China’s Gambit

Emerging from an award-winning article in International Security,

­China’s Gambit examines when, why, and how China attempts to
coerce states over perceived threats to its national security. Since 1990,
China has used coercion for territorial disputes and issues related
to Taiwan and Tibet, yet China is curiously selective in the timing,
­target, and tools of coercion. This book offers a new and generalizable
cost-balancing theory to explain states’ coercion decisions. It demon-
strates that China does not coerce frequently and uses military coercion
less when it becomes stronger, resorting primarily to nonmilitarized
tools. Leveraging rich empirical evidence, including primary Chinese
documents and interviews with Chinese and foreign officials, this book
explains how contemporary rising powers translate their power into
influence and offers a new framework for explaining states’ coercion
decisions in an era of economic interdependence, particularly how con-
temporary global economic interdependence affects rising powers’ for-
eign security policies.

Ketian Zhang is an Assistant Professor at George Mason University.

She studies rising powers’ grand strategies, coercion, ­economic ­statecraft,
and maritime disputes, with a focus on China. Her research has appeared
in International Security, Journal of Strategic Studies, Journal of
Contemporary China, Asia Policy, and Journal of ­Indo-Pacific Affairs.
China’s Gambit
The Calculus of Coercion

KETIAN ZHANG
George Mason University
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Title: China’s gambit : the calculus of coercion / Ketian Zhang, George
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Other titles: Calculus of coercion
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University Press, 2024. | Includes bibliographical references and index.
Identifiers: LCCN 2023024048 | ISBN 9781009423786 (hardback) |
ISBN 9781009423816 (ebook)
Subjects: LCSH: China – Strategic aspects. | China – Relations. | Power
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For my family
Contents

List of Figurespage ix
Acknowledgmentsxi
List of Abbreviationsxiii

1 Introduction 1
2 The Cost-Balancing Theory 13
3 Coercion in the South China Sea 46
4 Sino-Japanese Disputes in the East China Sea 97
5 Coercion in Cross-Strait Relations 130
6 Tibet and the Dalai Lama Visits 162
7 Conclusion 189

References201
Index223

vii
Figures

2.1 Cost-balancing theorypage 30

3.1 Challenges from other disputants in the South China Sea
and cases of Chinese coercion (1990–2020) 53
3.2 Number of incidents (challenges to Chinese sovereignty claims)
in the South China Sea (1990–2020) 55
3.3 AP, AFP, and Reuters report of South China Sea or Spratly
disputes (1990–2020) 58
3.4 Factiva search of English language reports on the South China
Sea from Malaysian, Vietnamese, and Philippine newspapers
(1990–2016)71
4.1 China’s coercion regarding maritime disputes in the East
China Sea (1990–2012) 99
4.2 Factiva search of “East China Sea” and “Senkaku” in Reuters,
AP, and AFP (1990–2016) 103
4.3 EU, Japanese, and US FDI as share of total FDI in China
(1997–2015)109
4.4 Japanese ODA to China 112
5.1 US arms sales to Taiwan (1990–2020) 132
5.2 Reports from major news sources on Taiwan and
US weapons sales 139
6.1 Chinese coercion regarding foreign heads of state/government
receiving the Dalai Lama (1990–2015) 164
6.2 The Dalai Lama’s reception by head of
state/government (1990–2015) 168
6.3 Factiva search of English language reports on the Dalai
Lama visits in Reuters, AP, and AFP (1990–2014) 169
6.4 French and German aircraft export to China (2004–2010) 176

ix
Acknowledgments

This book is a project that was almost a decade in the making. The first group
of people I would like to thank is my graduate school advisors. Taylor Fravel
has been an excellent advisor and chair, providing detailed feedback, advice on
both work and life, and much-needed encouragement. He is not only a great
mentor but also an incredibly kind human being. I hope to follow his exam-
ple. I am also indebted to Dick Samuels for both his input into this book and
moral support. Dick’s rich empirical knowledge about Japan and international
political economy is beyond helpful, and his detailed attention to sources and
strict requirements for qualitative methodology makes me a better scholar
when it comes to qualitative work. Steve Van Evera reminded me to ask big
and policy-relevant questions. Vipin Narang’s insistence on the clarity and the
theoretical aspect of the book brought me back to the big picture when I was
too bogged down in the empirics.
I am also particularly thankful for other colleagues and mentors. Edward
Friedman, my undergraduate mentor at the University of Wisconsin-Madison,
opened my eyes with his rich knowledge of China and Asia, a strong sense of
justice, and devotion to teaching. I would not have had the confidence to pur-
sue graduate school were it not for his mentoring and encouragement. Charles
Franklin and Scott Gehlbach at Wisconsin provided me with an early introduc-
tion to rigorous political science research. Elizabeth Perry at Harvard taught
me how to be a good China scholar, regardless of whether one studies interna-
tional relations or comparative politics. Jeffry Frieden at Harvard helped me
learn how to bridge the gap between international political economy and secu-
rity and guided me through the project that formed the prototype of this book.
Numerous institutions provided essential financial support along the
way. I would especially like to thank the Chiang Ching-kuo Foundation, the
Shorenstein Asia-Pacific Center, the Belfer Center for Science and International
Affairs, the Institute for Security and Conflict Studies, and the Oak Ridge

xi
xii Acknowledgments

Associated Universities. I greatly benefited from the stimulating intellectual

community of ISCS, Stanford, and the Belfer Center. I cannot thank Charlie
Glaser, Caitlin Talmadge, Elizabeth Saunders, Alex Downes, Steve Miller,
Steve Walt, Sean Lynn-Jones, Gi-Wook Shin, and Karl Eikenberry enough
for their help and kindness. I also benefited from valuable comments on my
work in various workshops, including those at Harvard University, the Notre
Dame University International Security Center, the Center for the Study of
Contemporary China at the University of Pennsylvania, and Yale University.
For helpful comments and suggestions on various chapters, I thank my for-
mer colleagues at MIT, especially Fiona Cunningham, Marika Landau-Wells,
Mark Bell, Lena Andrews, Reid Pauly, Sean Liu, Phil Martin, Yue Hou, Yiqing
Xu, John Minnich, Kacie Miura, Kelly Greenhill, and Josh Shifrinson. Outside
of MIT, I also received help and numerous comments along the way. I thank, in
particular, Dani Nedal, Sara Moller, Nina Silove, Tyler Jost, Jany Gao, Jingkai
He, Josh Kertzer, Anne Sartori, Austin Carson, Sebastian Rosato, Victoria Hui,
Xiaoyu Pu, and Binn Cho. I benefited immensely from the book workshop
I held in April 2021, especially from comments by Avery Goldstein, Jessica
Weiss, Todd Sechser, and Erik Gartzke, as well as from George Mason col-
leagues Colin Dueck, Mike Hunzeker, Ming Wan, Ashan Butt, and Chris Berk.
Colleagues from China and Washington, D.C. significantly helped my research
and fieldwork. I would like to thank all of my interviewees, even though they
have to remain anonymous. Moreover, I thank my undergraduate research
assistants, Abdallah Ali, Kevin Ligthtner, and Yulin Wu, for their wonderful
research assistance. Finally, I would like to thank my editor at Cambridge,
Robert Dreesen, for believing in this project, and my copy editor, Matt Ogborn,
for meticulous proofreading, as well as the reviewers for the book.
I owe my deepest debts to my family. Long before I started this book, my
family supported my intellectual pursuits. It was because of my grandparents
and my father that I became interested in studying politics and foreign policy
when I was a teenager. I am grateful to my parents for their unconditional love,
sacrifice, forgiveness, and encouragement. I am forever thankful to my mater-
nal grandparents for raising me, educating me, and making me believe that a
little girl can also “dream big.” I can still vividly remember my grandfather,
Yuan Ma, teaching me Chinese characters when I was little, even though he
passed away before this book came out. Finally, I thank my husband, Jason,
and daughter, Essie. As an academic mom, it is never easy to balance work and
family. My husband took the majority of the burden of caring for our daugh-
ter, especially during COVID and when Essie was just an infant. Jason was
often the first reader when I was revising the book for publication, while Essie
grew up on “stories” about coercion instead of fairytales. I dedicate this book
to my daughter, and I hope she can also grow up to dream big.
Abbreviations

AFP Agence France Presse

AMS Academy of Military Science
AP The Associated Press
ASEAN Association of Southeast Asian Nations
CASS Chinese Academy of Social Sciences
CCP Chinese Communist Party
CICIR China Institute of Contemporary International Relations
CIIS China Institute of International Studies
CMC Central Military Commission
CNOOC China National Offshore Oil Corporation
EEZ exclusive economic zone
FDI foreign direct investment
FTZ free trade zone
FONOP freedom of navigation operation
JCG Japan Coast Guard
LNG liquefied natural gas
MFA Ministry of Foreign Affairs
MFN most favored nation
MID militarized interstate dispute
MOA Ministry of Agriculture
NDRC National Development and Reform Commission
NISCSS National Institute of South China Sea Studies
ODA official development aid
OEW operating empty weight
PBSC Politburo Standing Committee
PLA People’s Liberation Army
PRC People’s Republic of China
PSC production sharing contracts

xiii
xiv List of Abbreviations

ROC Republic of China

SOA State Oceanic Administration
SOE state-owned enterprise
SWIFT The Society for Worldwide Interbank Financial Telecommuni-
cations
THAAD Terminal High Altitude Area Defense
1

Introduction

States have long used statecraft, a “selection of means,” for the pursuit of
­foreign policy goals.1 One of the means is coercion. Coercion, otherwise known
as compellence, is the threat or use of negative actions by a state to demand a
change in another state’s behavior. As a major power, the People’s Republic
of China (PRC, hereafter China) is no exception. When faced with issues of
national security, China has used coercion since the 1990s. For example, in
1995 and 1996, China utilized missile tests to force Taiwanese voters to change
their voting choices for fear that Taiwan would vote for a pro-independence
president, which China perceives as threatening its sovereignty regarding the
island. In 2009, it froze its Airbus orders from France, an instance of eco-
nomic sanctions, over the French president’s meeting with the Dalai Lama.
China employed economic sanctions once again when it imposed a ban on
Philippine banana exports over disputes surrounding the Scarborough Shoal in
April 2012. In the same year, it used its Coast Guard ships to patrol the territo-
rial waters of the disputed Senkaku/Diaoyu Islands between China and Japan,
hoping to change Japan’s position regarding the sovereignty of the islands.
Both scholars and policymakers have been increasingly worried that a more
powerful China will become more assertive.2 Media reports amplify China’s
coercive behavior, or the “China threat,” and make pessimistic predictions
about wars involving China. The Google query “China threat of war” yields
about 154,000,000 search results. Current US Secretary of State Anthony
Blinken asserts that China will take more aggressive actions as time progresses.3
Henry Kissinger warns that the Chinese threat risks not only a new Cold War

1
Baldwin (1985, p. 8); Freeman (1997).
2
Art (2010); Friedberg (2011); Ganguly and Pardesi (2012).
3
Norah O’Donnell, “Secretary of State Antony Blinken on the Threat Posed by China,” CBS
News, May 2, 2021, www.cbsnews.com/news/antony-blinken-60-minutes-2021-05-02/.

1
2 Introduction

but nuclear war.4 US Admiral John Aquilino is concerned about China’s grow-
ing threats to Taiwan.5 Numerous media reports predict that the United States
and China are on the brink of war, citing the “Thucydides Trap,” attributed
to the ancient war between Athens and Sparta, to indicate the inevitability of a
major conflict between the two states.6
The media and US foreign policy elites paint a pessimistic picture of China’s
behavior and the likelihood of major conflicts. However, they fail to capture the
curious variation in China’s coercive behavior, which is much more nuanced
than simplistic predictions that war is imminent. For one, despite the count-
less forecasts of major wars involving China over the past decade, China has
not fought a war since the 1988 Sino-Vietnamese maritime skirmish. Instead,
China utilizes a full spectrum of coercive tools, ranging from diplomatic and
economic sanctions to gray-zone measures and military coercion.
As my new dataset on Chinese coercion shows, when China faced criti-
cal national security issues, including territorial disputes, Taiwan, and for-
eign leaders’ reception of the Dalai Lama, in the 1990s, half of the cases
of Chinese coercion were militarized.7 Specific examples include Chinese
missile tests during the 1995–1996 Taiwan Strait Crisis, militarized seizure
of the Mischief Reef in the South China Sea, and the use of the Navy to
threaten Vietnam over contested sovereignty claims in the South China Sea.
Chinese coercion became more frequent in more recent years, but unlike in
the 1990s, very few of the 2000–2022 cases of Chinese coercion were mil-
itarized, except for the border dispute involving India and response to US
House Speaker Nancy Pelosi’s 2022 visit to Taiwan.8 Of the sixty-seven cases
of China’s coercion between 1990 and 2020 in my dataset, only nine cases

4
Vincent Ni, “Failure to Improve US-China Relations ‘Risks Cold War,’ Warns Kissinger,”
The Guardian, May 1, 2021, www.theguardian.com/us-news/2021/may/01/us-china-doomsday-
threat-ramped-up-by-hi-tech-advances-says-kissinger.
5
Brad Lendon, “Chinese Threat to Taiwan ‘Closer to Us than Most Think,’ Top US Admiral
Says,” CNN, March 25, 2021, www.cnn.com/2021/03/24/asia/indo-pacific-­ commander-
aquilino-hearing-taiwan-intl-hnk-ml/index.html.
6
See, for example, Jerome Keating, “Beijing Concocts a Thucydides Trap,” Taipei Times, March
23, 2021, www.taipeitimes.com/News/editorials/archives/2021/03/24/2003754376; Jeff Rogg,
“An American-Made Greek Tragedy: Coronavirus and the Thucydides Trap,” The National
Interest, September 27, 2020, https://nationalinterest.org/blog/buzz/american-made-greek-­
tragedy-coronavirus-and-thucydides-trap-169662?page=0%2C1; Michael Klare, “Are the US
and China Stumbling into War?” The Nation, April 2, 2021, www.thenation.com/article/world/
china-biden-war/; Jonathan Marcus, “Could an Ancient Greek Have Predicted a US-China
Conflict?” BBC News, March 25, 2019, www.bbc.com/news/world-47613416l; Alex Ward,
“Why There’s Talk about China Starting a War with Taiwan,” Vox, May 5, 2021, www.vox​
.com/22405553/taiwan-china-war-joe-biden-strategic-ambiguity; James Stavridis, “Four Ways
a China-U.S. War at Sea Could Play Out,” Bloomberg, April 25, 2021, www.bloomberg.com/
opinion/articles/2021-04-25/u-s-china-sea-war-could-spread-to-japan-australia-india.
7
See online appendix, Ketian Zhang, “Dataset and Interview Codebook for China’s Coercion
1990–2020,” https://doi.org/10.7910/DVN/H4IFH3, Harvard Dataverse, V2, 2021.
8
For data regarding military coercion on Sino-Indian border disputes, see Zhang (2022b).
Introduction 3

involve military coercion, and these include China’s military coercion against
Taiwan and India. In short, we have yet to see China initiate a war, but we
do see it increasingly using gray-zone tactics and other nonmilitarized tools,
including economic sanctions. China’s preference in using nonmilitary coer-
cion contradicts the coercion literature’s conventional argument that military
coercion is most effective and, therefore, if the coercer wants to succeed, it is
most likely to choose military coercion for high-stakes issues.9 It is puzzling
that China chooses nonmilitary tools when they are considered suboptimal
in terms of effectiveness, especially since China considers all the issues men-
tioned above as high stakes.
In addition, China does not coerce all states that pose the same challenges
to its national security. Existing studies have focused on evaluating the effec-
tiveness of coercion, not cases where coercion could have taken place but did
not. Interestingly, China sometimes refrains from coercion. China coerced the
Philippines and Vietnam over South China Sea disputes much more frequently
than Malaysia, and it used economic sanctions against the Philippines over
disputes in the Scarborough Shoal in 2012 but refrained from coercion in 2001
over the very same disputes in the Scarborough Shoal. China utilized its Coast
Guard ships to ram Vietnamese vessels in 2014 over disputes surrounding the
Paracel Islands. Rarely, however, does China coerce Malaysia over Malaysian
oil and gas exploration in what China considers to be its maritime exclusive
economic zone in the South China Sea. China imposed harsh economic and
diplomatic sanctions on Germany for its Chancellor’s meeting with the Dalai
Lama but refrained from coercion when the Australian Prime Minister did the
same. Both meetings took place in 2007.
China, therefore, is curiously selective in its timing, targets, and tools
of coercion. Most cases of Chinese coercion are not militarized, nor does
China coerce all states that pose the same threats to its national security.
Questions regarding China’s coercion patterns – crucial for the prospect of
peace and stability in the Asia-Pacific region and critical for understand-
ing a rising power’s foreign policy decision-making and future trajectory –
have not been systematically answered. Thus, this book examines when,
why, and how China attempts to coerce states over threats to its national
security. This question entails two parts. First, when and why does China
choose coercion over inaction, defined as not coercing? Second, if coercion
is chosen, what tools does China utilize? Although states could use coercion
proactively and opportunistically in pursuit of resources, this book seeks to
explain China’s coercive responses to the actions of other states that China
views as threatening.
I propose a new cost-balancing theory to explain China’s coercion deci-
sions, while discussing the broader implications for international relations in
Chapter 7. I show that instead of coercing all states and prioritizing military

9
Chamberlain (2016).
4 Introduction

coercion, China is a cautious actor that balances the benefits and costs of coer-
cion. The book identifies the centrality of reputation for resolve and economic
cost in driving whether China coerces or not. China often compels one target
in the hope of establishing a reputation for resolve, needing other states to view
it as strong in defending its national security interests. Nevertheless, China is
constrained by the imperative of developing its domestic economy and, there-
fore, economic costs – the degree to which China depends on the target state
for markets, supply, and capital, among other resources. China is more likely
to utilize coercion when the need to establish resolve is high and the economic
cost is low. If both are high, China will only choose coercion over issues of the
highest importance, such as Taiwan and Tibet. Moreover, China will prefer
nonmilitary coercion when the geopolitical backlash cost is high. Geopolitical
backlash cost is the possibility of other states balancing against China by form-
ing or strengthening alliances and the immediate risk of militarized escalation
involving a great power.
The conventional wisdom on coercion would predict that China would use
military coercion over high-stakes issues to maximize expected effectiveness in
the issue at hand. The cost-balancing theory, however, emphasizes a crucial
benefit of coercion: China coerces to establish resolve, not just for a specific
event over which it coerces the target. It also suggests that the benefits and costs
of coercion are in tension with one another. China balances the reputational
benefit of coercion against economic and geopolitical costs, which may lead to
Goldilocks choices or, in other words, China’s gambits. That is, China takes
the middle path and engages in cost-balancing calculations, often preferring
nonmilitary, especially gray-zone, coercion over military coercion. This seem-
ingly suboptimal choice, therefore, originates from a rational cost-balancing
calculus. In particular, the book elaborates on how globalized production and
supply chains affect China’s foreign and security policies, connecting interna-
tional political economy and international security.

1.1 Coercion and Chinese Foreign Policy

China’s use of coercion is puzzling both empirically and theoretically. Its
increase in the use of nonmilitarized and gray-zone coercion cuts against the
conventional prediction that use of force from China is more likely. Theories
of coercion do not examine when and how rising powers such as China coerce,
especially not under what conditions China is more likely to choose certain
targets and coercive tools. Explaining China’s record of coercion contributes
to theorizing states’ coercion decisions and rising power behavior in a global-
ized economy. It also has empirical implications for understanding China’s
grand strategy and predicting its future trajectory. Examining China’s coercion
decisions could generate crucial policy implications regarding how to manage
China’s rise, avoid great power conflicts, and maintain peace and stability in
the Asia-Pacific region.
1.1 Coercion and Chinese Foreign Policy 5

1.1.1 Coercion in an Era of Global Economic Interdependence

The literature on coercion gained prominence in the Cold War era, when
the United States was contemplating measures to contain the Soviet Union.
Beginning with Thomas Schelling and Alexander George, scholars have
focused on the effectiveness of coercion.10 George states that the central task
of coercive diplomacy is to impose sufficient expected costs on the target state
“to erode his motivation to continue what he is doing.”11 Unsurprisingly, this
fixation on identifying costs to the target state has led scholars to analyze dif-
ferent forms of coercion and their effectiveness, including the success or failure
of military coercion, coercive engineered migration, and economic sanctions.12
As such, the coercion literature privileges the analysis of the costs to the target
state, which leads to a rich subliterature evaluating the effectiveness of eco-
nomic sanctions. The first wave of studies concludes that economic sanctions
are ineffective.13 Subsequent scholars have argued that sanctions achieve goals
other than inducing behavioral changes.14 Recent scholars have specified the
conditions under which economic sanctions are effective.15
However, one cannot assume that coercion occurs automatically when the
coercer is facing national security threats. The literature also discusses costs
to the coercer, including audience costs, the domestic political cost of backing
down in a foreign policy crisis.16 However, such costs are discussed in a sce-
nario after a decision to coerce has been made – in other words, audience costs
in the crisis bargaining literature are related to whether one backs down from
a threat or not.
Some scholars do tackle questions of sanctions and coercion decisions. David
Baldwin, for example, stresses the cost–benefit analysis of sanctions over other
measures.17 Similarly, Daniel Drezner utilizes the cost–benefit framework to
compare the costs imposed on the coercer vis-à-vis the target.18 Branislav
Slantchev argues that states balance between the utility of military coercion
and the high costs of using military coercion.19 Others focus on domestic fac-
tors. For example, research has shown that the United States is more likely to
impose trade sanctions when domestic producers face more competition from

10
Schelling (1966); George (1991). Similarly, see Byman and Waxman (2002); Pape (1996);
Greenhill (2010); Drezner (1999a, p. 41); Carnegie (2015).
11
George (1991, p. 11). Similarly, Byman and Waxman (2002, p. 28); Alexander L. George,
“Coercive Diplomacy: Definition and Characteristics,” in George and Simons (1994, p. 16).
12
Powers and Altman (2023); Carnegie (2015); Greenhill (2010); Drezner (1999b); Pape (1996).
13
See, for example, Doxey (1972); Wallenstein (1968); Galtung (1967).
14
See Baldwin (1985); Nossal (1989).
15
Gerzhoy (2015); Bapat and Kwon (2015); (Whang et al. 2013); Rodman (2001); O’Sullivan
(2003); Pape (1997); Morgan and Schewbach (1997); Drezner (1999).
16
For audience costs, see Fearon (1994).
17
Baldwin (1985, p. 108).
18
Drezner (1999a, p. 41).
19
Slantchev (2011, p. 148). See also de Mesquita (1988, p. 635).
6 Introduction

imports from the target and when these producers depend less on exports to
the target.20 Moreover, sanctions can serve as safety valves: Leaders impose
sanctions to appease the public.21
These scholars provide a useful start for analyzing coercion decisions, but
the specific costs and benefits of coercion can be further elaborated, especially
in an era of global economic interdependence. Moreover, scholars focusing
on domestic politics tend to study the United States or Western democracies,
not China. The domestic dynamics of these countries, however, can be quite
different from China, an authoritarian state rising in what it perceives to be an
adverse unipolar international system. China is highly unlikely to impose sanc-
tions for the purposes of advancing universal values. More importantly, there
is a curious disconnect between scholars who focus on the external strategic
calculation of the coercer and those arguing for the importance of domestic
interest groups. Since China is part of the intricately connected global produc-
tion and supply chains, though, it is logical to assume that its coercion deci-
sions will consider both domestic economic and external strategic calculations.
As such, this book connects international political economy and international
security to examine China’s coercion decisions, arguing that they are a result
of the balancing of two factors. One crucial perceived benefit of coercion is the
possibility of a state establishing a reputation for resolve in defending its security
interests. China believes that past actions of coercion constitute a critical aspect
of maintaining its reputation for resolve. This book adds to the general coercion
literature by emphasizing an important additional logic of coercion – to demon-
strate resolve. At the same time, coercion has costs. China, therefore, needs to bal-
ance considerations for resolve against the economic cost of coercion, given that
the Chinese economy is intertwined with the global economy down to the supply
chain level and is sensitive to instability caused by political and military conflicts.

1.1.2 Tools of Coercion

The coercion literature focuses on particular coercive tools, such as military
coercion and economic sanctions.22 However, when state leaders make decisions
about what actions to take, they consider a range of policy choices. Relatedly,
beginning with Schelling, the literature has emphasized military coercion, view-
ing nonmilitary coercion as a suboptimal option.23 More recent scholars also
privilege military coercion, claiming that “sanctions, political pressure, and
other tools for influencing states have proven neither reliable nor efficient in

20
Drury (2001).
21
Daoudi and Dajani (1983).
22
See, for example, Pape (1996); Greenhill (2010); Maller (2011); He (2016); Baldwin (1985,
p. 15); Drezner (1999).
23
Schelling (1966, p. 3); see also Robert Art’s (1996) defense of the utility of force, which treats
coercion as military coercion, and Morgan (2003, p. 3); Sperandei (2006, p. 259); Goldstein
(2000, p. 27).
1.1 Coercion and Chinese Foreign Policy 7

changing the behavior of committed adversaries.”24 Slantchev argues that mili-

tary coercive tools can be very effective because they are physical measures and
send credible signals of commitment.25 Todd Sechser and Matthew Fuhrmann
examine the effectiveness of nuclear weapons for compellence.26 In his classic
discussion regarding the “sunk cost” mechanism of costly signals, James Fearon
notes that if we follow a purely game theoretic model, then we should expect
to see states signaling “all or nothing” instead of utilizing “partial signals,”
which implies that anything below the use of military signals are suboptimal.27
While not discrediting nonmilitary coercion completely, all the above scholars
consider nonmilitary coercion as the suboptimal option.
These scholars, however, may privilege military coercion precisely because
of the states that they are analyzing. Schelling wrote his book during the Cold
War, focusing on the two superpowers whose economies were not intercon-
nected. However, China, whose economy is connected to the global economy,
is creating new forms of coercive measures, including gray-zone measures. It
is all the more puzzling, then, that China would choose nonmilitary coercive
measures if they are considered suboptimal. Thus, China’s use of these non-
military coercive measures calls for seriously examining the full spectrum of
coercion in the toolkit of statecraft, analyzing when and why China coerces
and what explains its choices of tools.

