).
27 Chang Lulu and Chen Zhimin, 36 Some Chinese analysts agree. For
‘Xiyinxing jingji quanli zai Zhongguo example, one professor of agricul-
waijiao zhong de yunyong’ [The tural economics has recently argued
Application of Attractive Economic that the traditional notion that ‘food
Power in China’s Diplomacy], Waijiao supply for the world’s largest popu-
Pinglun [Foreign Affairs Review], vol. 3, lation should not be controlled by
2014, pp. 1–16. foreign countries’ is now unrealistic,
28 James Mann, About Face: A History and that ‘China should … abandon its
of America’s Curious Relationship with self-sufficiency targets … Rather, food
China, from Nixon to Clinton (New security should be ensured by increas-
York: Knopf, 1999), pp. 292–3. ing the income of the Chinese people.’
29 Ibid., p. 296. In this view, ‘food security will no
30 Saunders, ‘Supping with a Long longer be an important issue for a
Spoon’, p. 78. rich China’. This optimistic assess-
31 Ibid. ment does not appear to be shared by
32 Sergei Troush, ‘China’s Changing others in the Chinese system, espe-
Oil Strategy and Its Foreign cially those involved in the making of
Policy Implications’, Brookings national-security policy. Xiaohua Yu,
Institution, 1 September 1999, ‘Food Security in China’, China Policy
https://www.brookings.edu/articles/ Institute: Analysis, 13 December 2016,
chinas-changing-oil-strategy-and-its- https://cpianalysis.org/2016/12/13/
foreign-policy-implications/. food-security-in-china/.
33 Aaron L. Friedberg, ‘Going Out’: 37 Geoff Colvin, ‘Inside China’s $43
China’s Pursuit of Natural Resources Billion Bid for Food Security’,
and Implications for the PRC’s Grand Fortune, 21 April 2017, http://
Strategy (Seattle, WA: National Bureau fortune.com/2017/04/21/
of Asian Research, 2006), pp. 21–2. chemchina-syngenta-acquisition-deal/.
34 For a discussion of China’s success in 38 Some of the early manifestations of
increasing grain production, but its the ‘going out’ policy and its impact
failure to reach a target of supplying are described in James Kynge, China
95% of demand from domestic supply, Shakes the World: A Titan’s Rise and
Troubled Future – and the Challenge for for Food Security’.

America (New York: Houghton Mifflin, 43 Khurram Husain, ‘Exclusive: CPEC
2006). China’s activities in the energy Master Plan Revealed’, Dawn, 21
and mineral domain are discussed in June 2017, https://www.dawn.com/
William J. Norris, Chinese Economic news/1333101. It is not entirely clear
Statecraft: Commercial Actors, Grand from this account how much of the
Strategy, and State Control (Ithaca, NY: new agricultural production will be
Cornell University Press, 2016), pp. consumed in Pakistan as opposed to
67–106. being sent back to China.
39 See Elizabeth Economy and Michael 44 Costas Paris, ‘China’s Cosco Agrees to
Levi, ‘By All Means Necessary: How Buy Shipping Rival OOCL’, Wall Street
China’s Resource Quest Is Changing Journal, 8 July 2017, https://www.wsj.
the World’, All China Review, 3 July com/articles/chinas-cosco-agrees-to-
2015, http://www.allchinareview. buy-shipping-rival-oocl-1499523063.
com/by-all-means-necessary-how- 45 James Kynge, Chris Campbell, Amy
chinas-resource-quest-is-changing- Kazmin and Farhan Bohari, ‘How
the-world/. Economy and Levi cite a China Rules the Waves’, Financial
study estimating that China ‘typically Times, 12 January 2017. See also
has paid 20 percent more for oil and Cambiaso Risso Group, ‘China-
gas assets than the industry average’. Owned Ships: Fleet Expansion
This could be seen either as a measure Accelerates’, 15 March 2016,
of the inefficiency and wastefulness http://www.cambiasorisso.com/
of the Chinese approach to acquiring china-owned-ships-fleet-expansion-
energy resources, or as an indication accelerates/.
of the size of the premium Beijing 46 Kynge et al., ‘How China Rules the
has been willing to pay in order to Waves’.
gain whatever additional security it 47 Ben Bland, ‘Why China’s Global
believes it derives from physical own- Shipping Ambitions Will Not Easily
ership of sources of supply. Be Contained: Push for Control of
40 Michael J. de la Merced and Ian Strategic Assets Trumps Short-Term
Austen, ‘Chinese Oil Company Bids Commercial Logic’, Financial Times,
$15 Billion for Canadian Producer’, 17 July 2017, https://www.ft.com/
New York Times, 23 July 2013, https:// content/7065b5dc-6ada-11e7-bfeb-
dealbook.nytimes.com/2012/07/23/ 33fe0c5b7eaa?mhq5j=e3.
cnooc-to-buy-nexen-for-15-billion/?_ 48 Mercy A. Kuo, ‘The Power of Ports:
r=0. China’s Maritime March’, Diplomat,
41 Euan Rocha, ‘CNOOC Closes $15.1 8 March 2017, http://thediplomat.
Billion Acquisition of Canada’s com/2017/03/the-power-of-ports-chi-
Nexen’, Reuters, 25 February nas-maritime-march/.
2013, http://www.reuters.com/ 49 Wu Zhengyu, ‘Toward “Land” or
article/us-nexen-cnooc-idUS- Toward “Sea”? The High-Speed
BRE91O1A420130225. Railway and China’s Grand Strategy’,
42 Colvin, ‘Inside China’s $43 Billion Bid Naval War College Review, vol. 66, no. 3,
Summer 2013, p. 53. 55 For an interesting attempt to cat-