1.1.3 Theories of Rising Powers and Chinese Foreign Policy

This book contributes to the burgeoning literature on rising powers that exam-
ines specific strategies and foreign policy options of rising powers. Traditional
scholarship on rising powers, such as hegemonic stability, power transition,
and offensive realism, focuses on the grand theorization of war and peace.
Offensive realism, for example, predicts that rising powers bide their time and
become increasingly aggressive in pursuing regional hegemony as they become
more capable. However, offensive realism does not discuss specific foreign pol-
icy behavior while a state is rising.28 Similarly, theories of hegemonic wars
do not concern the myriad behavior of rising powers in different stages of
their rise, instead zooming in on the far end of statecraft: war.29 More recent
literature on rising powers, however, has begun to explain specific strategies
of rising powers, including Shifrinson’s book on rising power strategies and
Edelstein’s research on time horizons.30 In short, this book adds to the recent

24
Byman and Waxman (2002, p. 2).
25
Slantchev (2011, p. 5).
26
Haun (2015); Sechser and Fuhrmann (2017).
27
Fearon (1997).
28
John J. Mearsheimer, “Can China Rise Peacefully?,” The National Interest, October 25, 2014,
http://nationalinterest.org/commentary/can-china-rise-peacefully-10204.
29
Gilpin (1981); Copeland (2001).
30
Edelstein (2020); Shifrinson (2018).
8 Introduction

literature on rising powers by examining one specific kind of foreign policy

option when China is still in the process of rising, China’s coercive behavior.
Current theories of Chinese foreign policy behavior also leave room for
analyzing China’s increased use of nonmilitary coercion and its decision-­
making rationale.31 This book draws inspiration from Taylor Fravel’s the-
ory of when China cooperates or escalates into the use of force in territorial
disputes.32 There is, however, a rich space between cooperation on the one
hand and the use of force on the other. The rich literature on China’s grand
strategy does not explain China’s rationale regarding coercion, either.33
Therefore, this book seeks to contribute to the study of Chinese foreign pol-
icy by analyzing China’s coercion decisions. No one has cataloged Chinese
nonmilitary or gray-zone coercion yet.34 As such, this book attempts to ana-
lyze one slice of Chinese foreign policy behavior – its use of coercion – while
creating a new and comprehensive dataset of Chinese coercion since the
1990s.
In short, there are gaps in the current coercion literature when it comes
to analyzing the conditions under which China, in this current era of global
economic interdependence, chooses coercion over inaction. Moreover, the
book seeks to explain China’s choices of coercive tools, with particular atten-
tion paid to nonmilitarized coercion. It focuses on China because, for one, its
foreign policy behavior is significantly relevant for the prospect of peace and
stability in the Asia-Pacific region. For another, China provides an excellent
opportunity to study contemporary rising powers. The theory that I advance
below, however, could be generalizable beyond China to test the causes of
coercion, as well as the conditions under which states choose certain coercive
targets and tools. Chapter 7 examines what the theory might predict about
non-China cases in more detail and suggests how the theory could be revised
into a broader and more generalizable theory of coercion. Future research
could assess its generalizability beyond China.

1.2 The Argument

This book sets out to answer two questions: When and who does China
coerce, and what tools does China utilize when it decides to coerce?
Diplomatic sanctions constitute a coercer’s deliberate interruption of its
relations with the target state. Economic sanctions refer to instructions by

31
For the burgeoning literature on China’s use of nonmilitary statecraft, see Wong (2018);
­Erickson and Martinson (2019); Norris (2016).
32
Fravel (2008).
33
Glosny (2012); Goldstein (2005, 2020).
34
James Reilly cataloged Chinese economic sanctions but did not cover the full spectrum of Chi-
nese coercive diplomacy. See Reilly (2012). There are a few scholars who have studied Chinese
economic sanctions, but they tend to focus on the evaluation of the effectiveness and effects of
Chinese sanctions. See Zhao (2010); Fuchs and Klann (2013); Reilly (2021).
1.2 The Argument 9

the government to certain actors to withdraw from trade or financial rela-

tions. Gray-zone coercion uses civilian law enforcement agencies to harass
the target. Military coercion consists of the display, threat, and use of force
short of war.
Drawing on insights from the literature regarding credibility and reputa-
tion, global supply chains, and coercion, this book offers the cost-balancing
theory to explain China’s coercion decisions. I first discuss the importance of
the issue and then conceptualize the benefits and costs of coercion. I code each
of the costs and benefits as either high or low. Although the coercion litera-
ture prioritizes the immediate benefit of coercion – forcing the target state to
change its behavior in a given episode of coercion – I propose that one crucial
perceived benefit of coercion is broader. As will be shown in Chapter 2, this
broader benefit is the need to establish a reputation for resolve and be viewed
as strong and credible by other states, not just the target state. China fears
that it might be viewed as weak and unwilling to deter future transgressions
if it does not coerce. Consequently, China might not be considered credible
by other states, which could lead such states to encroach upon its national
security in the future. Thus, one potential benefit of coercion is for China to
establish a reputation for resolve in defending national security interests. Of
course, hoping that coercion can help establish a reputation for resolve does
not necessarily mean coercing states will automatically gain a reputation for
resolve. This book focuses on when, why, and how China coerces, not its effec-
tiveness or lack thereof. It examines under what conditions the need to estab-
lish resolve is high and when such a fear of appearing weak in front of other
states actually leads China to employ military or nonmilitary coercion, taking
into consideration the economic and geopolitical costs of using coercion. In
short, China’s coercion decisions are not a simple story of resolve, but rather
a complex balancing of the costs and benefits of coercion in an era of global
economic interdependence.
The cost-balancing theory thus predicts the following. First, China will
choose coercion when the need to establish a reputation for resolve is high
and the economic cost is low. Second, in circumstances when both the need
to establish resolve and the economic cost are high, China will only coerce
if the issue is of the highest importance. Third, China is much more likely to
choose nonmilitarized coercive tools, such as diplomatic sanctions, economic
sanctions, and gray-zone coercion, when the geopolitical backlash cost is high.
Fourth, China is more likely to selectively target challengers than to coerce all
challengers, also due to concerns about the geopolitical cost.
Economic cost is a negative disruption to China’s domestic economic pro-
duction and foreign economic relations, which might result in losing mar-
kets, supply, or capital. Geopolitical backlash cost is the cost of other states
balancing against China if coercion is chosen. Balancing is the creation or
aggregation of military power through internal mobilization or the forging
of alliances to prevent the political and military domination of the state by a
10 Introduction

foreign power or coalition. By geopolitical backlash, I mean concerns about

balancing, as expressed by Stephen Walt, who argues that states tend to bal-
ance against threats instead of “bandwagoning.”35 If coercion is applied, the
target state or its neighbors might interpret the coercer as a threat. If China is
aware of this logic, it will be concerned about geopolitical backlash: The tar-
get might side with other states against the coercer, especially by drawing in
external great powers with whom the target has military alliances. This could
lead to a military confrontation or the tightening of an alliance, at the very
least. As such, China might not want to use military coercive tools for fear
that the target state might bring in a great power ally. Chapter 2 will further
elaborate on each component of the cost-balancing theory, as well as how to
measure them.
I test the cost-balancing theory in three issue areas: China’s territorial dis-
putes with states in East, South, and Southeast Asia; its policy toward Taiwan;
and its behavior toward states that have received the Dalai Lama. I create a
new and comprehensive dataset regarding the timing, frequency, tools, and
targets of Chinese coercion. I use qualitative research methods, such as pro-
cess tracing and congruence tests. Regarding evidence, I use primary Chinese
language sources, some of which are internal and never before seen by schol-
ars. In my two years of fieldwork in China, I leveraged my native-Chinese
language capability to conduct over 150 interviews with Chinese government
analysts and former civilian and military officials. I also interviewed foreign
diplomats, officials, and military officers during my nine months of fieldwork
in Washington, D.C. to triangulate against Chinese sources.

1.3 Overview of the Book

This book focuses on Chinese coercion over its core or important national
security issues, post-1990s. I choose Chinese behavior since the post-1990s
for two reasons. First, China is an important rising power, necessitating the
study of its coercive behavior to understand how and in what ways China
is becoming assertive. Second, the post-1990s is in the post–Cold War era,
making it possible to control for polarity as a confounding explanation.
Concerning China’s important national security issues, this book examines
three sets.
First, the book examines issues involving Taiwan. There is a wide range
of issues, from China’s perspective, when it comes to Taiwan, including for-
eign arms sales to Taiwan, other states’ diplomatic relations with Taiwan, and
Taiwanese leaders’ own behaviors, as expressed in elections. China views the
first two kinds of behavior as a breach of the one-China principle and, by
extension, harmful to Chinese national security interests. China also sees the
possibility of electing a pro-independence Taiwanese president as a national

35
Walt (1983).
1.3 Overview of the Book 11

security concern. For the book, I focus on two sets of issues: US arms sales to
Taiwan and the Taiwan Strait Crisis of 1995–1996.
Second, the book also looks at territorial disputes. Chinese maritime ter-
ritorial disputes are disputes in the South and East China Seas regarding the
sovereignty of claimed islands and maritime delineation (over resources, for
example). In this sense, China has disputes with Japan in the East China Sea,
and with Vietnam, the Philippines, Malaysia, Brunei, and Indonesia in the
South China Sea. Elsewhere, I have examined land-based territorial disputes
with India.36
Third, the book analyzes issues involving Tibet. Specifically, this involves
foreign leaders’ reception of the Dalai Lama, the Tibetan spiritual leader,
which China views as a breach of its sovereignty over Tibet, interference with
its domestic affairs, and threats to China’s territorial integrity.
China considers Taiwan and Tibet as core interests, whereas territorial dis-
putes – concerning sovereignty and territorial integrity – are important national
security concerns. I analyze these three sets of issues because of the high stakes
that are involved. As David Shambaugh points out, China is “hyper-vigilant
and diplomatically active” on issues such as Taiwan, Tibet, and maritime ter-
ritorial claims.37 Therefore, if China were to employ coercion at all, it is most
likely that these three sets of issues would constitute the majority of Chinese
coercive measures. That is, we should most readily observe coercion in issues
of high national security concern to China. As such, focusing on these issues
might help us better get at China’s logic for applying coercion. This is espe-
cially the case for territorial disputes. As Fravel indicates, in an international
system composed of sovereign states, behavior in territorial disputes offers a
“fundamental indicator” of whether a state pursues status-quo or revisionist
foreign policies.38 In terms of the period that this book will examine, Chinese
behavior during the post-1990s period could potentially help predict the tra-
jectory of China’s rise as a great power.
Following this introductory chapter, Chapter 2 discusses the literature, the
cost-balancing theory, observable implications, alternative explanations, mea-
surement, and research design.
Chapter 3 examines Chinese coercion in the South China Sea. My previous
work examines the overall trends of Chinese coercion in the South China Sea.39
I find that China used coercion in the 1990s because of the high need to estab-
lish a reputation for resolve and low economic cost. China used militarized
coercion because the US withdrawal from the Subic Bay in Southeast Asia and
the focus on Europe reduced China’s geopolitical backlash cost of using coer-
cion. China then refrained from coercion from 2000 to 2006 because of the

36
Zhang (2022b).
37
Shambaugh (2013, p. 9).
38
Fravel (2008, p. 3).
39
Zhang (2019b).
12 Introduction

high economic cost and low need to establish a reputation for resolve. It began
to use coercion again after 2007, but because of the increasing geopolitical
backlash cost since the post-2000 period, Chinese coercion remains nonmil-
itarized. Chapter 3 also examines three case studies: the cross-national com-
parison of China’s coercion against the Philippines, Vietnam, and Malaysia;
the Sino-Philippine Mischief Reef incident in 1995; and the Sino-Philippine
Scarborough Shoal incident in 2012 (which is contrasted with the negative case
of the Sino-Philippine Scarborough Shoal incident in 2001, when China did
not use coercion). These case studies demonstrate that the mechanisms of the
cost-balancing theory are present in them.
Chapter 4 focuses on Chinese coercion in the East China Sea, where China
has maritime territorial and jurisdictional disputes with Japan. I explain the
trend of Chinese coercion in the East China Sea while conducting two in-depth
case studies: the Sino-Japan boat clash incident of 2010 and the incident of
Senkaku nationalization in 2012.
Chapter 5 looks at Chinese coercion regarding Taiwan, involving foreign
arms sales to Taiwan and the Taiwan Strait Crisis of 1995 and 1996. It demon-
strates the significance of the issue importance variable in issues involving
Taiwan and shows that the cost-balancing theory travels beyond territorial
disputes.
Chapter 6 turns to Chinese coercion regarding foreign leaders’ reception of
the Dalai Lama, the Tibetan spiritual leader. This chapter indicates that the
cost-balancing theory applies not only to territorial disputes or Taiwan but can
also generalize to political issues, such as visits with the Dalai Lama.
Finally, in Chapter 7, I briefly recap the cost-balancing theory and argu-
ments, extend the theory to other issue areas in Chinese foreign policy and the
behavior of other states, and finally discuss the implications of this book for
the study of international relations and Chinese foreign policy.
2

The Cost-Balancing Theory

The classical definition of coercion is Schelling’s, who uses the term

“­compellence,” an “active strategy to make an adversary act in the desired
way.”1 Robert Art and Patrick Cronin further specify that the goal of com-
pellence can be either forcing the adversary to do something it has not pre-
viously done or stop doing something it is undertaking.2 The term coercive
diplomacy, however, has become the convention in lieu of compellence, with
even Schelling using “coercion” and “coercive diplomacy” interchangeably.3
Following this convention, I use the term “coercion,” not compellence. I define
coercion as the use or threats of negative means to demand a change in the behav-
ior of a target state.4 Traditionally, coercion (or compellence, to be exact) is seen
as a status-quo-altering behavior. This book, however, highlights a particular
kind of coercion that is less discussed in the literature: China’s coercive responses
to perceived threats from other states. While acknowledging that China might

1
Schelling (1966, p. 70).
2
Art and Cronin (2003, p. 8).
3
Alexander L. George popularized the term “coercive diplomacy.” See also (George et al. 1971);
George (1991); George and Simons (1996); Sechser and Fuhrmann (2017); Schelling (1966,
pp. 3–4).
4
There are several distinctive characteristics of coercion. First, it is state action. Second, there are
usually clear targets. Third, coercion involves clear threats or tools that inflict pain on the target
state. Both credible threats, which are not bluffing, and the actual action constitute coercion.
For example, threatening an embargo on the target state but buying the product and publicly
promising to continue is bluffing, not coercion. Positive inducements, though equally aimed at
changing behavior and often used if the target complies, are not instances of coercion. Fourth,
coercion should entail the clear goal of making political demands. The goals of coercion are
twofold. Coercion is not brute force. For example, in maritime disputes, states may take coercive
actions to ram foreign naval vessels or threaten such actions, the result of which may be taking
control of an island. However, the goal, or political demand, of such coercive behavior goes
beyond controlling a particular island.

13
14 The Cost-Balancing Theory

on occasion attempt coercion opportunistically in pursuit of resources, this book

focuses on China’s coercive responses to what it considers status-quo-changing
actions from the target state. That is, China utilizes coercion to bolster the sta-
tus quo that it perceives to be under duress. This kind of coercion is implied
but not made explicit by the literature. For example, Schelling notes that to
“deter continuance of something the opponent is already doing,” compellence
is involved, that is, compelling the opponent to stop.5 In other words, Schelling
implicitly describes the “compelling to deter” kind of coercion on which this
book focuses. As such, it captures this kind of coercion by examining China’s
coercive responses to perceived threats to its national security.

2.1 Coercion on a Spectrum

The bulk of the extant international relations literature privileges the coercive
tools of military force and defines coercion in military terms. States, however,
do engage in a range of coercive acts. Therefore, this book examines the full
spectrum of coercion.
Inaction is a situation in which coercion is not used. It indicates a con-
scious choice to not take physical action or make threats, even when the state
is capable. By inaction, I do not mean cases of successful coercive threats or
deterrence. Rather, inaction is the negative case of coercion decisions – one can
think of it as “forbearance.” When faced with perceived threats to national
security, states can resort to rhetorical protests (not coercive threats), remain
silent, or even seek compromises, all of which count as inaction.
Diplomatic sanctions are deliberate interruptions of bilateral relations
with the target state. Maller, for example, codes diplomatic sanctions, from
least to most severe, as 1) short and temporary recall of the ambassador, 2)
downgrade in diplomatic status for less than a year, 3) downgrade in diplo-
matic status for more than a year, and 4) embassy closure.6 Extreme examples
include the US embassy closure in Libya in December 1979 to isolate Libya
due to its involvement in terrorist activities and Saudi Arabia cutting diplo-
matic ties with Qatar in 2017.7 The complete breakdown of overall bilateral
diplomatic relations, however, leaves both sides without the unique intelli-
gence and ease of communication that these relations provide.8 As a result,
states may choose to maintain some level of relations, which can lead to less
drastic measures, such as closing consulates and canceling important meetings
or all senior-level communications. More moderate examples of diplomatic

5
Schelling (1966, p. 74).
6
Maller (2011, p. 92).
7
Ibid., p. 273; “Gulf Plunged into Diplomatic Crisis as Countries Cut Ties with Qatar,” The
Guardian, June 5, 2017, www.theguardian.com/world/2017/jun/05/saudi-arabia-and-bahrain-
break-diplomatic-ties-with-qatar-over-terrorism.
8
Freeman (1997, pp. 95–97).
2.1 Coercion on a Spectrum 15

sanctions include the US drawdown of embassy staff in Rangoon and the de

facto downgrading of the relationship to the charge d’affaires level following
the Burmese coup in 1988.9
Diplomatic sanctions fulfill the roles played by coercion because they can
signal to the target state that the coercing state is displeased. If the target does
not comply, further downgrading of the bilateral relationship can take place.
Moreover, unlike rhetorical protests, diplomatic sanctions can inflict pain on
the target state. For example, a pause in senior diplomatic exchanges may lead
to a halt in negotiations of business contracts and projects, thereby reduc-
ing the economic profit of the target state. Diplomatic sanctions could also
pose security costs to the target state if the target is a security protégée of the
­coercing state.
Economic sanctions are deliberate government-instructed withdrawals of
customary trade or financial relations to coerce the target to change undesired
foreign policies.10 The specific contents of economic sanctions are as follows:
trade sanctions include embargos, boycotts, tariff increases or discrimination,
withdrawal of “most-favored-nation” status, quotas, blacklists, license denials,
and preclusive buying; financial sanctions include freezing assets, aid suspen-
sion, expropriation, unfavorable taxation, and controls on capital imports or
exports.11 Examples of economic sanctions include the US embargo on grain
exports to the Soviet Union following the Soviet invasion of Afghanistan in
1979 and the ongoing US economic sanctions against North Korea due to its
nuclear program. As with diplomatic sanctions, the coercing state expects eco-
nomic sanctions to be effective in forcing a change in the target state because
of the pain or potential pain that could be inflicted upon the target. For one,
by deliberately disrupting bilateral economic relations, economic sanctions sig-
nal to the target state the potential pain the coercer can further impose. For
another, economic sanctions, by inflicting damage on the economic well-being
of the target state (be it the general population or specific industries), could
incentivize the target state to change behavior viewed unfavorably by the
coercing state.
Gray-zone coercion straddles strictly nonmilitary coercion and military
coercion. Discussions regarding “gray-zone conflicts” gain greater traction
in the policy world, with the term appearing in both the 2010 Quadrennial
Defense Review and official Japanese government documents.12 Michael J.
Mazarr argues that gray-zone conflict “pursues political objectives through

9
Maller (2011, p. 400).
10
For a generic definition in the literature, see O’Sullivan (2003, p. 12). For specification of the
goals, see Baldwin (1985, p. 32).
11
Baldwin (1985, p. 41).
12
See Frank G. Hoffman, “The Contemporary Spectrum of Conflict: Protracted, Gray-zone,
Ambiguous, and Hybrid Modes of War,” The Heritage Foundation, http://index.heritage.org/
military/2016/essays/contemporary-spectrum-of-conflict/.
16 The Cost-Balancing Theory

coercive, integrated campaigns” and employs mostly nonmilitary or nonkinetic

tools.13 He adds that gray-zone campaigns are “the use of civilian instruments
to achieve objectives sometimes reserved for military capabilities.”14 Mazarr’s
characterization is insightful, but as with others in the gray-zone literature,
his conceptualization of gray-zone actions may be too expansive because of
his inclusion of the use of military force.15 As nonkinetic as some military
actions, such as troop mobilization, might be, they are still part of milita-
rized coercive tools, and thus not gray-zone actions. Theoretically, gray-zone
actions should be carried out strictly by civilians, however violent they might
become. Similarly, economic sanctions, which analysts like Mazarr include as
gray-zone actions, are not gray-zone at all because they do not inflict or have
the potential to inflict physical violence. Moreover, economic sanctions have
been a distinct category of coercive tools that have been studied for many
decades. For example, in an edited volume by Andrew Erickson and Ryan
Martinson on China’s maritime gray-zone operations, gray-zone measures are
limited to actions taken by the Chinese Coast Guard ships and maritime mili-
tia.16 Economic sanctions and diplomatic measures are excluded from their
discussion of Chinese gray-zone measures in the maritime realm.
Building on this burgeoning literature on gray-zone coercion while empha-
sizing the civilian aspect of gray-zone actions, I define gray-zone coercion as
physical and violent use of government organizations and agencies, or threats
to use them, to force the target state to change behavior. These agencies
include but are not limited to the police, border and customs agencies, and
Coast Guard agencies. The logic of gray-zone coercion is to utilize civilian
agencies to inflict or threaten physical pain on the target state’s civilians, mili-
tary personnel, or military assets. For example, in maritime territorial disputes,
coercion by law enforcement ships works by either physically damaging the
assets of the target state or denying the target state access to the disputed ter-
ritory. A state may also use its civilian maritime forces to engage in a naval
blockade of the target state to force it to adopt whatever policies the coercer
desires. Gray-zone measures are not limited to maritime scenarios. A state can
use its customs and border agency to detain (and even use violence against)
nationals of the target state to force the target state to change its behavior.
China has militia in the Sino-Indian land border region as part of its defense.17
The interdiction efforts led by North Atlantic Treaty Organization (NATO)
border patrol forces against Syrian refugees and the US Drug Enforcement

13
Mazarr (2015, p. 58).
14
Ibid., p. 62.
15
For similarly expansive definitions of gray-zone actions, see Michael Green et al., “Countering
Coercion in Maritime Asia: The Theory and Practice of Gray-zone Deterrence,” CSIS Report,
May 9, 2017, www.csis.org/analysis/countering-coercion-maritime-asia.
16
Erickson and Martinson (2019).
17
Zhang (2022b).
2.1 Coercion on a Spectrum 17

Agency’s enforcement in Latin America are both cases of gray-zone coercion.18

Iran has also utilized gray-zone tools to bolster its influence in the Middle East
and beyond, deploying quasi-military forces through its embassies.19
Gray-zone coercion is analytically distinct from military coercion because
civilian personnel impose gray-zone coercion, and the instruments involved
have a much lower capacity to inflict pain than military weapons. Also, being
nonmilitarized, gray-zone coercion is much less likely to invoke the target
state’s defense treaties with other powers, given that such treaties tend to stip-
ulate that the other powers will come to the defense of the target state if it is
under military attack. Gray-zone coercion reduces the likelihood of military
escalation.
Military coercion is the most escalatory level of coercion. Freeman divides
military coercion into two kinds: the nonviolent use of military power and the
use of force.20 Following Freeman, I define military coercion as involving the
displays, threats, and uses of force short of war. Nonviolent military actions
include shows of force, such as temporary deployments, military exercises,
and naval visits.21 Such displays of force could emphasize the possibility of
escalated and intensified confrontation.22 Military coercion carries with it both
advantages and disadvantages. For example, putting forces on alert, recalling
reservists, mobilizing, dispatching the Navy, and deploying troops are physi-
cal and so menacing that the threat of hostile intent is implicit in their use.23
Military coercion, therefore, sends clear and strong signals of commitment on
the part of the coercer. Nevertheless, military coercion is expensive and risks
escalation into militarized conflicts.
On the coercion spectrum, inaction is the least escalatory and military coer-
cion is the most. Diplomatic sanctions, economic sanctions, and gray-zone
coercion lie in between. First, gray-zone coercion is less escalatory than mil-
itary action because it could be conducive to escalation control and generate
plausible deniability for the coercer. That is, states can deny that they are using
military force, even while civilian law enforcement inflicts damage on the tar-
get. For example, such white-hull ships as Coast Guard ships might have the
capability to ram the Navy of the target state, but since they are not the mili-
tary, the coercing state using this tool could reduce the potential of a military
escalation, including military escalation invoked via defense alliance treaties.
Militarized coercion is more likely to draw a third-party great power into a

18
For further discussion of gray-zone conflicts, see David Barno and Nora Bensahel, “Fighting
and Winning in the ‘Gray Zone,’” War on the Rocks, May 19, 2015, https://warontherocks​
.com/2015/05/fighting-and-winning-in-the-gray-zone/.
19
Mazarr (2015, p. 44).
20
As for the use of force, there is a rich literature, for example, Pape (1996).
21
Freeman (1997, p. 53).
22
Ibid., p. 54.
23
Slantchev (2011, p. 3).
18 The Cost-Balancing Theory

dispute between the coercer and the target if the latter has defense treaties with
the external great power. Recent literature on secrecy and covert actions in
international relations also suggests why gray-zone coercion might be chosen
over military coercion to reduce escalation. The literature on covert actions in
the Cold War era suggests that states choose covert actions instead of outright
wars in order to reduce the risks of unwanted escalations with the adversary.24
Gray-zone coercion is similar to covert actions in that it is not overt military
actions, possibly reducing the risk of militarized conflicts.
Second, the literature on crisis escalation adopts a commonly accepted
escalation ladder that is in line with this book’s conceptualization. Herman
Kahn noted that there is an escalation ladder, or a linear arrangement of
roughly increasing levels of intensity of the crisis.25 In Kahn’s escalation
ladder, “political, economic, and diplomatic” gestures are least escalatory,
while military measures are most escalatory and have a greater probability of
leading states to wars.26 Similarly, the RAND report on managing escalation
indicates that escalation, defined as “an increase in the intensity or scope
of conflict,” can be depicted as a ladder, with the lowest escalatory rung
being normal peacetime conditions and higher rungs corresponding to shows
of force, conventional wars, and, ultimately, nuclear exchange.27 Likewise,
studies of crisis escalation treat nonviolence as less escalatory than serious
clashes or full-scale wars.28 In short, as Ian Johnston summarizes, crises can
be further categorized as those that lead to war, those that remain on the
margins of war, accidental crises, and quasi-crises (where sudden events in
the context of somewhat conflictual relations precipitate a crisis, but the
probability of war is low).29
As such, nonmilitary coercive tools are less escalatory than military ones
because the risk of escalation into militarized conflicts is lower for the coercer.
The US response to the recent Russian invasion of Ukraine illustrates this logic.
The United States imposed harsh sanctions on Russia, but NATO would not
send troops to aid Ukraine because concerns about getting the United States
involved directly and militarily with Russia loomed large.30

24
See Joseph and Poznansky (2018); Carson and Yarhi-Milo (2017); Poznansky and Perkoski
(2018); Carson (2018).
25
Kahn (2009).
26
Ibid.
27
Forrest E. Morgan et al., “Dangerous Thresholds: Managing Escalation in the 21st Century,”
RAND, 2008, www.rand.org/pubs/monographs/MG614.html, pp. 8, 15.
28
Levin-Banchik (2021).
29
Johnston (2016, p. 32).
30
John Chalmers, “NATO has No Plans to Send Troops into Ukraine, Stoltenberg Says,” Reu-
ters, February 24, 2022, www.reuters.com/world/europe/nato-has-no-plans-send-troops-
into-ukraine-stoltenberg-says-2022-02-24/; Barbara Plett Usher, “Ukraine Conflict: Why
Biden won’t Send Troops to Ukraine,” BBC, February 25, 2022, www.bbc.com/news/
world-us-canada-60499385.
2.2 The Cost-Balancing Theory 19

2.2 The Cost-Balancing Theory

Now that we understand the concept of coercion, this section turns to the
cost-balancing theory, its logic, measurement, and the competing hypotheses.
The underlying assumption of this book is that in an era of global economic
interdependence through the intricate global supply chains and global financial
network, coercion decisions are a result of balancing security and economic
factors. For one, states care about external security. They need to establish a
reputation for resolve to defend their national security interests. For another,
because economically integrated states are part of the global supply chains and
financial network, they need to consider the economic repercussions of coer-
cion while minimizing their potential for getting involved in military conflicts,
which could have negative impacts on their economies. In other words, we
are now in an era of global economic interdependence, which constrains state
behavior. States have to calculate both the direct economic cost and the geopo-
litical cost, which ultimately will have an impact on economic stability. China
is no different. Therefore, coercion decisions are a result of cost balancing of
security and economic factors.
As such, the scope conditions of the cost-balancing theory are severalfold.
First, the state is rational and its foreign policy is not ideologically driven.
Second, the state cares about its economy and is part of the global economic
interdependence. North Korea, in this formulation, is a country to which this
theory does not apply because it is not part of the global supply chains. I
constructed the cost-balancing theory with the assumption that China’s inte-
gration into the global economy simultaneously enables and constrains its
coercion decisions. The following passages explain the specific components of
the theory in detail.

2.2.1 Issue Importance

When devising national security policies, states weigh the importance of the
issues at hand, or the stakes. Fravel notes that all types of states are more likely
to escalate to the use of force in disputes over land highly valued for its stra-
tegic importance, economic resources, or matters of symbolic significance.31
Similarly, Vesna Danilovic takes into account national interest stakes when
analyzing an opponent’s perception of the deterrer’s resolve.32
The logic for choosing coercion is similar. Issues threatening national secu-
rity are, by definition, high-stakes issues. As laid out below, the costs and
benefits provide a framework of when states decide to use coercion and when
they refrain from doing so, given the high stakes intrinsic to national security

31
Fravel (2008, pp. 14–16). For earlier studies centering on the importance of issues and issue
importance, see Diehl (1992).
32
Danilovic (2002, p. 5).
20 The Cost-Balancing Theory

issues. Nevertheless, even high-stakes issues vary in their importance: Not

every national security issue is weighted equally, and some issues have an even
higher significance. As such, states use coercion for issues of high importance
and will not coerce others over things about which they do not care.33 Issue
importance matters critically in the highest-stakes issues precisely because
the need to establish a reputation for resolve – discussed below – may be
enhanced and even trump the costs of coercion. Thus, when both the need to
establish a reputation for resolve and economic cost are high, China coerces
only for issues with the highest importance. Nevertheless, issue importance,
which differs across issues but remains constant in the same issue, is not the
only factor influencing coercion decisions. When it comes to instances of the
same issue, the coercer chooses to coerce in certain periods and target certain
countries but not others. This is when the specific benefits and costs of coer-
cion become critical: the need to establish resolve, the economic cost, and the
geopolitical cost.

2.2.2 The Need to Establish a Reputation for Resolve

States care about their reputation and the credibility of their resolve. As
Jonathan Mercer defines it, a reputation for resolve is the extent to which a
state will risk war to keep its promises and uphold its threats.34 By resolve, I
follow Josh Kertzer’s definition: “a state of firmness or steadfastness of pur-
pose.”35 A reputation is a “judgment of someone’s character (or disposition)
that is then used to predict or explain future behavior,” and a reputation forms
when an observer uses “dispositional or character-based attributions” as well
as past behavior to explain or predict another’s behavior.36
In particular, states are concerned about how their actions (or lack thereof)
may be interpreted by allies and adversaries. For example, the Biden adminis-
tration increasingly believes that China is gauging the US response to Russia’s
invasion of Ukraine as a proxy for how America would deal with more aggres-
sive action by Beijing against Taiwan, according to three senior officials.37 US
Secretary of State Anthony Blinken said in February 2022 that “[o]thers are
watching, others are looking to all of us to see how we respond,” implying that
China was observing the Ukraine crisis closely. Similarly, Taiwanese President
Tsai Ing-wen ordered her government to monitor the situation in Ukraine and
its potential impact on the security of Taiwan.38

33
This is akin to the logic of deterrence. See Snyder (1961, p. 13).
34
Mercer (1996, pp. 2, 15).
35
Kertzer (2016, p. 3).
36
Mercer (1996, p. 6).
37
Peter Martin, “U.S. Sees China Watching Ukraine Showdown as a Proxy for Taiwan,” Bloomberg,
February 11, 2022, www.bloomberg.com/news/articles/2022-02-11/u-s-sees-china-watching-
ukraine-showdown-as-a-proxy-for-taiwan.
38
Ibid.
2.2 The Cost-Balancing Theory 21

Concerns about one’s actions and inaction, as well as the future implications
of one’s reputation for resolve, are nothing new. As Robert Jervis notes, states
need to “impress allies as well as adversaries.”39 For instance, in the Cold War
era, the perception of US leaders was that if the United States did not help
states like Vietnam, other states in another region of the world “might begin to
question the dependability of American support.”40 In the post-Cold War era,
Ahsan Butt indicates that even the United States engages in what he calls “per-
formative wars,” or wars fought in order to maintain a reputation for resolve
and send a message to other states.41 Therefore, states often stand firm in a
confrontation not because the issue is important when taken in isolation, but
because they believe that how it is resolved will strongly influence the course of
other events, often far removed in time, substance, and geography.42 In other
words, statesmen believe that reputational interest is crucial, and when the
state has displayed boldness or weakness in one case, other states may expect
similar behavior in other cases.43 Thus, beliefs about domino dynamics – the
analogy that if the United States did not fight the Vietnam War, other countries
would fall to communism like dominos – play a large role in a state’s foreign
policy for Jervis.44
Since coercion is one kind of foreign policy behavior, “domino beliefs”
are also relevant. As such, one crucial perceived benefit of coercion is exter-
nal: being viewed as strong and resolved by other states, including the target
state. China does coerce to achieve specific goals. This book argues, how-
ever, that China coerces not just to change the behavior of the target. China
fears that if it does not use coercion, it might not be considered credible by
other states, instead being viewed as weak and unwilling to deter future
transgression. Therefore, one perceived benefit of coercion is for China to
establish a reputation for resolve. Merely having the capacity is insufficient.
China needs to demonstrate its resolve in committing to defend national
security interests.
The logic of establishing a reputation for resolve also manifests itself in
recent scholarship. Nicholas Miller finds that the economic sanctions the
United States imposed on some of its allies attempting to proliferate had the
effect of deterring potential proliferators.45 Alex Weisiger and Keren Yarhi-
Milo emphasize the role of past actions on a state’s reputation.46 Anne
Sartori argues that the prospect of acquiring a reputation for bluffing, which
reduces the credibility of future deterrent threat, leads a state to engage in

39
Robert Jervis, “Domino Beliefs and Strategic Behavior,” in Jervis and Snyder (1991, p. 32).
40
Ibid.
41
Butt (2019).
42
Jervis and Snyder (1991, p. 22).
43
Ibid., p. 27.
44
Jervis (2017, p. 260).
45
Miller (2014).
46
Weisiger and Yarhi-Milo (2015).
22 The Cost-Balancing Theory

honest diplomacy rather than bluffing.47 In an experiment, Dustin Tingley and

Barbara Walter find that “individuals invest more heavily in reputation build-
ing” if they believe a game will be repeated many times.48 In civil wars, Walter
finds that governments fight civil wars against one secessionist group to look
tough and discourage other rebel groups from making their own demands.49
Other scholarly works emphasize the role of reputation, beyond a reputation
for resolve.50
Other scholars examine the perspective of the target of coercion. Timothy
Peterson argues that the target of sanctions pays attention to the sender’s
actions against prior resistant targets and will be less likely to acquiesce when
the sender has backed down recently.51 Todd Sechser explains why compellent
threats often fail: Complying with a coercive threat entails reputation costs for
the target, as well as the possibility that the challenger will make additional
demands in the future.52 Even though Sechser focuses on explaining conditions
under which compellent threats are ineffective, one can also apply the logic of
reputation cost to the coercer.53
Furthermore, concerns about the reputation for resolve travel beyond
international relations, as seen in the economics literature, and especially in
Reinhard Selten’s famous “chain store paradox.”54 That is, a chain store has
branches in multiple towns, each of which has a potential competitor. If the
competitor chooses to open a second store in a given town, a cooperative
stance from both the chain store and the potential competitor yields higher
profits for both than an aggressive stance from the chain store. However, the
chain store will gain even higher profits if the potential competitor does not
open the second store. If the game is repeated infinitely, the chain store will
choose the aggressive stance to discourage other potential competitors in mul-
tiple towns. Subsequent economists indicate that even in finite games, imper-
fect or incomplete information about players’ payoffs is sufficient to lead firms
to care about their reputations.55
One might wonder why strategic interaction between the target state
and coercing state isn’t present, in the sense that the target might adjust its
actions ex-ante to avoid being coerced. First, the target simply might not
know coercion is forthcoming due to imperfect or incomplete information.

47
Sartori (2005, p. 14). Other forms of maintaining credibility and reputation include raising
interest rates and repaying expensive loans. See Leblang (2003); Tomz (2007).
48
Tingley and Walter (2011, p. 344).
49
Walter (2009).
50
Kertzer (2016); Renshon et al. (2018); Erickson (2015); Leblang (2003); Tomz (2007).
51
Peterson (2013).
52
Sechser (2018); Sechser (2010).
53
Some scholars argue that current military and political capacity matter more than reputation,
see McManus (2017); Press (2005).
54
Selten (1978); the remaining paragraph is a description of Selten’s game.
55
Kreps and Wilson (1982).
2.2 The Cost-Balancing Theory 23

Second, domestic politics in the target state could inevitably lead the target
state to actions the coercing state deems threatening. Third, and most rele-
vant to the logic of reputation for resolve here, even if the target state does
have the information and adjusts its actions, the coercer may still decide
to proceed with coercion because of the need to demonstrate resolve. As
Butt analyzes, the United States invaded Iraq regardless of what actions Iraq
took because the United States wanted to use the invasion to send a signal
of resolve to other states.56 In 2012, China ignored the Philippines’ sugges-
tion of mediation over the Scarborough Shoal dispute because of the need
to coerce the Philippines to send a signal of resolve. Similarly, China seem-
ingly “overreacted” to Japan’s nationalization of the Senkaku Islands – the
Japanese government’s goodwill gesture to prevent its own nationalist citi-
zens from purchasing them – with coercion to establish resolve. Thus, it is
quite plausible that the target cannot avoid coercion by making concessions
because of the coercer’s need to demonstrate resolve. Sometimes, the target is
in the wrong place at the wrong time.
One might also wonder whether there is reputational risk if coercion is not
effective in changing the target state’s behavior. As Butt’s performative war
theory indicates, the logic of demonstrating resolve is not so much about out-
comes but rather the very fact that states take actions, including, in this book’s
case, coercion. Elsewhere I discuss why China prefers taking physical actions
instead of issuing mere threats of coercion. From bystander states’ perspec-
tives, they do not necessarily care about whether the target state acquiesces.
They are more concerned about whether the coercer will take similar coercive
actions against them in the future.
In short, as the literature indicates, China should care about the reputation
for resolve that goes beyond a particular incident of coercion per se. However,
just because China perceives the need to establish a reputation for resolve does
not mean it will gain the reputation for resolve automatically when it coerces.
The book focuses on unraveling the rationale of China’s coercion decisions,
not evaluating the effectiveness of coercion. It is entirely possible that China
might not be perceived as credibly resolved even after coercion.
It is true that domino beliefs and concerns about reputation for resolve
are nothing new. The cost-balancing theory applies concerns about resolve to
China’s coercion decisions in an era of global economic interdependence. In an
ideal world, China could use coercion to establish resolve whenever it wants.
In reality, however, China does not attempt coercion all the time, instead
choosing to be rather selective. As such, this book seeks to identify under what
circumstances concerns about resolve should be high and whether, given that
China is part of the global supply chains, global economic interdependence
affects the cost calculus of China’s coercion decisions and constrains China’s
behavior. Therefore, the next section elaborates on why China cannot coerce

56
Butt (2019).
24 The Cost-Balancing Theory

other states every time an incident threatening its national security arises to
maintain its resolve, from the perspective of global supply chains and eco-
nomic interdependence. In other words, economic factors at times constrain
and at times enable coercion decisions.

2.2.3 Economic Cost

Although the coercion literature originally focused on national security issues,
in this current era of global economic interdependence, and especially with
the emergence of global production and supply chains, national security
decision-making is inevitably connected to the international political economy.
As such, the first cost of coercion involves the economic repercussions from a
globalized economy, including the impact of foreign economic relations on the
domestic economy of the coercer. Coercion may generate economic costs to
the coercer, affecting its foreign trade, domestic production, and international
finance.

2.2.3.1 Foreign Trade

First, the coercer’s import sources and export markets might be negatively
affected if coercion is applied. Albert Hirschman argues that commerce can be
an alternative to war only when the coercer creates a situation in which the
target would do anything in order to retain the bilateral trade – it is “extremely
difficult” for the target both to dispense with trade with the coercer and
replace the coercer as a market and a source of supply with other countries.57
Hirschman is concerned with “exit options” – do states have alternatives that
are less costly? If the coercer does and the target does not, then the coercer
can use trade as a coercive tool. Building on Hirschman, Robert Keohane and
Joseph Nye use vulnerability dependence to indicate the “costliness of making
effective adjustments to a changed environment.”58 Thus, China is less likely
to initiate coercion if it is dependent on or needs the target for markets or sup-
ply, but the target has exit options. For example, it could be difficult for China
to find exit options for energy supply, such as crude oil or natural gas, other
than from the target state.

2.2.3.2 Domestic Production and Global Supply Chains

Second, and relatedly, if the coercer has no “exit options” for an intermediary
product that it needs due to the use of coercion in an era of global production and
supply chains, its domestic production will also be negatively affected. States
care about their domestic economic growth. For example, the United States,
when it was a rising power, paid keen attention to economic development.59

57
Hirschman (1945, p. 17).
58
Keohane and Nye (1977, p. 13).
59
Zhang (2022a, p. 9).
2.2 The Cost-Balancing Theory 25

During the John Quincy Adams period, development of the domestic econ-
omy and scientific development were central themes.60 This focus on economic
issues continued in the post–Cold War grand strategies of the United States.
For example, the National Security Strategy of 1991 emphasized that national
security and economic strength “are indivisible,” prioritizing economic growth
as an important end.61 Some might question former President Donald Trump’s
foreign policy conduct, but his signature “America First” slogan rests on the
long-held premise that the priority is “peace and prosperity.” Even when he
was just stumping on the campaign trail, Trump emphasized from day one
that “we have to rebuild our military and our economy.”62 Despite partisan
differences, Trump’s successor, President Joseph Biden, has demonstrated a
strikingly similar emphasis on economic recovery.63 Similarly, postwar Japan
placed a significant emphasis on economic development, and economic devel-
opment has been central to China’s grand strategy, where it is considered part
of China’s “comprehensive national security.”64
As such, states, whether China, the United States, or Japan, care about their
domestic economic growth. In the current era of global production and sup-
ply chains, states cannot rely solely on themselves for domestic production.
While some scholars argue that economic interdependence was not enough to
prevent World War I, states in the 1900s were not enmeshed in today’s global
production and supply chains.65 In the case of China, it has become a major
export powerhouse of the world because Chinese firms manufacture goods
marketed and designed by foreign companies elsewhere in the global produc-
tion and supply chains.66 China is able to circumvent issues other developing
countries have in marketing and technology by using the global production
and supply chains.67 Many products produced by China, and especially key
technologies, are dependent on Japanese, Korean, and American products.68
For example, one of Huawei’s latest and most advanced smartphones “con-
tains 869 parts made by Japanese companies, 562 by Korean companies, 15
by American companies, and only 80 supplied by Chinese domestic compa-
nies.”69 The trade war between China and the United States has already had
a negative impact on China’s export capacity.70 In the case of Japan, political

60
Ibid.
61
Ibid.
62
Ibid.
63
Ibid.
64
Ibid.
65
Etel Solingen, “Introduction: Geopolitical Shocks and Global Supply Chains,” in Solingen
(2021).
66
Yuqing Xing, “Global Value Chains and the US–China Trade War,” in Solingen (2021).
67
Ibid.
68
Ibid.
69
Ibid.
70
Ibid.
26 The Cost-Balancing Theory

and international security issues have had a negative impact on all Japanese
companies, and Japanese companies that depend on Chinese manufacturing
witnessed a decrease in employment and stock prices.71 In the case of South
Korea, political conflicts between Japan and South Korea led Japan to place
export controls on its semiconductor supplies in 2019, and the high depen-
dence of key South Korean industries on Japan generated economic costs to
South Korea’s economy, including lack of access to those Japanese inputs that
affected South Korea’s firms far more than Japan’s.72 It is important to note
that concerns about the global value chain’s impact on domestic production
are not peculiar to China, as they also apply to other countries, such as Korea
and Japan. Past studies have also shown that economic globalization changes
the calculus of great powers and reduces conflicts among them, in part due to
concerns about the global production chain.73
In short, international security issues can create significant disruptions to
supply chains that result in shifts in their topology. Therefore, China is less
likely to initiate coercion if it is dependent on or needs the target as part of its
production and supply chain.

2.2.3.3 International Finance

Third, the coercer might generate costs in the international financial sector
if coercion is used, especially if the target state controls the global financial
system. According to Henry Farrell and Abraham Newman, asymmetric eco-
nomic system structures make “weaponized interdependence” possible.74 As
these two scholars note, states with political authority over the central nodes
in the international networked structures through which money, goods, and
information travel are uniquely positioned to impose costs on others.75 It is
possible for such states to weaponize networks to gather information or choke
off economic and information flows.76 The Society for Worldwide Interbank
Financial Telecommunication (SWIFT), a financial messaging system, is cen-
tral to the global financial flow, holding a monopolistic position in the market
for international payment message transfer.
The recent Russian invasion of Ukraine illustrates how economic costs can
be imposed via the international financial system. In response to Russia’s inva-
sion of Ukraine, US President Biden has issued multiple rounds of economic
sanctions against Russia and its oligarchs, with some of the earliest sanctions
targeting the Russian banking system. Early on, the Biden administration opted

71
Hongyong Zhang, “The US–China Trade War: Implications for Japan’s Global Value Chains,”
in Solingen (2021).
72
Etel Solingen, “On Covid-19, Global Supply Chains, and Geopolitics,” in Solingen (2021).
73
See Brooks (2005); for arguments regarding the economic costs and opportunity costs of war,
see Kertzer (2016, p. 17.)
74
Farrell and Newman (2019).
75
Ibid.
76
Ibid.
2.2 The Cost-Balancing Theory 27

to target Russia’s largest and second-largest financial institutions, Sberbank and

VTB Bank, which hold one-third and one-fifth of Russian banking sector assets,
respectively, and are “systemically critical to the Russian financial system.”77
US allies have issued similar sanctions on Russian financial institutions, and the
United States and its allies have opted to expel Russia from SWIFT to disconnect
the country from international banking. SWIFT has over 11,000 users globally,
including 300 of Russia’s financial institutions, and it facilitates $140 trillion in
transactions each year.78 In this sense, it is possible that aggressor states may
face economic costs in the global financial sector, such as being banned from
the SWIFT system. The same logic can be applied to coercion. If China val-
ues the stability of its financial sector, then it will be hesitant to pursue coercion
if the target state has the ability to cut the coercer off from the global financial
system, and there is evidence that China does value its financial stability. In April
2022, Chinese regulators held an internal emergency meeting with domestic and
foreign banks to discuss how they could protect China’s overseas assets from
US-led sanctions similar to those imposed on Russia for its invasion of Ukraine.79
Chinese officials were reportedly worried that the same measures could be taken
against Beijing in the event of a regional military conflict or other crisis.80 One
official noted that “decoupling of the Chinese and western economies will be far
more severe than [decoupling with] Russia because China’s economic footprint
touches every part of the world.”81 One meeting attendee suggested, “[n]o one
on site could think of a good solution to the problem,” adding that “China’s
banking system isn’t prepared for a freeze of its dollar assets or exclusion from
the SWIFT messaging system as the US has done to Russia.”82
In short, despite its need to establish resolve, China has to consider the
potential economic cost of choosing coercion, which may negatively impact its
foreign trade, domestic production, and international finance.

2.2.4 Geopolitical Backlash Cost

Economic cost is not the only cost pertaining to coercion. Geopolitical cost is
also relevant. International security and international political economy are

77
Office of the Press Secretary, “Joined by Allies and Partners, the United States Imposes Devas-
tating Costs on Russia [Fact Sheet],” The White House, February 24, 2022, www.whitehouse​
.gov/briefing-room/statements-releases/2022/02/24/fact-sheet-joined-by-allies-and-partners-
the-united-states-imposes-devastating-costs-on-russia/.
78
Robert Greene, “How Sanctions on Russia will Alter Global Payments Flows,” Carnegie Endow-
ment for International Peace, March 4, 2022, https://carnegieendowment.org/2022/03/04/
how-sanctions-on-russia-will-alter-global-payments-flows-pub-86575.
79
Sun Yu, “China Meets Banks to Discuss Protecting Assets from US Sanctions,” Financial Times,
April 30, 2022, www.ft.com/content/45d5fcac-3e6d-420a-ac78-4b439e24b5de.
80
Ibid.
81
Ibid.
82
Ibid.
28 The Cost-Balancing Theory

closely connected.83 As for geopolitical backlash, there is a rich literature on

balance of power and balance of threat.84 As Jervis points out when discussing
the policy implications for the spiral model, threats can be self-defeating by
eliciting counteraction from the other side, thereby setting an unstable cycle
in motion.85 Coercion, a kind of negative behavior or threat, may be inter-
preted by the target state as threatening, which in turn might drive it to balance
against the coercing state. Therefore, if a state is aware that acts of coercion
may be interpreted as threats, it will be concerned about geopolitical backlash,
including the target siding with other states to balance the coercer.86 If states
are aware of the implications of the spiral model, they should consider the
costs of coercion.
As such, geopolitical backlash concerns about balancing are expressed in
Walt’s balance of threat theory. Balancing is “the creation or aggregation of
military power through internal mobilization or the forging of alliances to
prevent the political and military domination of the state by a foreign power
or coalition.”87 Walt argues that states tend to balance against threats instead
of bandwagoning and that larger states balance more than smaller ones.88 If
coercion is applied, the target state or its neighbors might interpret coercion
as threats to national security. If the coercer is aware of this logic, it will be
concerned about the geopolitical backlash when deciding on coercive tools.
Specifically, the geopolitical backlash cost includes both general balancing
backlash and immediate risks of war escalation. The general balancing back-
lash is characterized by the target forming or strengthening formal alliances
against the coercer, while the immediate war escalation risk is deliberate or
accidental escalation by the target state in response to coercion. For example,
if coercion is used, the target state may escalate into military conflicts by invok-
ing alliance treaties. A hypothetical scenario is China using military coercion
on Japan over the Senkaku Islands in the East China Sea, which could lead to
Japan escalating the conflict in kind by invoking the US-Japan defense treaty,
thus getting the US military involved. Escalation might also arise unintention-
ally. A hypothetical scenario is China using military coercion on Japan over the
Senkaku Islands, resulting in lower-rank Japanese maritime self-defense force
soldiers responding with the use of force without authorization, thus escalating
into a conflict that could involve US military assistance.
Therefore, the geopolitical backlash cost is measured by the capability
of the target state to balance against the coercer. This capability includes
both immediate military retaliation (from allies or neighbors of the target

83
This section is adapted from Zhang (2022b).
84
See, for example, Schweller (2006); Walt (1983).
85
Jervis (1976, pp. 58–60).
86
Zhang (2019b).
87
See Schweller (2006, p. 9).
88
For the balance of threat theory, see Walt (1983).
2.2 The Cost-Balancing Theory 29

state) and long-term balancing, which is the target’s forming or strengthen-

ing of alliances with its neighbors or great powers, and especially the United
States.89
Theoretically, the external great power can be any actor, but the United
States is the strongest and empirically most likely power to react to China’s
coercion, if at all, as compared to Japan, France, Australia, or other major
powers. For example, other countries might react rhetorically, but they are
much less likely to react to China’s coercion in the South China Sea or a Sino-
Indian border clash with militarized counterattacks against China than the
United States. In the Asia-Pacific region, the United States is the most likely
power that potentially has both interests in and capability to take military
actions. Essentially, geopolitical backlash cost centers on military backlash,
or an escalation to militarized conflicts. In other words, concerns about great
power geopolitical backlash from the United States is case-specific, depending
on the country China is trying to coerce. It is third-party great powers, and
especially the United States, that could change the balance of power, and the
United States is the most relevant great power when it comes to issues in the
Asia-Pacific. Theoretically, however, geopolitical backlash cost can involve any
power that has the willingness and capability. If the target of Chinese coercion
was a Central Asian country, China would more likely need to worry about a
Russian geopolitical backlash. In short, geopolitical backlash cost is China’s
awareness of balance of power and balance of threat concerns.