50 Samir Tata, ‘Deconstructing egorise the various ways in which
China’s Energy Security Strategy’, China has sought to use economic
Diplomat, 14 January 2017, http:// leverage, see Evan A. Feigenbaum, ‘Is
thediplomat.com/2017/01/deconstruct- Coercion the New Normal in China’s
ing-chinas-energy-security-strategy. Economic Statecraft?’, Carnegie
com&utm_campaign=buffer. Endowment for International
51 For useful surveys of recent Chinese Peace, 25 July 2017, http://carn-
thinking on this topic, see Matt egieendowment.org/2017/07/25/
Ferchen, ‘How New and Crafty Is is-coercion-new-normal-in-china-s-
China’s “New Economic Statecraft”?’, economic-statecraft-pub-72632.
working paper, 22 March 2016, 56 Regarding Chinese efforts to pres-
https://www.linkedin.com/pulse/ sure the US, see the analysis in Daniel
how-new-crafty-chinas-economic- W. Drezner, ‘Bad Debts: Assessing
statecraft-so-much-i-argue-ferchen; China’s Financial Influence in Great
Timothy R. Heath, ‘China’s Evolving Power Politics’, International Security,
Approach to Economic Diplomacy’, vol. 34, no. 2, Fall 2009, pp. 7–45.
Asia Policy, no. 22, July 2016, pp. Beijing has recently used similar
175–91; Audrye Wong, ‘Chinese techniques, albeit on a smaller scale
Perspectives on Economic Diplomacy’, and against less formidable targets,
Asan Forum, 22 September 2016, http:// to silence European critics of its
www.theasanforum.org/chinese- human-rights policies. In 2014 the
perspectives-on-economic-diplomacy/; Spanish government blocked efforts
and Zhang Xiaotong and James Keith, by human-rights activists to bring
‘From Wealth to Power: China’s New charges against Chinese officials in
Economic Statecraft’, Washington Spanish courts. At the time, China
Quarterly, vol. 40, no. 1, Spring 2017, reportedly held 20% of Spain’s
pp. 185–203. public debt, and Madrid reportedly
52 Heath, ‘China’s Evolving Approach to feared that ‘Beijing could unleash
Economic Diplomacy’, pp. 175–6. a new surge in borrowing costs by
53 Gao Cheng, ‘Cong Zhongguo jingji suddenly selling its titles’. Diego
waijiao zhuanxing de shijiao kan Torres, ‘Why the West Treats China
“Yidai Yilu” de zhanlüe xing’ [‘One with Kid Gloves’, Politico, 21 June
Belt One Road’ from the Perspective 2017, http://www.politico.eu/article/
of China’s Economic Diplomacy] Guoji china-europe-trade-why-the-west-
Guancha [International Observer], no. 4, treats-with-kid-gloves/.
2015, pp. 35–48. 57 Keith Bradsher, ‘U.S. Deal with
54 James Reilly, ‘China’s Economic Taiwan Has China Retaliating’, New
Statecraft: Turning Wealth into York Times, 30 January 2010; Elaine
Power’, Lowy Institute, 27 November Kurtenbach, ‘China’s Interests May
2013, https://www.lowyinstitute.org/ Limit Sanctions on US Firms’, San Diego
publications/chinas-economic-state- Union-Tribune, 1 February 2010, http://
craft-turning-wealth-power. www.sandiegouniontribune.com/
sdut-chinas-interests-may-limit-sanc- 63 Niu Xinchun, ‘Zhongguo waijiao