2.2.5 Synthesis – A Cost-Balancing Theory

In an ideal world without economic or geopolitical constraints, China could
use coercion to increase its reputation for resolve every time there is a chal-
lenge. The reality, however, is that China needs to balance the costs of coercion
against the need to establish a reputation for resolve and cannot coerce every
single time. China’s calculation regarding coercion is in line with Kertzer’s
argument that “risk aversion increases sensitivity to both the costs of fighting
and the costs of backing down.”90 This leads China to make the “Goldilocks
choice” – taking the middle path and engaging in cost-balancing calculations,
that is, China’s gambits.
Regarding the decision to coerce, for the same issue, China coerces when the
need to establish a reputation for resolve is high and the economic cost is low.
China will refrain from coercion when the economic cost is high and the need
to establish resolve is low. In circumstances when both the need to establish
resolve and economic costs are high, China will only use coercion when the
importance of the issue at hand is high. The theory can be viewed in a decision
tree, as shown in Figure 2.1.

89
Zhang (2019b, p. 130).
90
Kertzer (2017, p. S120).
30 The Cost-Balancing Theory

Figure 2.1 Cost-balancing theory

As for the choices of coercion, all else being equal, nonmilitary coercion
should generate lower geopolitical backlash, as it is less escalatory than military
coercion. China is much more likely to choose coercive tools like diplomatic
sanctions, economic sanctions, and gray-zone coercion when the geopolitical
backlash cost is high. However, if it is an issue of the highest importance, China
may still use military coercion despite the high geopolitical backlash cost.

2.2.6 Weighing the Costs and Benefits

The cost-balancing theory identifies the ways that both the need to establish
a reputation for resolve and economic cost influence coercion decisions for
several reasons. First, the direct goal of coercion is to force the target state to
change behavior, but, as the signaling and reputation literature indicates, the
expected benefit of coercion goes beyond forcing behavioral changes in the tar-
get state. Reputational concerns are not uncommon in international security,
as manifested in US credibility concerns during the Cold War.91
Second, economic indicators have crucial impacts on whether leaders will
stay in office, whether in authoritarian or democratic states. The prioritiza-
tion of economic indicators should be especially acute in developmental states
91
See Brutger and Kertzer (2018, p. 693).
2.2 The Cost-Balancing Theory 31

where economic development is the most pressing concern, such as in China,

Brazil, the Philippines, and Vietnam. Because the core concern of these states is
to develop their economy, economic factors are a critical concern when making
foreign policy decisions. After all, concerns about geopolitical backlash exist
precisely because it may thwart the momentum of domestic economic develop-
ment, which is an important basis for continued economic growth. Ultimately,
geopolitical concerns arise because of the economic repercussions when mil-
itary coercion leads to a militarized conflict. In other words, this theory may
be generalizable beyond rising powers, as long as states care about economic
development. The theory does not apply to ideologically driven states, such
as Maoist China and Islamist states, because these states may not care about
economic development.
Moreover, as Scott Kastner notes, not all conflicts escalate to wars or
involve the military, and conflicts in which the “political goals or interests of
two countries diverge” may negatively affect economic relations, such as in
the Cold War.92 State leaders may restrict foreign economic ties in the face
of political conflicts, making it riskier for firms to operate.93 Therefore, coer-
cion, no matter the kind, carries potential economic costs. Diplomatic sanc-
tions might stall bilateral economic relations, especially if both sides rely on
government meetings to negotiate significant purchases or investment deals.
Economic sanctions might generate a tit-for-tat response from the target state.
Military coercion might reduce the incentive for investors in the target state to
make investments in the coercing state. As such, if China needs the target state
for markets, critical supply, or international financial stability, then it is legit-
imate to worry about the potential economic cost of coercion when making
coercion decisions.
Geopolitical backlash cost is more likely to affect the choices of coercive
tools because greater geopolitical pressure could potentially mean that a mil-
itary alliance will be triggered, which might escalate to military confronta-
tion. In this sense, geopolitical backlash cost is directly relevant when states
contemplate whether to escalate to military coercion. After all, a moderate
use of economic sanctions is unlikely to trigger alliance treaty obligations that
lead to a militarized escalation. Empirically, I have also shown that China
tends to use military coercion in Sino-Indian border disputes and nonmilitary
coercion in maritime disputes in the South China Sea, post-2007, because of
the varying geopolitical backlash costs.94 Of course, no kind of coercion, mil-
itary or nonmilitary, will help create the image of China as a benign country,
but China believes in the need to establish resolve. Between demonstrating

92
Kastner (2009, pp. 11–12). Stephen Brooks also argues that economic globalization changes the
calculus of great powers and reduces conflicts among them, in part due to concerns about the
global production chain. See Brooks (2005).
93
Kertzer (2016, pp. 7, 14).
94
Zhang (2022b).
32 The Cost-Balancing Theory

resolve and avoiding militarized escalation, China sometimes needs to make

the Goldilocks choice of nonmilitary coercion, which is when geopolitical
backlash cost becomes relevant.
What I mean by economic cost and reputation for resolve influencing coer-
cion decisions and geopolitical backlash cost influencing coercive tools is that,
theoretically, economic cost should be considered as the most crucial factor
when it comes to whether China uses coercion, if at all. The theory is a simpli-
fied model of reality aimed at teasing out the most crucial factors that influence
coercion decisions. It is not that geopolitical backlash cost is unimportant, but
rather that geopolitical cost is more critical in explaining the choices of coer-
cive tools.

2.2.7 Measurement
Now that I have elaborated on the theory and its logic, one might wonder
whether and how components of the theory can be measured. In this section,
I begin by discussing how I measure the dependent variable, followed by the
operationalization and observable implications of the costs and benefits of
coercion.

2.2.7.1 Magnitude of Coercive Measures

For purposes of simplification, I code the magnitude of all coercive measures as
binary (i.e., greater magnitude or smaller magnitude), even though I acknowl-
edge that there is a spectrum of severity.
Concerning diplomatic sanctions, I code actions of canceling certain dip-
lomatic statuses, such as the closure of consulates or embassies, as greater in
magnitude. I code cancellation of high-level meetings or diplomatic commu-
nications and the postponing or cancellation of lower-level diplomatic com-
munications, such as military-to-military or cultural exchanges, as smaller in
magnitude.
Regarding economic sanctions, there are two indicators: the duration of the
sanctions and the goods or services being sanctioned. Actions, such as interrup-
tion of imports that are of key importance in the bilateral economic relations,
are greater in magnitude, while interruption of trivial goods in the bilateral
economic relations is smaller in magnitude. Threats of economic sanctions are
also coded as smaller in magnitude. Long duration means more than a year,
and short duration can range from days to several months. I exclude popular
boycotts from nonmilitary coercion, as they are not government actions.
As for gray-zone coercion, I use the Militarized Interstate Dispute (MID)
codebook as a model. That is, the patrol or presence of civilian law enforce-
ment ships is akin to “the display of force” in the MID hostility level,95 which

95
See Kenwick et al., Codebook for the Militarized Interstate Dispute Data, Version 4.0, available
at http://cow.dss.ucdavis.edu/data-sets/MIDs.
2.2 The Cost-Balancing Theory 33

is of smaller magnitude. However, there should be actions such as “calling”

(hanhua, i.e., loudspeaker diplomacy) when the patrol takes place. It does
not count if the ships are merely observing from a distance. When actual law
enforcement activities are involved (such as expelling, boarding, and fining of
foreign ships,96 as well as confrontation with foreign armed ships97), they are
akin to “the use of force” in the MID hostility level. The magnitude is there-
fore greater. Similarly, when it comes to using public security agencies against
nationals of the target state, a verbal warning would indicate a smaller magni-
tude, while detainment, arrest, or even use of violence against nationals of the
target state would suggest a greater magnitude.
For military coercion, I also use the MID coding rules. My assumption
is that military coercion is more escalatory than the previous three kinds of
­coercion.98 The threat to use force assumes the smallest magnitude. The dis-
play of force stands in the middle, while the actual use of force indicates the
greatest magnitude. I acknowledge that one might think, intuitively, that an
economic embargo of a major export or import should assume a greater mag-
nitude than a military show of force. However, I argue that military coercion
of any kind has higher magnitudes than nonmilitarized forms of coercion.
Military coercion carries with it the greatest risk of the target escalating into
war – intentionally or accidentally – and invoking defense treaties with great
power allies.
To measure the independent variables, I code them as either high or low.
A binary treatment is preferable because decision-makers do not operate in a
complex mathematical world. Rather, having many daily decisions to make,
they operate in simplistic (sometimes impressionistic) terms. Subsequent empir-
ical chapters will reflect more nuances.

2.2.7.2 Measuring Issue Importance

Regarding issue importance, states generally have an “interest hierarchy.”
Press, for example, divides a state’s interests into three categories: vital inter-
ests, important interests, and concerns.99 Vital interests are those related to a
state’s survival, important interests encompass crises over issue importance
with real material values that do not significantly threaten the state’s survival,
and concerns relate to a state’s values but are not of significant material issue
importance. National security threats mostly fall into the category of vital
interests.

96
Which, in the Chinese example, official Chinese documents indicate as coercive measures
(qiangzhi cuoshi).
97
Such as ramming or blockading/forcing a retreat of the armed ships of the target.
98
See Kenwick et al., Codebook for the Militarized Interstate Dispute Data, Version 4.0, and in
particular, the variable “hostility level reached by state in dispute,” as well as “highest action
by state in dispute [bracketed numbers refer to corresponding hostility level].”
99
Press (2005, pp. 26–27). In a similar vein, Freeman (1997, pp. 11–16) has an interest hierarchy
of supreme interest, vital interest, strategic interests, tactical interests, and national concerns.
34 The Cost-Balancing Theory

In the case of China, three issue areas call for the potential use of coer-
cion. The first category is territorial disputes, which threaten China’s territorial
integrity. The second category concerns Tibet, and especially foreign leaders’
reception of the Dalai Lama, which China believes will incite independence
movements in China’s Tibet autonomous region, thereby threatening China’s
sovereignty. The third category is Taiwan, including but not limited to foreign
states’ arms sales to Taiwan. China views Taiwan as part of its territory, when
Taiwan is de facto independent. China, therefore, treats foreign arms sales to
Taiwan as a threat to its national security.
China has its own interest hierarchy that reflects the existing literature. In
the case of China, it is the distinction between “core interest” issues, which
are of the highest significance, and important issues. Chinese leaders explicitly
affirm Taiwan and Tibet as core interests, the most crucial issues from China’s
perspective. Maritime disputes in the South and East China Sea are import-
ant because they pertain to China’s territorial integrity, but they are not core
interests. Therefore, I examine when, why, and how China uses coercion in the
three national security threat issue areas of territorial disputes, foreign leaders’
reception of and support for the Dalai Lama, and Taiwan.
I operationalize the issue importance variable with China’s stated inter-
est hierarchy, especially if there is an official denotation of its interests. The
observable implication is such that we should observe states choosing coercion
over inaction for issues of higher importance (i.e., higher on China’s interest
hierarchy). Ideally, we should also find speech evidence in which leaders and
scholars indicate that the issue at hand is too important for inaction, despite
equally high costs and benefits of coercion.
Territorial sovereignty, issues related to Taiwan, and issues related to Tibet
constitute the most important national interests of China, including both
national security and internal regime stability. The first official reference to
Taiwan as one of China’s “core interests” appeared in the report of a meeting
between Foreign Minister Tang Jiaxuan and Secretary of State Colin Powell
on January 19, 2003.100 In a previously internal speech made by President
Hu Jintao on the international situation and foreign affairs during the Central
Foreign Affairs Conference (zhongyang waishi huiyi) in August 2006, Hu
also reaffirmed Taiwan as one of China’s core interests.101 Of course, Taiwan
has been the single most important foreign policy issue for China for a long
time. For example, Chinese paramount leader Deng Xiaoping stated that “the
Taiwan issue” was the only issue between the United States and China to for-
mer US President Ford on March 23, 1981, and he similarly told US Secretary
of State Haig that “the Taiwan issue,” such as arms sales, was one of China’s
most critical policies, that is, national unification, on June 16, 1981.102 The first

100
People’s Daily, January 21, 2003.
101
Hu (2016a, p. 510). Hu’s speech during this conference was previously not made public.
102
Leng and Wang (2004, pp. 723, 749).
2.2 The Cost-Balancing Theory 35

official reference to Tibet as one of China’s core interests appeared when Vice
President Zeng Qinghong stated on April 23, 2006 that Tibet involved China’s
core interests.103 Jeffrey Bader, former senior director for Asian affairs on the
National Security Council in the Obama Administration, also noted that the
Chinese informed the United States of their “core concerns,” which was their
claimed sovereignty over Taiwan and Tibet, during the first few months of the
Obama administration in 2009.104 Chinese State Councilor Dai Bingguo laid
out China’s core interests comprehensively in 2009: first, maintaining basic
institutions (jiben zhidu, which implies domestic regime security) and national
security; second, sovereignty and territorial integrity; and third, stable eco-
nomic and social development.105 As such, Chinese leaders explicitly affirm
Taiwan and Tibet as core interests.
In contrast, individual territorial disputes – be they maritime or ­land-based –
are not explicitly stated in Chinese official documents as a core interest. Tibet
and particularly Taiwan are, therefore, the highest-stakes issues. The issue
importance in territorial disputes is lower compared with Taiwan and Tibet.
As President Hu Jintao stated during the internal Central Foreign Affairs
Conference in August 2006, it is necessary to differentiate between core inter-
ests and important interests. Core interests should be defended with resolution
and without compromise, whereas important interests leave room for maneu-
ver, and [China] should strive to get the best results.106 Within each of the
three issue areas – territorial disputes, Taiwan, and Tibet – issue importance
remains constant.
Table 2.1 indicates the observable implications for the remaining indepen-
dent variables in the cost-balancing theory. Subsequent paragraphs discuss
each of the variables in detail.

2.2.7.3 Measuring the Need to Establish Resolve

Beliefs about resolve and dominos are not new, but the cost-balancing theory
attempts to specify when we should expect to see high or low need to establish
resolve. Two indicators measure the need to establish a reputation for resolve,
in addition to speech evidence, in which officials stressed showing resolve
and expressed concerns about appearing weak. I use two objective indicators
to cross-check: the number of incidents, or challenges from other states that

103
People’s Daily, April 23, 2006. However, as early as 1992, the PRC white paper on Tibet
stated that “there is no room for haggling” on the fundamental principle that “Tibet is an
inalienable part of China.” See footnote 34 of Michael D. Swaine, “China’s Assertive Behav-
ior Part One: On ‘Core Interests,’” Carnegie Endowment, http://carnegieendowment.org/files/
CLM34MS_FINAL.pdf.
104
Bader (2012, p. 49).
105
Li Jing and Wu Qingcai, “Shoulun zhongmei jingji duihua” [The First Round of S­ ino-U.S.
Economic Dialogue], Xinhua News, July 28, 2009, www.chinanews.com/gn/news/2009/­07-
29/1794984.shtml.
106
Hu (2016a, p. 519). See also Hu (2016c, p. 237).
Table 2.1 Observable Implications for the Cost-Balancing Theory
Low
The need to •• There were few incidents of challenges from other states
establish a that the coercer deems threatening
reputation •• These incidents were of low visibility; the media remained
for resolve low key and did not make these incidents salient
•• Official and semiofficial sources indicated satisfaction
with the target state, noting its restraint and lack of
media salience
Economic •• Target is not a major export market for China or is not a
cost major import source for China (e.g., energy, technology,
or intermediary products)
•• Target is not a major source of Foreign Direct Investment
(FDI) or Official Development Aid (ODA) for China
•• Target does not control the global financial network
(e.g., the SWIFT system)
•• Official and semiofficial statements and interviews
indicated that China does not rely on the target for any
of the above
Geopolitical •• Official and semiofficial sources indicated the lack of
backlash great power emphasis or decreasing great power presence
•• Interviews indicated lack of great power emphasis on the
region of the target state
•• Objectively and behavior-wise, the great power has a
decreasing presence in the region where the target state is
or does not take actions to initiate or strengthen an
alliance between the great power and the target state
•• The region where the target state is located is divided
High
•• Incidents were abundant
•• These incidents were highly visible, especially through
international media, meaning there are more challengers and a
greater likelihood of other states observing Chinese behavior,
thus adding to the pressure to establish a reputation for resolve
•• Official and semiofficial sources stressed showing resolve and
expressed concerns about appearing weak and the ensuing
incidents due to appearing weak
•• We could also observe a cyclical temporal pattern over time in
which China uses coercion every so often, in periods of low,
high, and low cases of coercion
•• Target is a major export market for China or target is not a
major import source for China (e.g., energy, technology, or
intermediary products)
•• Target is a major source of FDI or ODA for China
•• Target controls the global financial network (e.g., the SWIFT
system)
•• Official and semiofficial statements and interviews indicated
that China relies on the target for any of the above
•• Official and semiofficial sources indicated an increasing great
power presence in the region of the target state
•• Interviews indicated great power emphasis on the region of the
target state
•• Objectively and behavior-wise, a great power has an increasing
presence in the region where the target state is or takes actions
to initiate or strengthen an alliance between the great power
and the target state
•• The region where the target state is located is united
2.2 The Cost-Balancing Theory 37

threaten the coercer’s national security, and the visibility and salience of the
incidents. It is important to note that I measure the need to establish resolve,
not the level of resolve that a state already has.107
When the visibility and salience of the target state’s action are high, China
might fear that potential challengers will observe this action. If it does not
use coercion, other states may take similar actions in the future (or the target
may continue or escalate its action), believing that the state will not be will-
ing to use coercion. I thus measure visibility with the level of media cover-
age (i.e., whether the issue threatening the coercer’s national security receives
lots of coverage), especially in such highly influential media as Reuters, the
Associated Press, and Agence France-Presse.
Visibility of national security issues in media reports is one indicator to
measure the need to establish resolve, because coercion is not just about the
challenger itself. The challenger might have excellent intelligence regarding the
issue at stake, but other states might not accord it the same level of atten-
tion. For example, not all states use their intelligence to track a particular
government receiving the Dalai Lama or when foreign fishermen were fishing
in waters claimed by China. They might not know about these incidents if
English-language news did not report them. The greater the media visibility,
the more likely that other states or potential challengers might be watching
the coercer’s response. All else being equal, the lack of a response in the face
of high-visibility incidents might make other states view the coercer as less
resolved than if the incidents had lower visibility. If China does not respond
despite the high level of visibility, other states might think that the coercer will
similarly refrain from coercion in the future. If the incident is not highly visible,
though, other states might think the coercer and the challenger have a private
arrangement.
In measuring status-altering events, Jonathan Renshon similarly notes that
such events should be highly visible and salient, because “leaders and their
advisors face severe constraints on their time and attention” and therefore
“cannot pay attention to everything that happens in the world.”108 Theoretical
and empirical studies in international relations, sociology, criminology, and
economics likewise show that increased visibility of rule-breaking behavior
may strengthen individuals’ propensities to break social norms, laws, or regu-
lations.109 That is, increased publicity for a particular behavior may lead others
to follow suit. These studies suggest that visibility and salience have external
validity and are not ad hoc measures.
As for the number of incidents, when multiple challengers threaten the
coercer’s national security or when one challenger takes the same action several
times – especially during a concentrated period and when the challengers are

107
Kertzer (2016) measures resolve.
108
Renshon (2017, p. 24).
109
Carnegie and Carson (2018, p. 628).
38 The Cost-Balancing Theory

smaller states – China uses coercion to avoid being seen as weak and unwilling
to defend its interests. Other states may be watching China’s reaction, so if
it does not take action to halt repeated transgression, other states may view
the lack of action as a green light to carry out similar transgression in the
future. As such, the higher both the visibility of the issue and the number of
perpetrators, the greater the pressure to establish one’s reputation for resolve.
This is not to say that reputation concerns disappear when the visibility is low
and there are fewer challengers, but states do not have unlimited resources to
respond to every challenge and therefore must determine when the need to
establish resolve is high.
The empirical chapters provide more information on what counts as an
incident: challenges from other states that the coercer deems as threatening
to its national security. Some examples include Malaysia taking over a land
feature in the South China Sea, Vietnam conducting oil and gas exploration
in the Paracel Islands, the French president meeting with the Dalai Lama, and
the United States selling weapons to Taiwan. The number of incidents is exog-
enous. Although some of these incidents are not aimed at challenging China,
China perceives that they are. For instance, France received the Dalai Lama to
uphold human rights values, not to focus on the domestic politics of China.
Similarly, oil and gas exploration in the South China Sea is often driven by
domestic economic interests of potential targets.
Finally, we might also observe a cyclical pattern over time, in which China
uses coercion every so often as part of a cyclical, temporal pattern with peri-
ods of low, high, and low cases of coercion. Similar to the case of US “per-
formative wars” described by Butt, if China cares about its reputation for
resolve and believes in the domino logic, and if China has coerced several
target states in one period, the next period should witness fewer cases of coer-
cion. Subsequently, if the number and the media exposure of incidents flare
up again, then we should observe China using coercion again, thus creating a
cyclical pattern of coercion over time.

2.2.7.4 Measuring Economic Cost

The economic cost is measured in terms of the economic relations between
China and the target state. When the economic cost is high, one should first see
that objective bilateral trade relations indicate an asymmetry favorable to the
target state. For example, the target state is a major export market for China,
or China relies on the target state for critical sources of import. Such imports
could include finished products, such as energy supply (fossil fuels and natu-
ral gas), intermediary products crucial to China’s supply chain (for instance,
computer chips or engines for automobiles), and key technologies that China
is unable to acquire domestically. We should also see objective bilateral finan-
cial relations being favorable to the target state. Such instances include the
target state being a key source of Foreign Direct Investment (FDI) or Official
Development Aid (ODA) to China or controlling the global financial networks,
2.2 The Cost-Balancing Theory 39

such as the SWIFT system. Finally, we should observe Chinese government

policy analysts, officials, and scholars talking or writing about such an asym-
metry, expressing how China needs the target state for markets, supply, or
capital.
When the economic cost is low, one should first see that objective bilateral
trade relations indicate an asymmetry favorable to China. For example, China
is a major export market to the target state, or the target state relies on China
for critical sources of import. Such imports could include finished products,
such as electronics, intermediary products crucial to the target state’s supply
chain, and key technologies that the target is unable to acquire domestically.
We should also see objective bilateral financial relations being favorable to
China. Such instances include China being a key source of FDI or ODA to the
target state, the Renminbi, or China’s electronic payment system being criti-
cal to the target state. Finally, we should observe Chinese government policy
analysts, officials, and scholars talking or writing about such a favorable asym-
metry, especially noting the reliance of the target state on China for markets,
supply, or capital, as well as the lack of exit options.

2.2.7.5 Measuring Geopolitical Backlash Cost

The geopolitical backlash cost includes both general balancing backlash and
immediate risks of war escalation. The general balancing backlash is character-
ized by the target forming or strengthening formal alliances against the coercer.
The immediate war escalation risk is the deliberate or accidental escalation by
the target state in response to coercion. For example, the target state may
escalate into military conflicts by invoking alliance treaties if coercion is used.
Therefore, the geopolitical backlash cost is measured by the capability of the
target state to balance against the coercer. This capability includes immediate
military retaliation (including from allies or neighbors of the target state) and
long-term balancing, which is the target’s forming or strengthening of alliances
with its neighbors or great powers, and especially the United States.110 As such,
geopolitical backlash cost includes immediate military escalation involving a
great power, strengthening long-term alliances with the great power, and bal-
ancing, such as the formation of multilateral alliances with the target state’s
neighboring countries.
It is important to note that the measurement of geopolitical backlash cost
should be weighted heavily toward immediate military escalation and the
strengthening of long-term alliances with a great power. This is because great
powers may have greater willingness and capabilities to get involved in a
militarized conflict involving China, whereas third-party neighboring coun-
tries might either lack the willingness or capabilities, as discussed previously.
Moreover, geopolitical backlash cost varies empirically. For example, I have
demonstrated elsewhere that the geopolitical backlash cost in Sino-Indian land

110
Zhang (2019b, p. 130).
40 The Cost-Balancing Theory

border disputes is low compared to maritime disputes in the South China Sea,
post-2007, and the key variance has to do with the differential willingness and
interests of the United States regarding these two regions.111
There are two kinds of indicators. The first is the official threat assessments
of policy analysts close to the government. When the geopolitical backlash
cost is high, we should first observe the threat assessments made by govern-
ment analysts and officials, including the potential target state’s bilateral rela-
tions with other states, such that if they perceive competition and are confident
that the target will not be able to form a balancing backlash against China,
China uses coercion. Official assessments of other states’ past and current pol-
icies, past crisis behavior, and statements prior to decisions of whether to use
coercion are therefore crucial. We should also see that officials and scholars
state their worries about a geopolitical backlash from the target state, such as
immediate military retaliation invoking alliance treaties or long-term alliance
forming, in cases where China does not use coercion. I use US national security
documents, including the National Security Strategy, to cross-check.
The second kind of indicator is behavioral. We should see China using
coercion against states that are in competition with its neighbors. We should
also see that China does not simultaneously coerce all states that challenge its
national security interests. Ideally, we should see speech evidence, in which
Chinese scholars and officials voice the need to pick on a single country to
drive a wedge or to dispel a potential balancing backlash.112 Ideally, we should
then observe state officials and scholars saying that the target is not powerful
enough to unite other states against the coercer. When the above evidence is
present, we would code geopolitical backlash cost low.