tions-on-us-firms-2010feb01-story.html. xuyao zhanlüe zhuanxing’ [China’s
58 See James Reilly, ‘China’s Diplomacy Needs a Strategic
Unilateral Sanctions’, Washington Transformation], Xiandai Guoji Guanxi
Quarterly, vol. 35, no. 4, Fall 2012, [Contemporary International Relations],
pp. 121–33; Clay Jian, ‘Is China 13 January 2013.
an Emerging Sanctioning State?’, 64 Ibid.
ResearchGate, December 2012, 65 Ibid.
https://www.researchgate.net/ 66 Ibid.
publication/282298631_Is_China_an_ 67 Xu Jian, ‘Rethinking China’s Period
Emerging_Sanctioning_State. of Strategic Opportunity’, China
59 Andrew Higgins, ‘In Philippines, Institute of International Studies, 28
Banana Growers Feel Effect of South May 2014, http://www.ciis.org.cn/eng-
China Sea Dispute’, Washington Post, lish/2014-05/28/content_6942258.htm.
10 June 2012, https://www.wash- 68 See, for example, Jost Wubbeke et al.,
ingtonpost.com/world/asia_pacific/ Made in China 2025: The Making of a
in-philippines-banana-growers- High-Tech Superpower and Consequences
feel-effect-of-south-china-sea-dis- for Industrial Countries (Berlin:
pute/2012/06/10/gJQA47WVTV_story. Mercator Institute for China Studies,
html?utm_term=.31d4d6e788a5. December 2016); and US Chamber of
60 ‘S Korea Complains to WTO About Commerce, Made in China 2025: Global
China Over Thaad’, BBC, 20 March Ambitions Built on Local Protections
2017, http://www.bbc.com/news/ (Washington DC: US Chamber of
business-39324536; Jethro Mullen and Commerce, 2017).
Sol Han, ‘One Company is Bearing 69 Professor Jin Canrong of Renmin
the Brunt of China’s Anger Over U.S. University, quoted in Deng Yuan and
Missile System’, CNN, 7 March 2017, Xiong Zhengyan, ‘Zhong-Mei xinx-
http://money.cnn.com/2017/03/07/ ing daguo guanxi: guang you gainian
news/china-lotte-thaad-south-korea- yuanyuan bu gou’ [China–US New
tensions/index.html. Type of Great-Power Relationship: A
61 Keith Bradsher, ‘Amid Tension, China Mere Concept Is Not Enough], Guoji
Blocks Vital Exports to Japan’, New Xianqu Daobao [International Pioneer],
York Times, 22 September 2010, http:// 30 September 2014. This assessment
www.nytimes.com/2010/09/23/busi- is not unique to Chinese observers.
ness/global/23rare.html. For an interesting recent analysis
62 See Alan Beattie, ‘Rare Earths and arguing similarly that China’s move-
China’s Self-Correcting Folly’, ment towards a consumption-driven
Financial Times, 8 January 2015, https:// economy will result in a ‘shift from
www.ft.com/content/17085d7c-78b1- complementarity to competition’,
3ddc-9ba0-4bcde804da39; and Eugene see William J. Norris, Geostrategic
Gholz, Rare Earth Elements and National Implications of China’s Twin Economic
Security (New York: Council on Challenges (New York: Council on
Foreign Relations, October 2014). Foreign Relations, June 2017), espe-
cially pp. 7–8. ‘Periphery’ Is More Important than

70 Huang Zhiling, ‘Zhongguo yi jinzao the United States], Huangqiu Shibao
tiaozheng duiwai jingji zhanlüe’ [Global Times], 13 January 2015.
[China Should Adjust Its Foreign 76 Li Wei, Xu Jin and Gao Cheng, ‘Dazao
Economic Strategy as Soon as Zhongguo zhoubian anquan de
Possible], Jingji Cankao Bao [Economic “zhanlüe zhidian” guojia’ [Building
Information Daily], 24 February 2014. ‘Strategic Fulcrum’ Countries for
71 Niu, ‘Chinese Diplomacy Needs a China’s Peripheral Security], Shijie
Strategic Transformation’. Zhishi [World Knowledge], 15 August
72 Gao Zugui, ‘Zhongguo guoji huanjing 2014.
suzao jinru xin jueduan’ [China Has 77 Gao Cheng, ‘“One Belt One Road”
Entered a New Stage for Shaping the From the Perspective of China’s
International Environment], Liaowang Economic Diplomacy’.
[Lookout], vol. 45, 2013. 78 See the discussion in Nadège Rolland,
73 Gao Cheng, ‘“One Belt One Road” China’s Eurasian Century? Political and
from the Perspective of China’s Strategic Implications of the Belt and
Economic Diplomacy’. Road Initiative (Seattle, WA: National
74 Gao Cheng, ‘Zhongguo jueqi bei- Bureau of Asian Research, 2017), p. 96.
jing xia de zhoubian geju bianhua 79 Todd Williamson, ‘Too Big to
yu zhanlüe tiaozheng’ [China’s Sanction: How the Internationalization
Rise, Structural Evolution of Its of China’s Currency Hurts
Neighbouring Regions, and Its Washington’s Ability to Punish
Strategic Adjustment], Guoji Jingji Human Rights Violators’, Foreign
Pinglun [International Economic Policy, 18 March 2016. See also
Review], no. 2, 2014. Christer Ljungwall and Viking
75 See the discussion in Yan Xuetong, Bohman, ‘Mending Vulnerabilities to
‘Zhengti de “zhoubian” bi Meiguo Isolation’, RUSI Journal, vol. 162, no. 5,
geng zhongyao’ [The Overall 2017, pp. 26–33.

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Survival

Global Politics and Strategy

ISSN: 0039-6338 (Print) 1468-2699 (Online) Journal homepage: https://www.tandfonline.com/loi/tsur20

Globalisation and Chinese Grand Strategy

Published online: 29 Jan 2018.

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Deng Xiaoping’s initiation of the ‘reform and opening up’ programme at

Aaron L. Friedberg is Professor of Politics and International Affairs at Princeton University.

Survival | vol. 60 no. 1 | February–March 2018 | pp. 7–40DOI 10.1080/00396338.2018.1427362

The revolution in policy that Deng engineered soon came to be seen as

has sought to bind the people to it by promulgating a form of national-

maintained key elements of self-control’. Included among these were a

of official policy, having identified some potential problems, most writers

In time, moreover, Beijing has supposedly grown more comfortable

Phase one: hiding and biding

openness in order to punish, pressure or undermine them. To the contrary,

course, abandoning economic liberalisation and pulling back into a posture

benefits to be derived from expanding trans-Pacific flows of trade and invest-

Exhibit A for this claim was the programme of ‘village elections’, in

members of both US political parties could agree. George W. Bush summed

Phase two: binding and hedging

reinforcing and, barring some truly catastrophic crisis or confrontation, it

Zemin made a highly publicised visit to Boeing’s headquarters in Seattle,

In addition to its obvious economic benefits, engaging with the United

Nor are Chinese state-owned enterprises content merely to purchase

Phase three: shape and restructure

demonstration of intent and the willingness to experiment with novel

started to change. According to one observer, the international economic

appear to distinguish between the nations of central and western Europe, on

strategic objective should be to help expand the domestic demand level

an interdependent and relatively independent production chain. China

Although some of the discussion of a future economic order is couched

Fearful of being ‘marginalised’, Japan itself might have to reconsider the

integration could aid ‘China’s neutralisation of the US Asia-Pacific alli-

pp. 947–74. Enemy: The Making of US Export

Democracy Shrugs in Rural China’, see Gregory Veeck, ‘China’s Food

Troubled Future – and the Challenge for for Food Security’.

Summer 2013, p. 53. 55 For an interesting attempt to cat-

sdut-chinas-interests-may-limit-sanc- 63 Niu Xinchun, ‘Zhongguo waijiao

cially pp. 7–8. ‘Periphery’ Is More Important than

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Survival | vol. 60 no. 1 | February–March 2018 | pp. 7–40DOI 10.1080/00396338.2018.1427362