2.3 Alternative Hypotheses

Now that I have established measures of the specific components of the
cost-balancing theory, this section turns to examine the competing hypotheses
to the cost-balancing theory. The alternative hypotheses fall into two groups:
1) explanations regarding when and why China uses coercion and 2) explana-
tions regarding when China uses military coercion. The empirical chapters will
examine these alternative explanations more in detail.

2.3.1 When States Use Coercion

The first explanation concerns individual leadership. Richard Samuels, for
example, shows that under the same constraints, different leaders make differ-
ent choices.113 Daniel Byman and Kenneth Pollack emphasize the centrality of

111
Zhang (2022b).
112
For the wedge strategy, see Crawford (2011).
113
See Samuels (2003, p. 2); Saunders (2009); Kennedy (2011).
2.3 Alternative Hypotheses 41

individual leaders in shaping their state’s strategies.114 Margaret Hermann et

al. believe that goal-driven-predominant leaders are not averse to using diver-
sionary tactics to “rally constituencies around the flag.”115 Michael Horowitz
et al. also indicate that more risk-prone leaders are more likely to start inter-
national conflicts.116 Keren Yarhi-Milo argues that the greatest willingness to
fight for face will be seen among leaders who have these four beliefs: 1) when
leaders care about others’ perceptions, 2) believe they can manipulate their
state’s reputation, 3) are prepared to misrepresent their interests, and, lastly,
4) want to appear strong in the eyes of others.117 Those who have these beliefs
are considered “high self-monitors” who modify their behavior in order to
maintain their image.118 The crux of Yarhi-Milo’s argument, as such, is that
high self-monitor leaders are more likely to use military instruments during
international crises to demonstrate their resolve.119 In short, individual lead-
ership differences might explain coercion decisions. For example, risk-tolerant
and assertive leaders may be more likely to coerce because they are more accept-
ing of the potential economic and geopolitical risks of coercion. Moreover, in
line with the abovementioned literature on leaders and war initiation, once a
coercion decision has been made, risk-tolerant and assertive leaders are more
likely to escalate to military coercion.
Second, choosing coercion might be related to domestic politics, and
domestic interest groups and certain bureaucracies might determine coer-
cion decisions.120 As such, when hawkish military groups are more powerful
domestically, they are more likely to lobby (successfully) for military coercion,
possibly because the military has an organizational interest in advocating for
military instead of nonmilitary tools to boost the role of the military and lead
to budgetary benefits. Moreover, when business groups, such as large energy
state-owned enterprises, are more powerful, they are more likely to lobby (suc-
cessfully) for coercion (regardless of kind) when they have competing economic
interests with companies in the target state. For example, Chinese energy com-
panies might have an inherent interest in the oil resources in the South and East
China Seas and, therefore, may push for coercive measures to solidify China’s
control of oil resources in these regions.121
In addition, based on the literature on territorial disputes in East Asia,
nationalism might have an impact on China’s coercion decisions. Andrew
Chubb suggests that, in the case of China’s policies regarding the South China

114
Byman and Pollack (2001).
115
Hermann et al. (2001, p. 96).
116
Horowitz et al. (2015, pp. 17–19, 30).
117
Yarhi-Milo (2018).
118
Ibid.
119
Ibid.
120
For domestic interest groups, see Frieden (1991).
121
Jonathan Markowitz, “Prices or Power Politics: When and Why States Coercively Compete
over Resources,” in Greenhill and Krause (2018).
42 The Cost-Balancing Theory

Sea, popular nationalist influence on Chinese foreign policy could render crises
or incidents at sea uncontrollable.122 Therefore, there is a risk that decisions
could be dominated by domestic public opinion.123 Todd Hall argues that
“dispute inflation” might lead to situations where an issue assumes greater
stakes and significance than its objective value, partly due to emotions such as
nationalism.124 Using maritime territorial disputes in the East China Sea as a
case study, Hall indicates that Chinese leaders were unwilling to look weak in
their handling of the disputes and thus took hardline stances to appeal to the
nationalistic domestic population.125 In short, coercion decisions may not be
driven by rational calculation, but nationalism.
Third, per various structural realist interpretations of state behavior, such as
offensive realism, as China’s relative power increases over its neighbors, China
may be more prone to use coercion, because it aims at maximizing its security
and achieving regional hegemony, and using coercion is one way to achieve
regional hegemony.

2.3.2 Tools of Coercion

Slantchev upholds the utility of military coercion, which stands out from other
tools of coercion in terms of its utility as a costly signal.126 Therefore, once a
coercion decision has been made, China should prioritize military coercion
over nonmilitary tools of coercion.

2.4 Research Methods

To evaluate the cost-balancing theory and the abovementioned alternative
hypotheses, I utilize the most-similar case comparison method. I examine
both temporal and cross-national variation, that is, cases that are similar in
all relevant respects except for the values of the independent variables, with
my proposed factors explaining coercion decisions.127 The first kind of vari-
ation is temporal variation. I examine cases in which, for the same country
that is a potential target for China’s coercion, China initiates coercion against
that country in some time periods but refrains from coercion in other periods.
This controls for cross-national differences and teases out temporal differences
related to the independent variables. The second kind is cross-national varia-
tion. I delve into cases in which, for the same period and among comparable

122
Andrew Chubb, “Chinese Nationalism and the ‘Gray Zone’: Case Analyses of Public Opinion
and PRC Maritime Policy,” CMSI Red Books, 2021, Study No. 16.
123
Ibid.
124
Hall (2021).
125
Hall (2019).
126
Slantchev (2011).
127
Gerring (2007, p. 89).
2.4 Research Methods 43

countries, China uses coercion against some but not others. I use detailed pro-
cess tracing to strengthen the case studies. In circumstances where evidence
for the direct decision-making process is lacking, which particularly concerns
analyzing temporal variations, I use congruence testing, carefully tracing the
values of the independent variables and dependent variables temporally and
assessing whether their values vary in accordance with the predictions of the
cost-balancing theory.

2.4.1 Case Selection

For each of my three issue areas – territorial disputes, Taiwan, and Tibet – I
first analyze and explain the general trend, including changes over time and
selections of both coercive tools and targets. I then conduct detailed case stud-
ies for all these issue areas: maritime territorial disputes in the South China
Sea, maritime jurisdictional and territorial disputes in the East China Sea, for-
eign arms sales to and presidential elections in Taiwan, and foreign leaders’
reception of Tibetan spiritual leader the Dalai Lama. Although my case studies
cover only China, I still contribute to generalizability by looking at these three
distinctive sets of issue areas and conducting in-depth process tracing of case
studies. Therefore, this book is conducive to cross-issue generalizability, while
contributing to the study of whether there is a generalizable pattern regarding
Chinese foreign policy.
I adhere to the following criteria for case selections and will justify my
case selections in more detail in each empirical chapter. First, I choose com-
parable cases in which the outcomes (dependent variables) take on opposite
values. That is, China coerces country A, not country B, even though both
A and B have taken similar actions that China views as threatening. For
example, China coerced the Philippines when it conducted oil and gas explo-
ration in the South China Sea but refrained from coercion when Malaysia
did the same. China coerced Germany for Angel Merkel’s meeting with the
Dalai Lama in 2007 but did not coerce Australia when its prime minister met
with the Dalai Lama in the same year. In another case of outcomes taking
on opposite values, China coerces country A at one time but not the other,
even though country A took similar actions. For instance, China refrained
from coercing the United States over selling weapons to Taiwan in 1992 but
did coerce the United States for weapons sales post-2008. China coerced
the Philippines over the Scarborough Shoal incident of 2012 but not the
Scarborough Shoal incident of 2001. In other words, I include both negative
and positive cases. Second, I examine extreme cases, such as Chinese military
coercion in the 1995–1996 Taiwan Strait Crisis, to tease out what leads to
such an escalation.128

128
Extreme cases are cases (one or more) that exemplify extreme or unusual values on X1 or Y
relative to some univariate distribution. See Gerring (2007, p. 89).
44 The Cost-Balancing Theory

2.4.2 Evidence and Sources

There are three kinds of primary written sources, categorized by whether
they are official.129 The first is official government documents and speeches.
Some examples include the annual book (zhongguo waijiao) from the Chinese
Ministry of Foreign Affairs (MFA), the biannual defense white paper from the
Ministry of Defense, and China’s annual government work report (zhengfu
gongzuo baogao). I also use the official chronologies of Chinese leaders
(nianpu), official statements, press releases, press briefings from the MFA,
and the People’s Daily. Finally, in terms of data measuring economic costs,
I use official data and assessments from the Chinese Customs, Ministry of
Commerce, and China’s annual statistical yearbooks (as well as yearbooks
from specific agencies), among other official datasets.
The second kind of source is semiofficial documents and reports written
by government think tanks, as well as articles written by “zhongsheng” in
the People’s Daily. Examples of semiofficial reports from government think
tanks include the annual Yellow Book of International Politics (guoji xingshi
huangpishu) published by the Chinese Academy of Social Sciences, the annual
Strategic and Security Review (guoji zhanlue yu anquan xingshi pinggu) pub-
lished by the China Institutes of Contemporary International Relations, and
internal reports by the National Institute of South China Sea Studies on the
situation in the South China Sea. I also use the memoirs of Chinese leaders.
The third kind of source is scholarly writing, which serves as a useful tool
to cross-check against other sources. Some of the more prominent scholars
have close ties to the Chinese government, while some scholars, and especially
historians, have written excellent books documenting the chronology of the
cases in this book.
Just as with the above primary written sources, there are three kinds of
interviews. The first kind is interviews with former Chinese officials and for-
eign officials, while the second is interviews with official government policy
analysts. The second kind of interviews are important because these govern-
ment policy analysts have internal information from the government, and they
also wrote the semiofficial think tank reports. The third kind is interviews with
scholars.
In addition, I use secondary sources (i.e., non-Chinese language sources) for
two purposes. First, when constructing the dataset of cases of Chinese coer-
cion and the incidents that China views as threatening, I used LexisNexis and
Factiva newspaper searches and statements from the foreign ministries of such
countries as Vietnam, the Philippines, and Japan to cross-check and make sure
that the incidents that Chinese sources indicated actually took place. In other
words, every incident in the dataset has been cross-checked with non-Chinese
sources. To avoid biases in favor of China, I use both the Chinese and foreign

129
Elsewhere I discuss Chinese sources more in detail. See Zhang (2019b).
2.4 Research Methods 45

accounts of particular incidents, and especially the official accounts from the
target states. In addition, I use secondary sources, including statements made
by United States or foreign officials, English-language journalistic reports, such
as in the New York Times and Diplomat, the secondary literature on cases
in this book, and US alliance treaties and how they evolve over time, all to
triangulate the measurements of the costs and benefits in the theory. In short,
I use primary written speech evidence, interview data, and secondary sources
to cross-check against one another. In this way, the evidence presented in the
empirical chapters is not post hoc justification of coercive behavior and there-
fore resolves the issue of falsifiability.
Now that we have gone through the conceptualization of coercion, the
logic and measurement of the cost-balancing theory, the alternative explana-
tions, and the data and sources, the subsequent chapters will examine empir-
ical cases and demonstrate that the cost-balancing theory explains China’s
coercion behavior and choices.
3

Coercion in the South China Sea

China has had disputes with Vietnam, the Philippines, Malaysia, Brunei, and
Indonesia in the South China Sea, which includes the Paracel Islands, the
Spratlys, and features around the Macclesfield Bank. These disputes, centering
on the sovereignty of claimed islands and maritime jurisdiction, have been over
such resources as oil and fishery.
The U-Shaped Line, or Nine-Dash Line, is the basis for Chinese claims in the
South China Sea. China maintains that it holds “indisputable sovereignty over
the islands in the South China Sea and the adjacent waters.”1 The U-Shaped
Line originates from a 1947 Republic of China (ROC) Map.2 After Japanese
occupation in World War II, the ROC used this map to “reassert” its sover-
eignty over islands in the South China Sea. In 1949, China adopted the line
as its own, naming it the Nine-Dash Line and claiming the islands within the
South China Sea. In 1974, China began to use vaguer terms, like “adjacent”
or “relevant,” as well as a new claim to “historic rights.”3 China continues to
use these phrases today.
China lays claim to ownership of all land features in the South China Sea.4
The most significant of these claims are to four island groups: the Pratas Islands,
the Paracel Islands, the Macclesfield Islands, and the Spratlys.5 These claims

1
Dolven Ben, Susan Lawrence, and Ronald O’Rourke, “China Primer: South China Sea Dis-
putes,” Congressional Research Service, February 2, 2021, https://crsreports.congress.gov/
product/pdf/IF/IF10607.
2
Chung (2016).
3
See Section III, part IV in China’s Ministry of Foreign Affairs (MFA), “Statement of the Gov-
ernment of the People’s Republic of China on China’s Territorial Sovereignty and Maritime
Rights and Interests in the South China Sea,” July 12, 2016, www.fmprc.gov.cn/nanhai/eng/
snhwtlcwj_1/t1379492.htm.
4
Guan (2000).
5
Yang and Li (2016).

46
Coercion in the South China Sea 47

are ambiguous and stem from vague assertions regarding historic rights, mar-
itime jurisdiction, and the Nine-Dash Line, which overlaps with the exclusive
economic zones (EEZs) of Brunei, Malaysia, the Philippines, Vietnam, and
Indonesia.6
Brunei, which makes claim to a 200-nautical-mile EEZ that overlaps with
China’s Nine-Dash Line,7 is known as the “silent claimant” because of its
silence about and limited claims in the South China Sea disputes. Within this
EEZ, Brunei only claims Louisa Reef.8 It has not enforced its claims in the
region and, in recent years, has aligned itself closer to China.9
Malaysia claims fourteen features in the South China Sea and controls
six.10 It has overlapping claims to these features with China, the Philippines,
Vietnam, and Brunei.11 It dropped its claim to Louisa Reef after an exchange
of letters with Brunei in 2009.
The Philippines lays claim to four areas within the South China Sea: the
Scarborough Shoal, the Second Thomas Shoal, Reed Bank, and several features
in the Spratlys.12 The Filipino claim is based upon the declaration of a Filipino
national named Thomas Cloma that the Kalayaans (the Filipino name for their
claimed section of the Spratlys) are res nullius due to the Japanese renounce-
ment of the territory after World War II.13 The land was later transferred to
the Philippine Government by Cloma and declared Philippine territory. The
Philippines also bases its claims on proximity.14
Vietnam claims “indisputable sovereignty” over the Spratlys and the Paracel
Islands.15 It controls most islands in the Spratly archipelago.16 Like China,
Vietnam bases its claims on historical evidence, but also upon economic devel-
opment, administration, and international recognition.17 South China Sea dis-
putes are Vietnam’s most challenging issue with its neighbor China, having
engaged in notable clashes in 1974 and 1988.18 Vietnam has an enormous

6
Dolven et al., “China Primer: South China Sea Disputes.”
7
Michael F. Martin and Ben Dolven, “Brunei Darussalam,” Congressional Research Service,
October 21, 2020, https://crsreports.congress.gov/product/pdf/IF/IF11009.
8
J. Ashley Roach, “Malaysia and Brunei: An Analysis of Their Claims in the South China Sea,”
CNA Analysis and Solutions, August 2014, www.cna.org/cna_files/pdf/iop-2014-u-008434.pdf.
9
Putra (2021).
10
Ahmad and Sani (2017).
11
Wey (2017).
12
Mark E. Rosen, “Philippine Claims in the South China Sea: A Legal Analysis,” CNA Analysis
and Solutions, August 2014, www.cna.org/cna_files/pdf/iop-2014-u-008435.pdf.
13
Storey (1999).
14
Hong (2013).
15
Dutton (2011).
16
Dolven et al., “China Primer: South China Sea Disputes.”
17
Raul Pedrozo, “China versus Vietnam: An Analysis of the Competing Claims in the South
China Sea,” CNA Analysis and Solutions, August 2014, www.cna.org/cna_files/pdf/IOP-
2014-U-008433.pdf.
18
Dutton (2011, p. 4).
48 Coercion in the South China Sea

stake in the conflict, both strategically and economically, due to the presence
of hydrocarbons and a massive fishing industry.19
Indonesia is not a claimant state in the South China Sea disputes.20 It main-
tains that it is not part of the dispute in any way and is a reluctant participant
in maritime disputes within the region. China’s Nine-Dash Line overlaps with
Indonesia’s EEZ, and despite China not claiming the Natuna Islands,21 it is
still a point of contention. The Natuna Islands are of special importance to
Indonesia in terms of fishing and energy acquisition. If China were to succeed
in a dispute with Brunei, Malaysia, the Philippines, or Vietnam, it could set its
sights on more, leading to challenges with Indonesia.22

3.1 General Trends, Specific Cases, and Theoretical

Expectations of the Cost-Balancing Theory
The past three decades have witnessed curious trends in Chinese coercion, and
this chapter examines such general trends. China used coercion in the 1990s
(especially the mid-1990s), refrained between 2000 and 2006, and resumed
using it in 2007, exhibiting a curious cyclical pattern of coercion. It also
conducts three case studies: a cross-national comparison of the frequency of
coercion toward the Philippines, Vietnam, and Malaysia; the Mischief Reef
case; and the Scarborough Shoal case. These case studies are both “positive”
and “negative,” with cases where coercion took place and cases where China
refrained from coercion. The three cases examine both the cross-national and
within-case temporal variation in China’s coercion in the South China Sea.
They illustrate that the mechanisms of the cost-balancing theory are at play
by detailing the conditions under which coercion is chosen and why military
coercion is utilized or not.
The first case study concerns China’s selective targeting, in which it coerces
the Philippines and Vietnam more than Malaysia, while using the most coer-
cive tools toward the Philippines, even though the three countries are com-
parable. It demonstrates how variation in the use of coercion exists not only
temporally but also cross-nationally.
The second case study delves deeper into a single-country case: the Mischief
Reef incident of 1994–1995 between China and the Philippines. The Mischief
Reef is in the eastern Spratlys. As noted by former Chinese diplomat Zhang
Liangfu, from December 1994 to February 1995, China seized and built shel-
ters (gaojiaowu) on the Mischief Reef (Meijijiao), which was also claimed by
the Philippines and Vietnam.23 In February 1995, the Philippines announced

19
Hiep (2014).
20
Kipgen (2021).
21
Ibid.
22
Meyer et al. (2019).
23
See Zhang (1996, p. 218).
3.1 Cost-Balancing Theory: General Trends 49

that it had discovered Chinese infrastructure on the Mischief Reef and lodged
strong protests.24 From mid- to late-March 1995, the Philippine Navy destroyed
Chinese shelters on the reef.25 In May 1995, the Philippines also dispatched
journalists to the reef.26 However, Chinese fishery administrative ships success-
fully used gray-zone coercion to force Philippine naval vessels out of the reef.
According to the memoir of one official from the South China Sea bureau of the
Chinese State Oceanic Administration (SOA) who was involved in the incident,
the Philippines had to unwillingly accept Chinese control of the reef.27
The third case study concerns the Scarborough Shoal incident between
China and the Philippines in 2012. To demonstrate how cost-balancing the-
ory explains coercion decisions, the 2012 Scarborough case is carefully paired
with a negative case in which China did not use coercion. In April 2012, a
Philippine naval ship tried to arrest Chinese fishermen around the disputed
waters of Scarborough Shoal. China immediately sent two maritime surveil-
lance vessels to block the Philippine ship and rescue the fishermen.28 Just as
in the Mischief Reef incident, China used coercion. First, China reacted with
gray-zone coercion to block the Philippine naval ship. Second, it used its mar-
itime surveillance ships to keep Philippine naval vessels out of the shoal, even-
tually taking effective control of it. China also began to impose economic
sanctions on the Philippines, beginning to quarantine Philippine bananas,
among other fruits. However, unlike the Mischief Reef case, China did not
use military coercion.
Interestingly, a similar incident in 2001 serves as a negative case to the
Scarborough Shoal incident to demonstrate the mechanisms of the cost-balancing
theory. In early 2001, after finding Chinese fishermen fishing around the
Scarborough Shoal, the Philippine Navy boarded the Chinese fishing boats,
searched the fishermen, confiscated the catches, and, according to the Chinese
Ministry of Foreign Affairs (MFA), forcefully drove the fishing boats away.29
This 2001 incident is extremely similar to the 2012 incident, including the same
land feature (Scarborough Shoal) and the same country taking the same actions
that China views as threatening (the Philippines and its navy’s actions toward the
Chinese fishermen). The only difference is China’s reactions. China used coer-
cion in 2012, but although the spokesperson from the Chinese MFA criticized

24
Zhang (2006, p. 59). Zhang was previously in the MFA and is now a research analyst for China
National Offshore Oil Corporation (CNOOC).
25
Ibid.
26
Li (2000).
27
Yi et al. (2009, p. 77).
28
Patrick M. Cronin, “Muddy Waters,” New York Times, April 24, 2012, www.nytimes​
.com/2012/04/25/opinion/the-philippines-china-and-the-us-meet-at-sea.html?_r=1&.
29
Ma Kun and Li Zhiqiang, “Feilvbin xiang qiangwo huangyandao, waijiaobu fayanren yan-
zheng bochi [The Philippines Wants to Grab the Scarborough Shoal; the MFA ­Spokesperson
Lodged a Strong Refutation],” Global Times, March 27, 2001, http://news.sina.com​.cn/c/
216894.html.
50 Coercion in the South China Sea

Philippine actions, China did not use or threaten coercion in 2001, making that
incident the perfect negative case to contrast against the 2012 incident.30
As stated in the previous chapter, territorial disputes, Taiwan, and Tibet
are all important national security concerns to China. Although South China
Sea maritime territorial disputes remain a constant high-stakes issue, China
does not use coercion all the time, which has to do with the varying degrees of
costs and benefits of coercion. In other words, the issue importance is constant
within the South China Sea but varies among different issue areas of territo-
rial disputes, Taiwan, and Tibet. Taiwan and Tibet are explicitly stated to be
China’s core interests, whereas any individual territorial dispute – be it mari-
time or land-based – is not. In fact, even when South China Sea issues became
increasingly salient in 2009, senior Chinese officials never once listed the South
China Sea as a “core interest.” For example, during a private luncheon at the
Sino-US Strategic and Economic Dialogue on July 29, 2009, Chinese State
Councilor Dai Bingguo made the Chinese stance to US officials clear: “The
South China Sea is highly sensitive (gaodu min’gan); we hope that the United
States will respect China’s interests and concerns (liyi he guanqie) regarding
the South China Sea.”31 Bader also confirmed that the Chinese Deputy Foreign
Minister gave a private presentation on China’s rights in the South China Sea
in March 2010, highlighting it as a national priority but never calling it a “core
interest,” like Taiwan or Tibet.32
As such, the cost-balancing theory predicts that China coerces South China
Sea claimants when the need to establish a reputation for resolve is high and
the economic cost is low. China will refrain from coercion when the economic
cost is high and the need to establish resolve is low, and it is much more likely
to choose such coercive tools as diplomatic sanctions, economic sanctions, and
gray-zone coercion when the geopolitical backlash cost is high. The need to
establish resolve is measured by objective indicators, such as the number of
incidents in the South China Sea and the level of media exposure of these
incidents, as well as written and interview speech evidence. Economic cost is
measured by the target state’s trade and financial relations with China. For
example, is the target state a major export market for China or an important
source of imports, such as energy supply or key technologies? Is the target
state a critical Foreign Direct Investment (FDI) or Official Development Aid
(ODA) source for China? Does the target state control the global financial
network? Geopolitical backlash cost is measured by the target state’s alliance
relationship with an external great power, which, in the South China Sea cases,
is the United States. For instance, is the United States strengthening its military

30
“Feihaijun zainanhai dengshang woyuchuan, zhongguo tichu yanzheng jiaoshe [The Philippine
Navy Boarded Our Boats; China Lodged Strong Protests],” Xinhua News, February 6, 2001,
http://news.sina.com.cn/c/179709.html.
31
Dai (2016, p. 157).
32
Bader (2012, p. 77).
3.1 Cost-Balancing Theory: General Trends 51

presence in Southeast Asia? Is the United States forming or strengthening an

alliance with the target state? The extent to which the Association of Southeast
Asian Nations (ASEAN) countries are unified will also be examined.
The cost-balancing theory predicts that when China used military coercion
in the 1990s, we should expect to see low economic cost, high need to establish
resolve, and low geopolitical cost. This should manifest itself in the 1994–1995
Mischief Reef case study. In the early to mid-2000s, when China refrained from
coercion, the economic cost should be high and the need to establish resolve
low. When China began using nonmilitary coercion post-2007, we should see
low economic cost, high need to establish resolve, and high geopolitical cost.
This contrast between the early 2000s and post-2007 should also be present in
the comparison between the 2001 and 2012 Scarborough Shoal case studies.
The 2001 case should have a high economic cost and low need to establish
resolve, whereas the 2012 case should witness a low economic cost and high
need to establish resolve. Moreover, the varying need to establish resolve and
economic cost manifests not only temporally but also cross-nationally. In the
comparison in which China coerces the Philippines and Vietnam more than it
does Malaysia, we have low economic cost and high need to establish resolve
in the former and high economic cost and low need to establish resolve in the
latter. Finally, it is plausible to see a cyclical pattern in the frequency of coer-
cion over time, in line with the varying need to establish resolve.
Alternative explanations might yield predictions different than the
cost-balancing theory. First, if evidence suggests that the Chinese president
makes coercion decisions that contradict the judgment of all other leaders, this
is strong evidence for the individual leadership argument.
Second, if domestic lobbies and interest groups dictate coercion decisions, we
should expect to see a bottom-up decision-making process of coercion, instead
of top-down. Moreover, in the comparison between Malaysia, Vietnam, and
the Philippines, we should see Malaysia being coerced the most frequently, as
it extracts the most energy from the South China Sea, which could conflict with
the interests of Chinese state-owned energy companies.
Third, if popular nationalism is crucial, then we wouldn’t expect a cyclical
pattern of coercion over time. Given that nationalism, an ideational source
of behavior, tends to be stable over time, we should see stable occurrences in
terms of coercion frequency. Fourth, if overall Chinese material power growth,
especially offensive realism, is central, then we should expect to see a linear
progression of coercion, from fewer to more cases of military coercion over
time. Moreover, we should not expect to see selective targeting cross-nationally
at any point of time. Finally, if the argument favoring the utility of military
coercion is correct, we should expect to see an overall linear increase or even
preclusive use of military coercion over time.
The remainder of the chapter first describes the data and overall trend regard-
ing China’s coercion in the South China Sea, then applies the cost-balancing
theory to explain the temporal trend, followed by three detailed case studies to
52 Coercion in the South China Sea

illustrate the logic and process of the cost-balancing theory. The final section
discusses alternative explanations before concluding.

3.2 Explaining the Temporal Trend of China’s

Coercion in the South China Sea
This section first describes the overall trend of Chinese coercion in the South
China Sea and then applies the cost-balancing theory to explain it.
Figure 3.1 illustrates Chinese coercion in the South China Sea from 1990
to 2020. The vertical axis shows the number of incidents. The dark gray bars
are the total pool of incidents for each year, where China could react to other
states’ behavior by either using or not using coercion. These incidents concern
two categories: the control of disputed land features in the South China Sea
and energy exploration in the disputed maritime area, based on an internally
circulated publication by China’s SOA. This internal publication from 2002
stated clearly that defending maritime rights – sovereign, jurisdictional, and
administrative rights – is the core of maritime rights and that resource explo-
ration in one’s EEZs and continental shelves is an exclusive “quasi-sovereign”
(zhunzhuqan) right that lies just below sovereign rights.33 These are the sce-
narios in which China is most likely to use coercion, if at all. Specifically, inci-
dents regarding the control over land features include other claimants seizing
and building infrastructure on them. For example, Vietnam established a light-
house on one of the land features in the South China Sea in May 1992, fol-
lowed by starting land reclamation on the Pearson Reef in 2011. In 2001 and
2012, the Philippine Navy arrested Chinese fishermen fishing in the disputed
Scarborough Shoal. Incidents regarding resource exploration include actual
oil and gas exploration activities and oil and gas production contracts signed
by other claimants. For instance, Malaysian oil company Petronas signed pro-
duction sharing contracts (PSCs) with a US company in July 1998. In 2004,
Vietnam signed oil and gas contracts with three Japanese companies. In 2011,
the Philippines conducted oil and gas exploration around Reed Bank. A com-
plete dataset describing these activities is in the online appendix.34
The goals of Chinese coercive behavior are clear. They aim at stopping other
claimants’ specific actions in China’s claimed maritime area. The broader goal,
according to former officials, government analysts, and scholars, is to use coer-
cion to stop countries from unilateral development of the resources, forcing
them to go back to the negotiation table to discuss and conduct joint devel-
opment with China.35 As stated in the 2009 internal report of the National

33
Internal Materials edited by the China Institute for Maritime Affairs (2002, pp. 395, 398).
34
See the online appendix, “Dataset and Interview Codebook for China’s Coercion 1990–2020,”
https://doi.org/10.7910/DVN/H4IFH3.
35
Interview KZ-#12, Beijing, China, October 21, 2015; interview KZ-#26, Nanjing, China,
December 30, 2015; and interview KZ-#54, Haikou, China, April 8, 2016.
 Figure 3.1 Challenges from other disputants in the South China Sea and cases of Chinese coercion (1990–2020)
53
54 Coercion in the South China Sea

Institute of South China Sea Studies (NISCSS), China should consider coerc-
ing (bipo) others into jointly developing resources in the South China Sea
with China, which head of the NISCSS Wu Shicun reaffirmed during a 2011
interview.36 Internally published materials also point to this broader goal.37
Similarly, former Chinese Deputy Foreign Minister Fu Ying notes in her mem-
oir that China’s goal is to force the “state of disputes back to the track of
negotiation.”38
As Figure 3.1 shows, China used coercion in the mid-1990s, especially from
1994 to 1996. These cases of coercion were more drastic than those in the late
2000s in that they sometimes were military coercion involving naval ships.
In the early 2000s, however, China refrained from using coercion. Starting
in 2007, though, China began to increase its use of coercion, particularly in
the form of gray-zone coercion, which peaked in 2016. Beginning in 2017,
cases of Chinese coercion decreased, exhibiting a cyclical pattern. Unlike the
early 1990s, the cases of coercion beginning in 2007 tend not to involve the
military, thus reducing the magnitude of coercion. Furthermore, China prefers
to coerce Vietnam and the Philippines, while coercing Malaysia less. If the
cost-balancing theory is correct, we should see China coercing when the need
to establish resolve is high and economic cost is low and using nonmilitarized
coercive tools when the geopolitical backlash cost is high.

3.2.1 The Need to Establish a Reputation for Resolve

China’s need to establish a reputation for resolve was high in the 1990s, low
between 2000 and 2006, and high again in the post-2007 period. There are
two objective indicators: the number of incidents and the visibility of such inci-
dents. Figure 3.2 shows the number of challenges to Chinese sovereign claims
from 1990 to 2020.39
There was a surge in other claimants’ actions in the South China Sea begin-
ning in the early 1990s, especially by Vietnam, the Philippines, and Malaysia.
For example, Vietnam took Prince Consort Bank (Xiwei tan) in the Spratlys
in November 1990 and Grainger Bank (Lizhun tan) and Alexandra Bank

36
NISCSS, 2008nian nanhai diqu xingshi pinggu baogao [The 2008 Report Regarding Situation
in the South China Sea], printed by NISCSS in 2009 for internal use, p. 52; Mao Lingyun,
“Zhuanfang zhongguo nanhai yanjiuyuan yuanzhang Wu Shicun [An interview with Wu Shi-
cun from NISCSS],” Nanfeng chuang [South Reviews], Issue 17 (2011 August), p. 33.
37
Lu (2016, p. 226). The author is an analyst at the Chinese Academy of Military Sciences. This
book was published by the official press of the PLA Daily.
38
Fu (2018, p. 199).
39
For the data, see the online appendix. As mentioned, these incidents include other claimants’
seizures of land features in the South China Sea, fortification or construction of airport run-
ways on previously occupied land features, and oil and gas contracts, as well as exploration
activities with foreign companies. Separating incidents regarding land features and incidents
related to oil and gas into two figures yields similar trends seen in Figure 3.2, which is why it
is not shown here.
 Figure 3.2 Number of incidents (challenges to Chinese sovereignty claims) in the South China Sea (1990–2020)
55
56 Coercion in the South China Sea

(Renjun tan) in November 1991.40 During the same period, Vietnam was con-
structing lighthouses on occupied islands.41 Also, it drastically increased the
number of PSCs signed with foreign companies. For instance, Petrovietnam,
Vietnam’s state oil company, signed agreements with Canadian, Norwegian,
and Indonesian companies to explore oil and gas in the Spratlys in 1992.42 The
Philippines and Malaysia were also taking control of and building infrastruc-
ture on land features in the Spratlys. For example, Malaysia finished building a
runway on Swallow Reef in the summer of 1992, and the Philippines ordered
its armed forces to build an airport on disputed islands in the Spratlys.43
Throughout the 1990s, Vietnam, the Philippines, and Malaysia engaged in
sixty-six incidents to take control of land features in the Spratlys and make oil
and gas production deals with foreign companies, with most incidents concen-
trated in the early to mid-1990s. The rapid increase of Vietnamese PSC deals
was a notable new phenomenon.44
Challenges to Chinese sovereignty claims in the South China Sea reduced
greatly in the 2000–2006 period. The nature of these challenges also made
them less concerning to China. Vietnam, the Philippines, and Malaysia seized
land features in the 1990s, but in the 2000–2006 period they focused more
on building infrastructure on land features they had already taken. Unlike the
1990s, when incidents of the seizure of land features were abundant, many of
the thirty incidents in the 2000–2006 period had to do with oil exploration
and new PSC deals, some of which were presumably outside of China’s Nine-
Dash Line. Also, the number of oil and gas PSCs signed with foreign countries
in this period was smaller than in the 1990s. The small bump in 2003 reflects
officials of other claimant countries visiting land features they had already
taken in the 1990s.
The post-2007 period witnessed a resurgence of actions by Vietnam, the
Philippines, and Malaysia. In 2007 alone, Vietnam initiated eleven cases of oil
and gas exploration and new PSC deals. This increase, which began in 2006,
was dramatic compared to previous years. Malaysia, which rarely signed new
PSC deals, also began signing them in 2007, with the number peaking in 2012.
The Philippines, albeit a latecomer, conducted oil exploration around the Reed
Bank in 2011.45 Moreover, the claimants appear to have rekindled efforts to

40
Hainan provincial gazetteer office (2005); Li (2005, p. 34). These are cross-checked by English
sources. See the online appendix.
41
Cross-checked by English-language sources and official data from the Vietnamese government.
42
For data sources, see the online appendix.
43
See Zhang (1996, p. 247). Cross-checked by Makito Shashi, “Malaysia Develops Disputed Spratly
Isle; Hotel Goes Up on Territory Claimed by Six Nations,” The Nikkei Weekly, May 30, 1992.
44
Data come from Zhang (2013, p. 246). Crossed-checked with the official website of Petro­
Vietnam at http://english.pvn.vn/?portal=news&page=detail&category_id=38&id=3676.
45
Joseph Santolan, “Chinese Patrol Boats Confront Vietnamese Oil Exploration Ship in South
China Sea,” World Socialist Website, May 31, 2011, www.wsws.org/en/articles/2011/05/
chinYm31.html, accessed May 1, 2018.
3.2 China’s Coercion in the South China Sea: Temporal Trend 57

strengthen infrastructure on occupied islands. For example, Vietnam started

renovating the airport runway on the Spratly Island (Nanwei dao) in 2007. In
short, incidents challenging Chinese claims in the South China Sea were abun-
dant in the 1990s, dropped in the 2000–2006 period, and picked up again in
the post-2007 period.
This trend is generally corroborated by trends in international media expo-
sure, which is the second objective indicator.
Figure 3.3 presents the results of a Factiva search of reports by AP, AFP,
and Reuters, the most influential English-language news agencies, that men-
tion either “South China Sea” or “Spratlys” disputes.46 Reporting by these
agencies would increase the salience of the South China Sea issue and the pres-
sure on China to establish resolve. I read every report to exclude irrelevant
ones, such as typhoon reports, positive development in the South China Sea,
or reports of Chinese coercion, so that I did not capture the dependent vari-
able itself. International media exposure was high in the 1990s, lower from
2000 to 2006, and picked up again starting in 2009. The decrease of media
exposure in 2017 and 2018 is in line with the decrease of Chinese coercion in
the post-2016 period.
In addition to the two objective indicators above, the written and inter-
view speech evidence below serves to demonstrate the same mechanism of the
logic, showing that it is indeed concern about resolve that matters to China’s
decision-making regarding coercion in the South China Sea.
China’s MFA was keenly aware of the concentrated activities of South
China Sea claimants in the 1990s (especially in the early to mid-1990s). It was
not only quick to respond but also took steps to prevent their recurrence.47
Internal Chinese Academy of Social Sciences (CASS) publications from 1993
and 1994 also documented reactions to the behavior of South China Sea claim-
ants, which worried about the growing trend of “internationalization,” that
is, the increasing salience and international attention paid to these disputes.48
Internal CASS reports in the early 1990s asserted that other claimants had
begun to “carve up” the Spratlys because China had not taken measures to

46
I used the following search in Factiva: “(South China Sea OR Spratly) NOT (typhoon OR storm
OR piracy OR pirate OR rescue OR refugee OR EP-3 OR code OR conduct OR declaration
OR conduct OR crash OR CNOOC OR HD-981 OR 981 OR Ocean Oil 981 OR Hai Yang
Shi You OR reclamation OR oil rig OR Flight 370 OR MH370 OR artificial island OR negoti-
ation OR agreement OR discussion OR code OR code of conduct OR negotiating OR positive
OR Declaration on the Conduct of Parties in the South China Sea OR DOC OR draft OR
framework OR Taiwan OR friendship OR spy plane OR missing pilot).” This search excludes
positive developments between China and other claimants (e.g., signing of a declaration of
conduct), Chinese coercion (e.g., land reclamation), and irrelevant reports (e.g., typhoons, the
MH370 plane crash, Taiwan Strait Crisis, or piracy).
47
Diplomatic history editorial office of the MFA (1992, p. 49).
48
Sun Xiaoying, “Buzhan erzheng de heping zhanlue yu heping jiejue nansha zhengduan [Using
the Peaceful Strategy to Resolve the Spratly Disputes],” in Asia-Pacific Office of CASS (1996,
p. 278).
58

Figure 3.3 AP, AFP, and Reuters report of South China Sea or Spratly disputes (1990–2020)
3.2 China’s Coercion in the South China Sea: Temporal Trend 59

assert its sovereign rights since 1988.49 SOA’s internal March 1992 publica-
tion reasoned that only by showing more resolve would China be able to make
great powers stop investing in Vietnam for oil exploration in China’s waters.50
Thus, the need to establish resolve was high.
From 2000 to 2006, official and semiofficial government threat assessments
noted reduced pressure on China to establish resolve. For example, China’s
official defense white papers from 2000 and 2002 indicated that the situation
in the South China Sea was “basically stable,” and 2004 papers did not men-
tion the South China Sea at all.51 The China Institute for Maritime Affairs – a
government institute under the SOA – indicated that the situation in the South
China Sea was relaxed in its 2004 and 2005 reports.52 Similarly, internal 2003
and 2004 reports from the NISCSS described the general situation in the South
China Sea as “overall stable.”53 Interviews with current government officials
and government policy analysts are also in line with the above assessments.54
In the post-2007 period, increasing actions by other claimants in the South
China Sea heightened China’s concerns about growing international attention.
Beginning in 2008, internal NISCSS assessments reported that the situation in
the South China Sea had become complicated and that the disputes were becom-
ing “salient.”55 An internal NISCSS report published in 2008 suggested that
China strengthen regular patrolling of the Spratlys and “selectively disrupt and
stop” other claimants’ actions.56 China’s 2010 National Defense white paper
stated that pressure on China to defend its maritime rights had increased.57

49
Ibid., p. 280; and Lu Jianren, “Nansha zhengduan ji duice [Countermeasures for the Spratly
Disputes],” in ibid., p. 307.
50
China Institute for Maritime Affairs (CIMA) of the SOA (1992, p. 63).
51
White Paper on China’s National Defense in 2000, www.mod.gov.cn/regulatory/2011-01/07/
content_4617805.htm; White Paper on China’s National Defense in 2002, www.mod.gov.cn/
regulatory/2011-01/06/content_4617806.htm; and White Paper on China’s National Defense
in 2004, www.mod.gov.cn/regulatory/2011-01/06/content_4617807.htm, all published by
China’s Ministry of Defense.
52
Jia Yu et al., “Zhongguo zhoubian haiyang xingshi zongshu [China’s Maritime Situation in
2004–2005],” in Gao and Zhang (2007, pp. 207, 242).
53
NISCSS, 2003nian nanhai diqu xingshi pinggu baogao [The 2003 Report Regarding the Situa-
tion in the South China Sea], printed by NISCSS in July 2004 for internal use, p. 5; and NISCSS,
2004nian nanhai diqu xingshi pinggu baogao [The 2004 Report Regarding the Situation in the
South China Sea], printed by NISCSS in 2005 for internal use, p. 4. These materials are avail-
able in the library of the NISCSS in Haikou.
54
Interview KZ-#114, Beijing, China, December 29, 2016; interview KZ-#64, Beijing, China,
April 27, 2016.
55
NISCSS, 2007nian nanhai diqu xingshi pinggu baogao [The 2007 Report Regarding the Sit-
uation in the South China Sea], printed for internal use (Haikou: NISCSS, 2008), p. 4; and
NISCSS, 2008nian nanhai diqu xingshi pinggu baogao [The 2008 Report Regarding the Situa-
tion in the South China Sea], printed for internal use (Haikou: NISCSS, 2009), pp. 3–4.
56
NISCSS, 2007nian nanhai diqu xingshi pinggu baogao, pp. 15, 41.
57
China’s Ministry of Defense, White Paper on China’s National Defense in 2010, www.mod​
.gov.cn/regulatory/2011-03/31/content_4617810.htm.
60 Coercion in the South China Sea

Semiofficial documents shared this assessment, with one internal CASS report
from 2011 indicating that China’s maritime security environment had wors-
ened in 2010 and that China would face “regularized” pressure in the maritime
realm, observations echoed in China Institutes of Contemporary International
Relations (CICIR) reports.58 Furthermore, the publicity and salience of the
South China Sea issue added to China’s need to establish resolve. For example,
the 2008 NISCSS report was particularly concerned about Vietnam and the
Philippines because they had tried to publicize the South China Sea issue.59 As
such, the Deputy Chief of Staff of the People’s Liberation Army (PLA) stated
in early 2010 that “we are against actions of drastically publicizing the South
China Sea issue.”60
Interviews with officials and government analysts in various parts of China
also confirm this logic of using coercion to establish a reputation for resolve
and avoid being seen as weak.61 Government policy analysts and scholars
stated that China used coercion to “kill the chicken to scare the monkey” (shaji
jinghou), warning all claimants against taking action in the future.62 Chinese
coercion thus aimed to deter any future encroachment on China’s sovereign
rights in the South China Sea.63 As an official from the maritime surveillance
team of the SOA indicated, China needed to show its resolve that it would not
lose any island or maritime area.64 In short, the need to establish resolve was
high in the 1990s, low from 2000 to 2006, and high post-2007.
Interestingly, beginning in 2017, and in line with decreased media exposure
and a reduced number of challenges, official Chinese statements and China’s
government think tank reports also reflected China’s assessment that the South
China Sea issue was not as heated and salient as it had been during the peak

58
Zhang Jie and Zhong Feiteng, “2010nian zhongguo zhoubian anquan xingshi yu zhongguo duice
[The Regional Security Environment in 2010 and China’s Countermeasures],” in Zhang and
Yang (2011, p. 7). This book was for internal circulation in China; CICIR (2012, pp. 114–115).
59
See NISCSS, 2008nian nanhai diqu xingshi pinggu baogao, p. 11.
60
Wang Guopei, “Jiefangjun fuzongzhang: fandui nanhaiwenti guojihua, fandui waibushili jieru
[The Deputy Chief of Staff of the PLA: Against the Internationalization of South China Sea
Issues and Intervention from External Actors],” Dongfang zaobao [Eastern Morning Daily],
April 28, 2010, p. A12.
61
Interview KZ-#4, Beijing, China, September 15, 2015; interview KZ-#5, Beijing, China,
­September 16, 2015; interview KZ-#11, Beijing, China, October 14, 2015; interview KZ-#12,
Beijing, China, October 21, 2015; interview KZ-#16, Guangzhou, China, November 30, 2015;
interview KZ-#17, Guangzhou, China, December 1, 2015; interview KZ-#18, Guangzhou,
China, December 3, 2015; interview KZ-#19, Guangzhou, China, December 4, 2015; interview
KZ-#30, Haikou, China, January 6, 2016; interview KZ-#34, Haikou, China, January 8, 2016;
interview KZ-#53, Atlanta, United States, March 17, 2016; and interview KZ-#69, Shanghai,
China, May 5, 2016.
62
Interview KZ-#8, Beijing, China, October 6, 2015; interview KZ-#11, Beijing, China, October
14, 2015.
63
Interview KZ-#26, Nanjing, China, December 30, 2015; Zhang (2013, pp. 25–31).
64
Wang Yong, “Weihu haiyang quanyi shiyixiang changqi de zhanlue renwu [Maritime Rights
Protection is One Long-Term Mission],” in Wu and Zhu (2009, p. 160).
3.2 China’s Coercion in the South China Sea: Temporal Trend 61

period around 2016. For example, the 2018 China Maritime Development
Report, which analyzed China’s 2017 maritime disputes, noted that begin-
ning around late 2016 and throughout 2017, the situation in the South China
Sea had become “stable” (zongti wending), which differed significantly from
reports from previous years. Part of this stability had to do with new Philippine
President Durterte, whom China believed to be taking a less confrontational
approach to South China Sea disputes.65 For example, in January 2017, the
Chinese Foreign Ministry welcomed the new Philippine government’s stance of
refraining from acting on the 2016 arbitral tribunal ruling of the Philippines’
case against China in the South China Sea as part of ASEAN’s agenda.66 The
2016 ruling had overwhelmingly favored the Philippines and garnered inter-
national media attention, leading to China coercing the Philippines in 2016.
The MFA spokesperson further emphasized that the South China Sea issue was
“cooling down” and “heading back on the right track.”67 Similarly, the 2018
CASS assessment also noted that the South China Sea situation was “trending
toward stability” (quwen xianghao).68 In particular, the 2018 CASS assess-
ment noted the low media salience of one incident – Vietnam’s oil rig in block
136-03 – and attributed China’s lack of coercion to the Vietnamese govern-
ment’s attempt to avoid media salience and control media reports.69
Therefore, although the need to establish resolve has remained high in
recent years compared to the early 2000s, the South China Sea issue does
appear to be less salient now than in the 2012–2016 period, and the number
of incidents of Chinese coercion has reduced, reflecting such a change. Signs of
cooperation have emerged. Philippine fishermen were found fishing around the
Scarborough Shoal again in 2018, which China allowed.70 In 2019, Durterte
negotiated a joint oil and gas exploration deal with China.71 Nevertheless, if
media salience picks up in the post-2020 period, we might again witness an
increase in Chinese coercion. This cyclical pattern of the frequency of coercion
is in line with the theoretical expectations of the need to establish resolve.

3.2.2 Economic Cost

Since the cost-balancing theory includes both the benefits and costs of coer-
cion, the following passages examine the costs of using coercion and turn first
to economic cost. The economic cost of coercion was low in the 1990s, high
roughly between 2000 and 2006, and low in the post-2007 period. The first
indicators are objective, such as ASEAN’s market share as China’s export

65
CIMA (2018, p. 1).
66
MFA press conference, January 10, 2017.
67
MFA press conference, January 17, 2017.
68
Zhang (2018, p. 10).
69
Ibid., p. 171.
70
NISCSS, 2018nian nanhai dashiji.
71
NISCSS, 2019nian nanhai dashiji.
62 Coercion in the South China Sea

market or import source and whether ASEAN is an important source of FDI.

As my previous research on China’s exports to ASEAN, Japan, the EU, and the
United States as a share of China’s total exports demonstrates, even though
Chinese exports to ASEAN grew continuously, they still pale in comparison to
Chinese exports to the EU and the United States, each constituting an average
of fifteen percent of Chinese exports.72 As subsequent chapters will show, in
addition to the large trade volume between China and Japan, the EU, and the
United States, China also needs their technologies and intermediary products
because of the supply chain. In the 1990s and early to mid-2000s, Japan, the
EU, and the United States were also crucial sources of FDI in China. By con-
trast, ASEAN is not a major source of FDI in China, nor is it as critical in the
supply chain of key technologies and intermediary products.
For ASEAN, however, Sino-ASEAN trade has increasingly become an
important component of its overall trade relations since the mid-2000s.73 In
more recent years, China has become ASEAN’s largest trading partner.74 It has
retained this position since 2009.75 Trade between ASEAN and China has more
than doubled from $235.5 billion in 2010 to $507.9 billion in 2019 (eighteen
percent of ASEAN’s total), and it has almost quadrupled since enforcement of
the ASEAN-China Trade in Goods Agreement in 2005.76 ASEAN’s exports to
China grew at an average annual rate of 10.4 percent from 2010 to 2019, as
compared to 12.5 percent for ASEAN’s imports from China during the same
period. ASEAN’s trade deficit with China increased from $10.4 billion in 2010
to $102.9 billion in 2019.77
Even though ASEAN has become China’s largest trading partner, the
trade relationship is asymmetrical. China exports higher value-added prod-
ucts and services on the supply chain that are less easily replaceable, includ-
ing telecommunication technology and infrastructure construction, whereas
ASEAN exports agricultural products to China, including fruits, for which
China has exit options or can dispense with. One of the most recent CICIR
annual reviews highlights this asymmetry and emphasizes the size of China
as an export market, as well as China’s technology compared to ASEAN.78
For example, in discussing China’s supply and value chain integration with
ASEAN, an official document from China’s Guangxi province noted Guangxi

72
Figure 4 in Zhang (2019b, p. 139).
73
China Customs Data. Data regarding ASEAN’s export and import totals come from the World
Trade Organization, International Trade Statistics 2008 (Geneva: World Trade Organization,
2008), www.wto.org/english/res_e/statis_e/its2008_e/its2008_e.pdf.
74
Data come from the official website of ASEAN, “ASEAN-China Economic Relation,” https://asean
.org/our-communities/economic-community/integration-with-global-economy/asean-china-
economic-relation/.
75
Ibid.
76
Ibid.
77
Ibid.
78
CICIR (2020, pp. 181–183).
3.2 China’s Coercion in the South China Sea: Temporal Trend 63

as a critical export source of automobile and new-energy automobile vehi-

cles, electronics, valued-added metals, engines, construction machineries, and
agricultural machineries to ASEAN countries.79 In short, China is an import-
ant export market of value-added products to ASEAN, whereas exports from
ASEAN to China are more replaceable.
In line with objective indicators in the 1990s, Chinese government policy
analysts indicated that China directed its attention to attracting investment
from Japan and the United States in the 1990s.80 Of course, China would also
have liked to expand economic ties with Southeast Asian countries, but that
was not its priority.
Interestingly, there was a brief period from 2000 to 2006 when the economic
cost for China to coerce ASEAN countries was high because ASEAN was the
only option for China to initiate its free trade agreement, which enabled China
to be further integrated into the global economy. From the early 2000s, China
began to increase its economic cooperation with ASEAN, such as by establish-
ing the ASEAN-China free trade zone (FTZ). According to Zhang Yunling, a
senior government policy analyst involved in the negotiations, China initiated
the talks out of economic concerns and interests, as discussed below.81 China
was focused on entry to the World Trade Organization (WTO) in the 1990s,
gaining membership in 2001.
One of China’s economic strategies following accession to the WTO was
finding ways to increase regional economic cooperation, as well as to reap
benefits from the free trade in FTZs, as noted by Chinese analysts in 2003.82
ASEAN was an ideal starting place, given its concerns about what China’s
membership in the WTO would mean for market share competition and FDI.83
Zhang Yunling indicated that China was aware of these concerns and wanted
to reduce them.84 For example, Premier Zhu Rongji suggested that China and
ASEAN begin discussions involving free trade issues in November 2000.85 Also,
China considered ASEAN more likely to negotiate an FTZ than more advanced
economic blocks.86 In other words, China did not have exit options regarding
FTZ, whereas ASEAN had such exit options as Japan, the United States, and

79
China’s Guangxi government,“Promoting the Deep Integration of China-ASEAN ­Industry Chain,
Supply Chain, and Value Chain,” http://gxt.gxzf.gov.cn/xxgk/fgzc/cyzc_82324/P02021092242
3257168383.pdf.
80
Interview KZ-#40, Beijing, China, January 22, 2016; interview KZ-#39, Beijing, China, ­January
22, 2016; and interview KZ-#42, Beijing, China, January 25, 2016.
81
Zhang (2015, p. 12). Premier Zhu Rongji instructed the MFA, the Ministry of Foreign Eco-
nomics and Trade, and CASS to establish an expert group to evaluate the ASEAN-China FTZ.
Zhang was a member; see also Feng (2003).
82
Zhang (2015, p. 97).
83
He (2003).
84
Zhang (2015, p. 113).
85
Zhang and Peng (2002).
86
Zhang (2015, p. 97).
64 Coercion in the South China Sea

the EU.87 To improve Sino-ASEAN economic relations, China refrained from

coercion, as noted in interviews and internal 2002 SOA reports.88
China’s economic cost, generated due to the FTZ, gradually reduced, with
China believing that ASEAN depends more on it than vice versa. For exam-
ple, the 2009 NISCSS report noted that as a result of the global financial cri-
sis, ASEAN countries would need China’s markets for an extended period.89
Because the Chinese economy was in a better shape than advanced economies,
China believed that it could stand firm regarding coercion.90 The Chinese gov-
ernment was also beginning to initiate the transition from an export-oriented
to a consumption-oriented economy after 2007, reducing the importance of
the China-ASEAN FTZ.91 Furthermore, by April 2009, China had completed
negotiations with ASEAN regarding all aspects of the FTZ.92
In a way, the China-ASEAN FTZ set a crucial and positive precedent for
China to establish FTZs or Free Trade Agreements (FTAs) with other coun-
tries and regions, giving China many “exit options” with which to pursue free
trade agreements. As of now, China maintains seventeen FTZs with its trade
and investment partners and is negotiating or implementing additional FTAs.93
China’s FTA partners include ASEAN, Singapore, Pakistan, New Zealand,
Chile, Peru, Costa Rica, Iceland, Switzerland, the Maldives, Mauritius, Georgia,
Korea, Australia, Cambodia, Hong Kong, and Macao. In addition, China
and fourteen other countries signed the Regional Comprehensive Economic
Partnership in November 2020, with China announcing the ratification of the
agreement in early 2021. In summary, the economic cost of coercion was low
in the 1990s, high from roughly 2000 to 2006, and low from 2007 to now.

3.2.3 Geopolitical Backlash Cost

The other cost of coercion, in addition to economic cost, is geopolitical back-
lash cost. Turning first to official Chinese and US documents, including the
MFA’s annual China’s Foreign Affairs and the US National Security Strategy,

87
Ministry of Foreign Affairs of Japan, “The Japan-ASEAN Plan of Action,” 2003, www.mofa​
.go.jp/region/asia-paci/asean/year2003/summit/action.pdf; Tong (2002, p. 25).
88
Interview, KZ-#59, Wuhan, China, April 18, 2016; interview KZ-#64, Beijing, China, April 27,
2016; and CIMA (2002, p. 144).
89
NISCSS, 2008nian nanhai diqu xingshi pinggu baogao, p. 51.
90
Interview KZ-#19, Guangzhou, China, December 4, 2015; interview KZ-#35, Beijing, China,
January 18, 2016.
91
China’s State Council, “China’s Government Work Report 2008,” Beijing, March 5, 2008,
www.gov.cn/premier/2009-03/16/content_1260198.htm; Hu (2016c, p. 335); and China’s
State Council, “China’s Government Work Report 2011,” Beijing, March 5, 2011, www.gov​
.cn/2011lh/content_1825233.htm.​
92
Zhang (2009, p. 222).
93
Data in this paragraph come from China’s official Ministry of Commerce website, “China FTA
Network,” updated May 2022, http://fta.mofcom.gov.cn/enarticle/enrelease/202101/44181_1​
.html.
3.2 China’s Coercion in the South China Sea: Temporal Trend 65

geopolitical backlash cost was low in the 1990s but high in the post-2000
period. As noted in the author’s previous research, MFA assessments in the
1990s maintained that the United States and Russia had decreased their pres-
ence in Southeast Asia.94 For example, the 1993 issue of China’s Foreign
Affairs Overview noted that the United States had withdrawn its forces from
the Subic naval base in the Philippines.95 Official Chinese national defense
white papers made similar threat assessments.96 This position was corrobo-
rated by the US National Security Strategy, which treated Europe as its vital
interest until 2000.97
Unlike in the 1990s, geopolitical backlash has become a serious con-
cern for China since the 2000s. Official Chinese threat assessments in the
post-2000 period expressed worry that the United States had come back to
Southeast Asia. The 2001 issue of China’s Foreign Affairs stressed that the
United States had reinstated joint military exercises with the Philippines,
and its Secretary of Defense had visited Vietnam for the first time since the
Vietnam War.98 The 2002 issue of China’s Foreign Affairs stated that after
the terrorist attacks of 9/11, the United States had sought greater coun-
terterrorism cooperation with ASEAN countries, given rampant terror-
ism in Southeast Asia.99 An internally circulated 2004 document on great
power issues, classified as “secret,” from the Central International Liaison
Department of the Chinese Communist Party declared that the United States
had begun to establish counterterrorism battlegrounds in Southeast Asia.100
Finally, each of the 2007–2014 issues of China’s Foreign Affairs also cited
US efforts to strengthen relations with ASEAN. China’s official defense white
papers made similar observations.101 The China Institute of International
Studies (CIIS) 2020/2021 Strategic and Security Review continued to view
risks of US involvement as high, similar to the CICIR 2020/2021 Strategic
and Security Review.102 China noted, in particular, then-US Secretary Mike
Pompeo’s February 2019 statement regarding the United States honoring its
defense commitment to the Philippines.103

94
See Zhang (2019b).
95
Ibid.
96
Ibid.
97
Ibid.
98
Diplomatic history editorial office of the MFA (2001, pp. 449–454).
99
Diplomatic history editorial office of the MFA (2002).
100
Qi Ju [Seventh Bureau] of the CCP Central International Liaison Department (2004, p. 297).
101
China’s Ministry of Defense, White Paper on China’s National Defense in 2008, www.mod​
.gov.cn/regulatory/2011-01/06/content_4617809.htm; White Paper on China’s National
Defense in 2010; White Paper on China’s National Defense in 2013, www.mod.gov.cn/­
regulatory/2013-04/16/content_4617811_2.htm; and White Paper on China’s National
Defense in 2015, www.mod.gov.cn/regulatory/2015-05/26/content_4617812.htm.
102
CIIS (2021, p. 375); CICIR (2020).
103
NISCSS, 2019nian nanhai dashiji.
66 Coercion in the South China Sea

Shifts in geopolitical costs also manifest themselves in internal reports and

interviews with government policy analysts.104 Several interviewees explicitly
indicated that Chinese military coercion in the South China Sea during the
mid-1990s was related to the US withdrawal from Subic Bay, which cre-
ated a “geopolitical power vacuum” that China was eager to fill.105 CICIR
noted, however, that the United States began seeking to develop alliance or
quasi-alliance relations with ASEAN countries after 2000.106 Similar assess-
ments were made by CASS, the Academy of Military Science, and the CIIS.107
An internal 2011 CASS report indicated that the United States viewed the
role of ASEAN in the Asia-Pacific as critical.108 To summarize, the geopoliti-
cal backlash cost of coercion was low in the 1990s but high in the post-2000
period.

3.2.4 Result: Temporal Variation in Chinese Coercion

and Choices of Coercive Tools
In the 1990s, the need to establish a reputation for resolve was high and both
geopolitical backlash and economic costs to use coercion in the South China
Sea were low. China thus used coercion, some of which was militarized. For
example, China used the Navy to expel PetroVietnam’s ships conducting
oil-drilling operations in July 1994, as confirmed by one former PLA Navy
official who commanded a contingent in the South China Sea.109
In the 2000–2006 period, while the need to establish a reputation for resolve
was low and economic costs were high, China refrained from coercion. In the
post-2007 period, the need to establish a reputation for resolve was high and
economic cost was low, and China used coercion. However, due to high geopo-
litical backlash cost, China used nonmilitarized coercive tools. The PLA stated
that it was not “convenient” for the Navy to carry out “rights patrol” (haijun
bubian chumian) and supported using maritime surveillance ships instead.110
Even with the most recent reform in March 2018, which put the Chinese Coast
Guard under the People’s Armed Police, the Chinese Coast Guard, like the rest

104
Sun, “Buzhan erzheng de heping zhanlue yu heping jiejue nansha zhengduan,” p. 280.
105
Interview KZ-#16, Guangzhou, China, November 30, 2015; interview KZ-#25, Nanjing,
China, December 30, 2015; interview KZ-#17, Guangzhou, China, December 1, 2015; and
interview KZ-#19, Guangzhou, China, December 4, 2015.
106
CICIR (2002, p. 27). Nina Silove’s article and my research on U.S.-ASEAN presidential meet-
ings also indicate this trend, see Silove (2016); Zhang (2019a).
107
CASS (2003, pp. 102–104); China’s Academy of Military Science (AMS) (2004, pp. 12–22,
168); and CIIS (2006, pp. 16, 28).
108
Zhang and Zhong, “2010nian zhongguo zhoubian anquan xingshi yu zhongguo duice,” pp. 1, 4.
109
See Julian Brutus, “Prospects of Oil Make Spratlys Hot Property; Storm Brews Around the
Islands,” South China Morning Post, July 26, 1994, p. 7; interview KZ-#26, Nanjing, China,
December 30, 2015.
110
Lu (2016, p. 145).
3.2 China’s Coercion in the South China Sea: Temporal Trend 67

of the Armed Police, is not part of the Chinese PLA.111 Chinese analysts and
retired military officials also indicate that China’s Coast Guard ships remain
law enforcement tools and are nonmilitarized.112 In short, the Chinese Coast
Guard remains a gray-zone coercive tool.
Despite the need to establish an external reputation for resolve, China
rarely chooses military coercion because it is cost-conscious, which is partic-
ularly the case in the post-2007 period. For example, in internal conferences,
MFA official Yi Xianliang stressed that China put its Coast Guard ships in
the front line as opposed to naval vessels because “China wanted to prevent
an escalation that would be too costly.”113 Interviewees added that military
coercion was too costly for China to use because China valued Sino-ASEAN
relations.114 Chinese government policy analysts believed it was fine to use
coercive measures “with rooms left for maneuver” (you huixuan yudi), but
militarization would escalate the disputes and push ASEAN countries toward
the United States.115
More critically, the United States was an important factor in limiting
China’s choices of coercive tools. In internal conferences and internal publica-
tions, Chinese government policy analysts stressed that China needed to avoid
direct confrontation with the United States in the South China Sea, fearing US
military containment.116 China wanted to avoid being seen as implementing
“gunboat diplomacy” and reduce the likelihood of the United States getting
involved in the South China Sea disputes.117 One former PLA personnel was
particularly concerned that if China used military coercion, the US Navy might
be directly involved, admitting that the United States was still the “no. 1.”118
In short, China believed that military means were too costly to use in South
China Sea disputes, and peace remained the most important priority.119 The
logic is therefore that China can use coercion, but on condition that it does not
escalate to military coercion, which might invoke US alliance treaties. China is
exploiting the loopholes and ambiguities in US alliances.
Since China’s current focus is peaceful development, it needed to reduce
costs and prevent crisis escalation.120 Unless it was absolutely necessary (budao

111
See “Shenhua danghe guojia jigou gaige fang’an [The Plan Regarding Deepening the Reform
on the Party and State Apparatus],” March 31, 2018, Xinhua News, www.xinhuanet.com/
politics/2018-03/21/c_1122570517_6.htm.
112
Interview, Washington, D.C., August 27, 2019.
113
Interview KZ-#24, Nanjing, China, December 29, 2015.
114
Interview KZ-#12, Beijing, China, October 21, 2015.
115
Xue and Hu, “Shendu jiexi zhongguo de haiyang qiangguo zhilu”; interview KZ-#85, Guang-
zhou, China, May 23, 2016; interview KZ-#92, Xiamen, China, June 13, 2016; interview
KZ-#106, Washington, D.C., USA, September 22, 2016.
116
Liu, “New Moves in U.S. South China Sea Policy,” p. 242; Wu (2005, p. 189).
117
Interview KZ-#64, Beijing, China, April 27, 2016.
118
Interview KZ-#84, Guangzhou, China, May 21, 2016.
119
Interview KZ-#4, Beijing, China, September 15, 2015.
120
Interview KZ-#90, Guangzhou, China, May 25, 2016.
68 Coercion in the South China Sea

wanbu deyi), China would not use the military.121 Even the PLA’s official
stance favored the use of maritime surveillance ships as opposed to military
coercion during the Scarborough standoff in 2012, because “escalation would
cost the peaceful development of the Asia-Pacific.”122
Therefore, due to concerns about geopolitical backlash, China tends to
use nonmilitarized forms of coercion to prevent escalation.123 China is a
cost-conscious coercer, “paying the least price to gain the greatest interests.”124
Government policy analysts summarized China’s behavior as “strong prefer-
ences for risk aversion.”125 To quote one former diplomat, China’s foreign
policy behavior focuses on cost estimation: “China seeks the least loss and
demands zero failure” (buqiu yougong, danqiu wuguo, sunshi zuixiao).126
Furthermore, the use of white-hull ships – maritime surveillance and fishery
administrative ships – makes China seem less violent and forceful.127

3.3 Selective Targeting: A Cross-national

Case Study of Coercion Toward the
Philippines, Vietnam, and Malaysia
Not only is there temporal variation regarding China’s coercion, as examined
above, but there is also cross-national variation. China uses coercion on Vietnam,
the Philippines, and Malaysia. This is understandable, given that Brunei claims
one land feature in the Spratlys but does not occupy it and China and Indonesia
only have maritime jurisdictional disputes over the Natuna Islands. Brunei and
Indonesia do not challenge China’s claims of sovereignty and resources in the
South China Sea as much as Vietnam, the Philippines, and Malaysia.
China, however, is selective regarding these three targets. Of the thirty-three
times that China used coercion in the South China Sea from 1990 to 2020, only
five were against Malaysia, and the magnitude of these was mild. Moreover,
Chinese coercion toward the Philippines tends to be of greater magnitude than
coercion against Vietnam. Thus, China prefers to coerce the Philippines and
Vietnam rather than Malaysia,128 and it coerces the Philippines the most harshly.

121
Ibid.
122
Wang Xinjun, “Zhongguo haijian weiquan kezhi erfei ruanruo [China Used Maritime Surveil-
lance Ships due to Restraint Instead of Weakness],” Zhonghua Wang, April 17, 2012, www​
.china.com.cn/news/txt/2012-04/17/content_25167908.htm, accessed May 1, 2018.
123
An (2015, p. 166).
124
Lu (2016, p. 154).
125
Zhou Fangyin, “Zhongguo de shijie zhixu yu guoji zeren [China’s View on World Order and
International Responsibility],” in Zhang (2011, p. 51); interview KZ-#6, Beijing, China, Sep-
tember 28, 2015.
126
Interview KZ-#77, Shanghai, China, May 12, 2016.
127
Interview KZ-#84, Guangzhou, China, May 21, 2016; interview KZ-#91, Beijing, China, June
7, 2016.
128
Peter Kreuzer has similar observations, see Kreuzer (2016, p. 256).
3.3 Selective Targeting 69

One might wonder if this selectivity has to do with Vietnam having the
most extensive claims in the South China Sea. Vietnam controls 29 land fea-
tures in the Spratlys, the Philippines nine, and Malaysia five.129 This suggests
that one would expect China to use the most drastic coercion on Vietnam.
Furthermore, the Philippines and Malaysia do not control drastically different
numbers of land features, suggesting that China would coerce the Philippines
as much as Malaysia. Finally, in China’s view, Malaysia reaps the most eco-
nomic benefit by drilling oil and gas in the South China Sea,130 and China views
oil and gas resources as part of its “quasi-sovereign” rights. China believes
that Malaysia’s oil and gas blocks have encroached into China’s Nine-Dash
Line by 205,000 square kilometers, Vietnam’s by 22,000, and the Philippines’
by 93,000.131 One figure from an internal report that maps out other claim-
ants’ oil and gas fields in and outside of China’s Nine-Dash Line also sug-
gests that Malaysia has the most oil fields from within China’s Nine-Dash
Line.132 With seventy-three oil fields inside China’s Nine-Dash Line, Malaysia
clearly dwarfs Vietnam (eleven) and the Philippines (it has only one, in Reed
Bank, which has been put on a halt after Chinese coercion).133 According to
data gathered by Chinese scholars in 2005, Malaysia’s oil production was
750,000 barrels per day, Vietnam’s was 356,000 barrels, and the Philippines’
a mere 9,469.134 During an internal conference, a Chinese government analyst
admitted that despite having oil blocks carved out within the Nine-Dash Line,
Vietnamese’s actual oil and gas production within the Nine-Dash Line was
quite meager.135 The same thing can be said about the Philippines. In fact, the
Philippines rarely struck deals with foreign oil companies or engaged in actual
oil exploration activities.136 Nevertheless, China rarely coerced Malaysia, but
it did coerce the Philippines the one time it conducted exploration. In short,
China prefers to coerce the Philippines and Vietnam rather than Malaysia,
even though the three countries are comparable. The following passages
adopt a most-similar case research design and apply the cost-balancing theory
to explain these trends.

129
Guo (2007, p. 81).
130
Jiang (2015, p. 136).
131
Li Mingjie and Qiu Jun, “Zhoubian guojia zai nanhai de shiyou kaifa gaishu [Overview of
Other States’ Oil Development in the South China Sea],” in Gao and Zhang (2007, p. 253).
132
Data come from an internally circulated report conducted by the Geology Department at
China’s Academy of Sciences. The project leader is Wang Ying from Nanjing University. The
title of this March 2015 report is “Resources and Maritime Rights in the South China Sea.” A
copy is available in the library of NISCSS in Haikou, China. This figure appears on page 195
of the report.
133
Ibid., p. 195.
134
Qtd. In Liu (2009, p. 438).
135
Internal Conference #4, Haikou, China, April 14, 2016. For cross-check, another scholar also
agrees. Interview KZ-#90, Guangzhou, China, May 25, 2016.
136
See the online appendix.
70 Coercion in the South China Sea

3.3.1 Why China Coerced Some Claimants More Than Others

The Philippines gives China the greatest challenges in establishing its reputa-
tion for resolve, Vietnam stands in the middle, and Malaysia generates the least
pressure, as shown in Figure 3.4.
Figure 3.4 is a Factiva search of major English-language Malaysian,
Vietnamese, and Philippine newspapers. Malaysian newspapers include the
New Straits Times, the Sun, and the Star, available starting in 1994. Vietnamese
newspapers include the Vietnam News Agency Bulletin, the Vietnam News
Brief Service, and the Vietnam News Summary. Unfortunately, these news-
papers were not available until 1999, making it impossible to calculate the
frequency of Vietnamese media reports on the South China Sea before 1999.
Philippine newspapers include the Philippine Daily Inquirer, the Manila Times,
and the Philippine Star, available starting in 2004. Reports mention either
“South China Sea” or “Spratlys” disputes. I read every report to exclude irrel-
evant ones, such as typhoon reports, positive developments in the South China
Sea, or reports of Chinese coercion so that I am not capturing the dependent
variable itself. Despite the incomplete data, Philippine and Vietnamese reports
on the South China Sea were much greater in frequency in the post-2007 period
when compared to their Malaysian counterparts. Philippine and Vietnamese
media reports especially picked up after 2007. In contrast, throughout the
1990–2016 period, Malaysian media reports fell well below 100 on an annual
basis, even in 2019 and 2020, when China and Malaysia had face-offs over
Malaysian oil and gas exploration in the South China Sea.137 In this sense, the
Philippines and Vietnam placed more pressure on China to establish its reputa-
tion for resolve because of media exposure, especially in the post-2007 period.
Speech evidence also conforms to objective measures. Chinese govern-
ment policy analysts pointed out that the Philippines has been “the loudest
and the noisiest” (naode bijiao da, diaozi gao), contrasting it with Malaysia,
which “does not go to extremes.”138 For example, government official Zhang
Haiwen stated that the Philippines and Vietnam frequently used the interna-
tional media to make the South China Sea disputes a hot issue, making espe-
cially salient public announcements prior to their cooperation with foreign
oil and gas companies.139 Malaysia has also built infrastructure on land fea-
tures it controls, but Malaysia does not “make noises” or sensationalize its

137
Factiva search, using “South China Sea” or “Spratly” as the keyword, of New Strait Times, the
Sun, and the Malaysian National News Agency “Bernama.”
138
Interview KZ-#1, Beijing, China, August 19, 2015; interview KZ-#8, Beijing, China, October
6, 2015; interview KZ-#9, Beijing, China, October 9, 2015; interview KZ-#11, Beijing, China,
October 14, 2015; interview KZ-#41, Beijing, China, January 22, 2016; interview KZ-#54,
Haikou, China, April 8, 2016; interview KZ-#57, Haikou, China, April 14, 2016; interview
KZ-#80, Shanghai, China, May 13, 2016; interview KZ-#88, Guangzhou, China, May 25,
2016; and interview KZ-#106, Washington, D.C., USA, September 22, 2016.
139
Zhang (2012, p. 15).
 Figure 3.4 Factiva search of English-language reports on the South China Sea from Malaysian, Vietnamese, and Philippine
­newspapers (1990–2016)
71
72 Coercion in the South China Sea

disputes with China (bu chaozuo), which reduces demonstration effects, or

the likelihood that other states might follow suit.140 From China’s perspective,
Malaysia is a country that “makes money silently” (mensheng fa dacai), reap-
ing oil benefits but not “internationalizing” its disputes with China, calling
for bilateral negotiations instead.141 By contrast, according to several senior
former Chinese diplomats, Vietnam and especially the Philippines are much
more vocal, publicizing oil contracts and making it seem that the situation in
the South China Sea is tense. If China does not respond to them, it will show
weakness (shiruo) to the outside world and indicate that China has given up its
claims.142 Government policy analysts are highly concerned that other states
might imitate the Philippines’ efforts to sensationalize and “internationalize”
the disputes if China does not use coercion.143 They fear that the publicity the
Philippines generates might reduce China’s reputation for resolve in the eyes
of other claimants. China thus coerces the Philippines the most to warn other
states, killing the chicken to scare the monkey.144
Moreover, despite signing new oil contracts in the 2000s, most of Malaysia’s
contracts were signed in the 1970s and 1980s, and those oil fields have been
put into production. The deals struck by Vietnam and the Philippines, by con-
trast, were mostly signed in the post-1990s period.145 China fears that if it
cannot use coercion against these newly signed and quite publicized oil and gas
deals, there will be more deals and unilateral oil and gas development in the
future, and thus it uses coercion to warn against the signing of new deals.146 It
is the contracts and their potential that China fears most.
Turning next to geopolitical backlash cost, China has dared not coerce all
South China Sea claimants because of high geopolitical costs since the 2000s.
Chinese scholars, government policy analysts, and current SOA officials all
emphasize that China should be clear about with whom to unite, whom to
strike against, whom to isolate, and whom to win over to avoid creating too

140
Interview KZ-#16, Guangzhou, China, November 30, 2015; interview KZ-#103, Philadelphia,
USA, September 2, 2016.
141
Interview KZ-#27, Nanjing, China, December 31, 2015; interview KZ-#30, Haikou, China,
January 6, 2016; interview KZ-#86, Guangzhou, China, May 23, 2016; interview KZ-#92,
Xiamen, China, June 13, 2016; Guo (2007, p. 84); interview KZ-#6, Beijing, China, Septem-
ber 28, 2015; and interview KZ-#120, Beijing, China, March 29, 2018.
142
Interview KZ-#90, Guangzhou, China, May 25, 2016; interview KZ-#120, Beijing, China,
March 29, 2018.
143
Interview KZ-#20, Beijing, China, December 9, 2015; interview KZ-#30, Haikou, China,
­January 6, 2016; interview KZ-#32, Haikou, China, January 7, 2016; interview KZ-#34,
Haikou, China, January 8, 2016; and interview KZ-#84, Guangzhou, China, May 21, 2016.
144
Interview KZ-#35, Beijing, China, January 18, 2016; interview, Beijing, China, January 8,
2015.
145
Interview KZ-#92, Xiamen, China, June 13, 2016; interview KZ-#103, Philadelphia, USA,
September 2, 2016.
146
Interview KZ-#92, Xiamen, China, June 13, 2016; interview KZ-#57, Haikou, China, April
14, 2016.
3.3 Selective Targeting 73

many enemies.147 China has a strategy of “divide and conquer” and strikes
a balance between using coercion and inducement, which one government
policy analyst terms as intentional selectivity (youyishi de qubie duidai).148
China thus wanted to strengthen the Sino-Malaysian relationship, making it
a role model of friendship.149 Simply put, China wants “friends” in Southeast
Asia, and Malaysia has this potential.150 Malaysia can be a wedge that China
places into ASEAN.151 Even in the 1990s, when the geopolitical backlash cost
was low, China’s logic of differentiation was evident. In a 1996 internal pub-
lication of CASS, Shang Guozhen stated that China should create a wedge and
tackle them one by one (gege jipo, zuohao fenhua gongzuo).152 Therefore, this
cross-national variation over the frequency of China’s coercion fits with the
cost-balancing theory’s prediction that when the geopolitical backlash cost is
high, China tends to be selective in its targets of coercion.
Turning finally to economic cost, although China is not solely dependent on
Malaysia for energy, government analysts note that China needs to import oil
and gas resources from Malaysia.153 In particular, since China became a net
importer of natural gas in 2006, its natural gas imports have grown over the
years.154 Malaysia is among the top four sources of China’s liquefied natural
gas (LNG) imports, one of the two kinds of natural gas China imports.155
China has recently strengthened its policy of importing Malaysian LNG, the
vast majority of which is pumped from wells in waters claimed by China as its
own, and China has become the third-largest customer of Malaysian LNG.156
In 2013, Malaysian LNG export to China constituted 14.76 percent of total
LNG import.157 In 2014 and 2015, Malaysian LNG export constituted 6.98

147
Lu (2016, p. 174); interview KZ-#4, Beijing, China, September 15, 2015; interview KZ-#5,
Beijing, China, September 16, 2015; public lecture by Ms. Xu Heyun, an official from the
SOA, Tsinghua University, Beijing, China, September 17, 2015; interview KZ-#17, Guang-
zhou, China, December 1, 2015; interview KZ-#86, Guangzhou, China, May 23, 2016; and
interview KZ-#106, Washington, D.C., USA, September 22, 2016.
148
Interview KZ-#19, Guangzhou, China, December 4, 2015; interview KZ-#106, Washington,
D.C., USA, September 22, 2016.
149
Interview KZ-#4, Beijing, China, September 15, 2015; interview KZ-#9, Beijing, China, Octo-
ber 9, 2015; and interview KZ-#12, Beijing, China, October 21, 2015.
150
Interview KZ-#16, Guangzhou, China, November 30, 2015; interview KZ-#61, Wuhan,
China, April 18, 2016.
151
Interview KZ-#85, Guangzhou, China, May 23, 2016.
152
Shang, “Luelun nansha wenti guojihua qushi ji women de duice,” in Asia-Pacific Office of
CASS (1996, p. 293).
153
Interview KZ-#7, Beijing, China, September 30, 2015; interview KZ-#17, Guangzhou, China,
December 1, 2015.
154
See Sinopec’s official company reports, www.sinopecgroup.com/group/xwzx/hgzc/20140627/
news_20140627_370638126180.shtml.
155
Ibid.
156
See Kreuzer (2016, p. 33).
157
See Sinopec’s official company reports, www.sinopecgroup.com/group/xwzx/hgzc/20140627/
news_20140627_370638126180.shtml, accessed September 1, 2016.
74 Coercion in the South China Sea

percent and 8.9 percent of China’s total natural gas imports, respectively.158
Therefore, China needs Malaysia as one of its suppliers for natural gas. The
economic cost of destabilizing this import source is quite high, making China
reluctant to use coercion on Malaysia. By contrast, China does not depend on
either Vietnam or the Philippines for supply or markets.
To summarize, China coerces the Philippines more frequently because it
challenges China’s reputation for resolve the most. China coerces Malaysia the
least because of the low the need to establish a reputation for resolve and high
geopolitical and economic costs. As such, China chose to coerce the “loudest”
(rangde zui huan de) to establish a model of what could come if one does not
behave.159 China’s selective coercion fits its “wedge strategy,” which exploits
interest differences among ASEAN states.160 Government policy analysts term
this behavior “beating one and luring others” (yida yila).161

3.4 The Sino-Philippine Mischief

Incident of 1994–1995
Now that we have examined the cross-national variation in China’s coercion
regarding the South China Sea, the next two case studies analyze within-country
temporal variations of China’s coercion regarding the South China Sea, focus-
ing on the Philippines, the country that China coerces most frequently. This
section turns to the Mischief Reef incident of 1994–1995.
In August 1994, Liu Guojun, the head of the South China Sea section of
the Chinese Fishery Administrative Bureau (FAB), had a secret meeting with
the Deputy Minister of Agriculture, who told Liu that the central leaders had
decided to establish shelters on the Mischief Reef to “make salient” (tuchu)
China’s presence in the South China Sea.162 Liu was told that this mission was
“politically critical” and that the South China Sea section of the FAB should
“unconditionally” implement it.163 The Philippines patrolled the Mischief Reef
in rotation, but China took the reef in between the patrols.164 China began
building shelters on the Mischief Reef in December 1994.

158
Data come from Chinese energy consulting firms SIA Energy and web-based consulting
firm China Energy Website: www.china5e.com/news/news-896193-1.html; www.usea.org/
sites/default/files/event-/2015-09-17%20PM%2012%20by%20Li%20Yao%20CN%20
%E2%98%85.pdf, accessed September 1, 2016.
159
Interview KZ-#9, Beijing, China, October 9, 2015; interview KZ-#85, Guangzhou, China,
May 23, 2016.
160
Lu (2016, pp. 155, 174); interview KZ-#92, Xiamen, China, June 13, 2016.
161
Interview KZ-#1, Beijing, China, August 19, 2015; interview KZ-#12, Beijing, China, October
21, 2015.
162
Yi et al. (2009, p. 36). One of the authors, Chen Zhenguo, was in the South China Sea section
of the Fishery Administrative Bureau (FAB) and was involved in the Mischief incident.
163
Ibid., p. 36.
164
Interview KZ-#26, Nanjing, China, December 30, 2015.
3.4 The Sino-Philippine Mischief Incident of 1994–1995 75

China Fishery Administrative Ship no. 31 was tasked with guarding the
reef and had the authority to block and warn unarmed foreign ships (lanzu,
jinggao).165 On January 17, 1995, the Chinese crew found that a Philippine
fishing boat had entered the Mischief Reef, and therefore they blocked and
boarded it.166 Fishery Administrative Ship no. 31 was later replaced by Ship
no. 34 for rotation. The incident escalated when the Philippines found Chinese
shelters on the reef, and the Philippine Navy planned to enter the waters sur-
rounding the Mischief Reef with new naval vessels and one civilian ship on
May 13, 1995.167 According to the Strait Times, Manila “invited 37 jour-
nalists, mostly from the foreign media.”168 The captain of China’s Fishery
Administrative Ship no. 34 laid out three plans: First, block Philippine ships
eight nautical miles from the reef; second, forcefully expel the ships if they
entered the reef; and third, block the entrance to the reef, even if it meant sink-
ing Ship no. 34 itself.169 The situation was quite tense, with Ship no. 34 only
0.75 nautical miles from the Philippine naval frigate and both sides charging
toward one another.170 Ship no. 34 eventually succeeded in blocking the
Philippine frigate and patrol boat at the entrance of the reef.171 Crewmembers
of Ship no. 34 had a seventy-minute standoff with the Philippines, hiding on
the deck and holding assault rifles.172 Foreign media reports corroborated this
account. As the Philippine naval ship neared the reef, “two Chinese vessels
began to cut across its bows.”173 The standoff ended with the Philippines back-
ing off and China taking control of the Mischief Reef.
The seizure of Mischief Reef constituted military coercion, and the Chinese
Navy was involved in the construction of shelters on it. According to one naval
officer who served in the South Sea fleet, China used the Navy’s “Type 991
Landing Ship” to transport construction materials.174 Furthermore, China used
gray-zone coercion on January 17 and May 13, 1995. During both, Chinese
Fishery Administrative Ships expelled Philippine vessels.
China’s immediate goal was to stop the Philippines from controlling the
Mischief Reef. As the reef lies in the eastern part of the Spratlys, the Chinese
viewed it as a good location for controlling other land features in the South

165
Yi et al. (2009, p. 9).
166
Zhang (2013, p. 58).
167
Yi et al. (2009, p. 71).
168
Nirmal Ghosh, “Menacing Moves by Chinese Vessels Raise Tension,” The Straits Times, May
17, 1995.
169
Ibid.
170
Tang (2013, p. 182). Tang is an official in China’s Ministry of Agriculture, which supervises
the FAB.
171
Ibid., p. 184.
172
Ibid., p. 76.
173
Nirmal Ghosh, “Standoff between Chinese, Philippine Ships in Spratlys,” The Straits Times,
May 17, 1995.
174
Interview KZ-#26, Nanjing, China, December 30, 2015.
76 Coercion in the South China Sea

China Sea.175 Chinese-occupied land features in the Spratlys were all in the west-
ern part, closer to Vietnam, but most of the Vietnamese and Philippine resupply
lines to land features in the Spratlys lie in the eastern part. China thus wanted
to seize one land feature in the eastern Spratlys to “cut off their supply lines.”176
The broader goal, however, was to enforce the “policy of restraint” on claim-
ants.177 In May 1994, Philippines’ Ramos government secretly approved an
application from a Philippine company, Alcorn Petroleum, to conduct a paper
assessment of the oil and gas potential in an area off the coast of Palawan.
China believed this was a violation of the Manila Declaration, a 1992 agree-
ment between the then-six members of ASEAN to “exercise restraint in their
actions in the South China Sea.”178 After news of the survey leaked, China
protested against what it saw as “an infringement of its sovereignty.”179 In
addition, the location of Mischief Reef was “almost exactly in the middle of
the area being surveyed by Alcorn Petroleum.”180 Therefore, China also used
coercion to force the Philippines to return to the policy of restraint.

3.4.1 Why China Used Coercion

The need to establish a reputation for resolve was high. The Philippines had
taken several land features in the Spratlys in the early 1990s and expanded
infrastructure on occupied land features. Moreover, from China’s perspec-
tive, the Philippines had increased the international salience of the South
China Sea disputes by involving nonclaimants – other ASEAN countries and
external powers – in the issue. For example, the Philippines first raised the
idea of a “Spratlys Declaration” during the ASEAN Ministerial Meeting in
Manila in July 1992, making diplomatic efforts to elevate discussions on
the Spratlys dispute to official ASEAN levels.181 China subsequently warned
ASEAN against “internationalizing” the issue.182 The Philippines further
proceeded to “internationalize” the conflict by invoking the UN in 1994,
thereby directly challenging China’s preference for bilateral management.183

175
Interview KZ-#55, Haikou, China, April 12, 2016; interview KZ-#57, Haikou, China, April
14, 2016; interview KZ-#84, Guangzhou, China, May 21, 2016; and interview KZ-#91, Bei-
jing, China, June 7, 2016.
176
Interview KZ-#92, Xiamen, China, June 13, 2016.
177
Interview KZ-#54, Haikou, China, April 8, 2016.
178
Hayton (2014, p. 84).
179
Ibid.
180
Ibid., p. 86.
181
“Manila in Two-pronged Bid to Reaffirm Spratlys Claim,” Straits Times, September 14, 1992;
“Spratlys Declaration ‘Gives Asean New Role in Dispute,’” The Straits Times (Singapore),
July 31, 1992, http://eresources.nlb.gov.sg/newspapers/digitised/issue/straitstimes19920731-1,
accessed May 9, 2018.
182
Al Labita, “Spratlys Seen Dominating Ramos’ Meeting in China,” The Business Times, April
26, 1993.
183
To cross-check with English-language secondary sources, see Kreuzer (2016, p. 19).
3.4 The Sino-Philippine Mischief Incident of 1994–1995 77

In response, one Chinese MFA spokesman reiterated that Beijing was opposed
to “internationalizing” the issue.184
Speech evidence from semiofficial sources also indicated that China viewed
the Philippines as being vocal and “internationalizing” the South China Sea dis-
pute. For example, an internal CASS report noted that the Philippine Foreign
Minister demanded US protection if there were attacks on disputed islands in
September 1992 and announced that ASEAN should generate international
attention to the South China Sea issue during the ASEAN Foreign Ministerial
Meeting in July 1993.185 Writing in July 1992, Xiong Changyi noted Philippine
President Ramos’ support for convening international conferences to resolve
the disputes.186 In August 1993, President Ramos called on the United States,
Japan, and Australia to participate in an international symposium on the South
China Sea disputes, which Chinese government analysts resented as a salient
tactic to “internationalize” the dispute.187
The immediate trigger for Chinese coercion was the approval for Alcorn
Petroleum to assess the oil and gas potential in an area close to the Mischief
Reef. As noted in an internal publication by Zhang Liangfu, China learned
this news from AFP on June 13, 1994, and it made the final decision to estab-
lish infrastructure on the Mischief Reef in August.188 Furthermore, once the
Philippines found out about Chinese infrastructure on the reef, its Ministry
of National Defense showed pictures of Chinese shelters to foreign media
while making Chinese actions a focal point in its domestic news.189 In March
1995, the Philippines subsequently demolished the markers and structures that
China placed on land features in the Spratlys, which was reported extensively
by Singaporean and Australian newspapers.190 Furthermore, according to

184
“China Opposes Referring Spratlys Dispute to UN,” Agence France-Presse, September 11, 1994.
185
Cao Yunhua, “Nanhai zhongguo fengyu [Situation in the South China Sea],” in Asia-Pacific
Office of CASS (1996, pp. 46–47). Cao’s article was written in 1995, but given that the events
he described end in February 1995, it is quite plausible that this article was written well before
the May 13, 1995 standoff.
186
Xiang Changyi, “Feilvbin zai nansha qundao shangde lichang [Philippine Stance on the Spratly
Issue],” in ibid., p. 51.
187
Zhang Liangfu, “Lici chuli nanzhongguo hai qianzaichongtu feizhengshi taolunhui shup-
ing [The annual Workshop on Managing Potential Conflicts in the South China Sea],” in
Asia-Pacific Office of CASS ibid., p. 108. This was written before the May 13, 1995 standoff.
188
Zhang (1996, p. 259); cross-checked by report by “World Wire: More Drillers Enter Sprat-
lys,” Wall Street Journal, June 15, 1994.
189
South China Sea bureau of the SOA (2010). For foreign reports, see William Branigin, “China
Takes Over Philippine-Claimed Area of Disputed Island Group,” The Washington Post, Feb-
ruary 11, 1995, p. A18; Philip Shenon, “Manila Sees China Threat on Coral Reef,” The New
York Times, February 19, 1995; see also, David Jenkins, “Remote Islands a Flashpoint for
Asia,” Sydney Morning Herald, March 25, 1995; Raymond Whitaker, “Dragon Flexes Its
Muscles in Islands Dispute,” The Independent, March 19, 1995; and James Pringle, “Protest
to China by Manila,” The Times, February 16, 1995.
190
“Spratly Islands: China Likely to Continue Claiming Territory,” The Straits Times, March 25,
1995; Nirmal Ghosh, “No Co-operative Ventures in Spratlys Until Atmosphere Improves,”
78 Coercion in the South China Sea

Chinese officials in the South China Sea bureau of the SOA, the Philippines
invited foreign journalists to the Mischief Reef in May 1995 to “attract inter-
national attention.”191
Remarks by China’s MFA spokesperson Shen Guofang a few days after the
May 13 standoff shed light on China’s rationale. In response to the standoff,
Shen accused the Philippines of breaching Chinese sovereignty by taking report-
ers to the reef, advising the Philippines “not to misinterpret China’s restraint,
but instead return to the correct path of negotiations to resolve this dispute,”
and warning that any similar actions could result in “serious consequences.”192
That is, China did not want the Philippines to treat Chinese restraint as a sign
of weakness and engage in further transgressions. Taking foreign journalists to
the reef was an especially serious issue to China, further publicizing the dispute
and potentially putting China’s resolve (or lack thereof) in the spotlight.
Interviews with former officials and government policy analysts also sug-
gested that if China did not take action, the Philippines might think that its
future encroachment would also go unnoticed, making it necessary for China
to establish its resolve in defending its territory.193 As one scholar stated, the
Philippines’ action of “internationalizing” the Mischief issue and taking land
features in the South China Sea touched China’s “bottom line,” and China
had to act.194 In short, China needed to demonstrate its resolve in defending its
national security interests in the South China Sea.
The economic cost for China was low. China’s focus in the 1990s was on
improving economic and trade relations with Western countries, especially
the United States, as will be shown in more detail in subsequent chapters. The
Philippines’ lack of importance to China manifested itself in Sino-Philippine
trade relations in the early to mid-1990s, which were not China’s priority.
The trade volume between China and the Philippines was the lowest among
China’s bilateral trade relations with other ASEAN countries.195 Sino-
Philippine trade constitutes only a minor portion of China’s foreign trade,
especially in the 1990s.196 One policy analyst stated that because China and
the Philippines had a minimal trade volume, coercing the Philippines would
have few impacts on China’s foreign trade.197 Instead, China was looking
for places to develop its fishery to fill a burgeoning need. According to one
former senior official in the SOA, one factor leading to China’s control of

The Straits Time, April 7, 1995; and Lindsay Murdoch, “Spratly Bombing Fuels Row,” The
Age, March 25, 1995.
191
South China Sea bureau of the SOA (2010, p. 434.)
192
Nirmal Ghosh, “Menacing Moves by Chinese Vessels Raise Tension.”
193
Interview KZ-#17, Guangzhou, China, December 1, 2015.
194
Interview KZ-#34, Haikou, China, January 8, 2016.
195
Liu and Zhou (1993, p. 128); Aileen S.P. Baviera, “Philippines-China Bilateral Relations,” in
Do (2007, p. 170).
196
See Zhang (2019b, p. 151).
197
Interview KZ-#55, Haikou, China, April 12, 2016.
3.4 The Sino-Philippine Mischief Incident of 1994–1995 79

the Mischief Reef was to turn it into a “distant-water fishing base,” which it
indeed became.198 In short, China did not need the Philippines as an import
source, export market, or source of FDI.
An important reason that China seized the Mischief Reef militarily was the
low geopolitical backlash cost. China viewed the Philippines as preoccupied
with domestic issues and believed that it took a “subordinate role” in regional
security affairs.199 Furthermore, the United States withdrew its troops from
the Subic Bay in the Philippines in 1992. The Chinese government had been
tracking US-Philippine basing negotiations and noticed this move immediately,
quoting the US Embassy in Manila in November 1992 that “the United States
will defend the Philippines, but will not support any specific demands [from the
Philippines].”200 The official chronology of then-Vice Chairman of the Central
Military Commission Liu Huaqing also corroborated the timing of the seizure.
As early as December 5, 1990, Liu had agreed with the suggestion that China
should control some reefs or banks in the Southern part of the Spratlys, but
it was not until late 1994 – after the complete US withdrawal from the Subic
Bay – that China officially decided to seize the Mischief Reef.201
Early 1995 internal CASS reports also noted that after the Cold War ended,
Russia was preoccupied with its internal affairs and the United States began
“strategic retrenchment” in Asia.202 Due to the end of the Cold War, the
importance of the Subic base to the United States decreased, as did the strate-
gic significance of the Philippines.203 Worse, the annual subsidy that the United
States had provided to the Philippines disappeared, and the Philippine Navy
and Air Force were unable to fill the funding gap left by the US departure.204
US statements confirm Chinese assessments. Despite the US-Philippine
Mutual Defense Treaty, US officials stated that the treaty would not apply to
the Spratlys and it “does not bind the United States to come to the rescue of the
Philippines in a case involving a third country.”205 In particular, on March 8,
1995, Commander-in-Chief of the US Pacific Command Admiral Richard Macke
emphasized that the goal is “not to confront China. The answer to China is to
work with them… to become partners with them.”206 Suggesting that China

198
Interview KZ-#88, Guangzhou, China, May 25, 2016; interview KZ-#92, Xiamen, China,
June 13, 2016.
199
Huang (1996).
200
Zhang (1996, p. 238).
201
Liu (2016, p. 904).
202
Wang Bo, “Nansha zhengduan zhongde chongtu yu feichongtu yinsun [Factors of Conflict and
Peace in the South China Sea Dispute],” in Asia-Pacific Office of CASS (1996, p. 88).
203
Zhou, “The Asia-Pacific Alliances of the United States and China’s Countermeasures.”
204
Hayton (2014, pp. 84–85); see also Li and Chen (2012, p. 348).
205
William Branigin, “China Takes Over Philippine Claimed Area of Disputed Island Group,”
The Washington Post, February 11, 1995; “U.S. Backs Philippines in Spratlys,” Japan Eco-
nomic Newswire, March 30, 1995.
206
Jayandra Menon, “China’s Blue-Water Fleet Not a Threat,” The Straits Times, March 8, 1995.
80 Coercion in the South China Sea

and the Philippines engage in talks, Admiral Macke added, “alliances and trea-
ties were not as important as dialogue in the Asia-Pacific region.”207 Indeed,
Filipino officials admitted that they could not invoke the treaty if they went to
war with China over the Spratlys, explaining that the Spratlys were “not part
of the Philippine territorial limits covered under the defense pact.”208 The US
aloofness reduced the geopolitical pressure that China faced. Sure enough, an
internal CASS report picked up this US statement and was convinced that the
US-Philippine Mutual Defense Treaty would not cover the Spratlys.209
Interviews with government policy analysts and former officials also con-
firmed that China read US withdrawal as a sign that the Philippines would not
gain US support, and many stressed that China, therefore, took the geopoliti-
cal vacuum “as an opportunity.”210 They believed that the United States paid
little attention to the South China Sea disputes and would not intervene in the
incident.211
China immediately responded to this geopolitical vacuum in 1992. As one
former naval officer involved in maritime patrol in the South China Sea in the
1990s recalled, the decision to occupy the Mischief Reef originated around
1992 and 1993, which was confirmed by another long-time watcher of Sino-
ASEAN relations.212 Although the central government secretly released the
official decision to establish sheltering infrastructure on the Mischief Reef to
the FAB in August 1994,213 it took a year or so to prepare.214 The Chinese
Navy first intended to take the Mischief Reef, and the FAB also lobbied for
more attention to the South China Sea, but these two organizations could do
nothing without gaining approval from the central government.215 The deci-
sion to take the Mischief Reef came from the center (the central government,
that is), and the SOA and the military only “followed orders from the center
unconditionally.”216 In short, US withdrawal and Philippine weakness reduced
China’s geopolitical backlash cost.

207
Ibid.
208
Martin Abbugao, “Updates with US Ambassador’s Appeal,” Agence France-Presse, February
10, 1995.
209
Li Geping, “Qianxi jinqi youguan guojia zai nansha zhengduan zhong de taidu [An analysis of
relevant countries and their attitudes in the Spratly disputes],” in Asia-Pacific Office of CASS
(1996, p. 168).
210
Interview KZ-#17, Guangzhou, China, December 1, 2015; interview KZ-#26, Nanjing, China,
December 30, 2015; interview KZ-#55, Haikou, China, April 12, 2016; interview KZ-#64,
Beijing, China, April 27, 2016; interview KZ-#69, Shanghai, China, May 5, 2016; interview
KZ-#103, Philadelphia, USA, September 2, 2016; and interview KZ-#106, Washington, D.C.,
USA, September 22, 2016.
211
Interview KZ-#106, Washington, D.C., USA, September 22, 2016.
212
Interview KZ-#26, Nanjing, China, December 30, 2015.
213
Yi et al. (2009, p. 34).
214
Interview KZ-#26, Nanjing, China, December 30, 2015. By center, I mean top Chinese leaders.
215
See ibid.; Yi et al. (2009).
216
Yi et al. (2009, p. 36).
3.5 Divergent Reactions 81

To summarize, the need to establish a reputation for resolve was high,

whereas geopolitical backlash and economic costs were low. China, there-
fore, decided to use measures including military coercion to take the Mischief
Reef. China’s coercion brought the Philippines back to bilateral negotiations:
“Beijing refused to discuss the issue at the official regional meetings that
President Ramos would have preferred, and Ramos had to agree to bilateral
discussions.”217 China and the Philippines signed an agreement on joint devel-
opment and shortly after, in August, agreed to resolve their disputes through
“friendly bilateral negotiations.”218

3.5 Divergent Reactions: The Sino-Philippine

Scarborough Incidents of 2001 and 2012
As seen in the discussion of the temporal trend of China’s coercion, China
utilized coercion in the 1990s, refrained in the early to mid-2000s, and started
using coercion again post-2007. This section, therefore, compares two cases in
2001 and 2012, respectively, and explains why China used coercion in 2012
but not in 2001 over the Scarborough Shoal, disputed between China and the
Philippines.
The Scarborough Shoal (Huangyandao) is in the Macclesfield Bank in the
South China Sea. On April 10, 2012, a Philippine naval ship tried to arrest
Chinese fishermen for illegally fishing around the disputed Scarborough
Shoal.219 In previous years, China had used diplomatic channels to secure the
release of such fishermen.220 April 10 marked the first time in the post-2000s
that China reacted with multiple coercive tools to take the shoal. As shown
earlier, despite the 2001 incident being almost identical to the 2012 incident,
China did not use or threaten coercion in 2001.
China used three forms of nonmilitarized coercion against the Philippines
in 2012. First, using gray-zone coercion, the head of the South China Sea
section of the SOA immediately ordered two maritime surveillance ships to
rescue the Chinese fishermen on April 10.221 A fishery administrative ship
arrived at the Scarborough Shoal on April 11, 2012.222 On May 2, China

217
Hayton (2014, p. 88).
218
Zhang (2013, p. 73).
219
Floyd Whaley, “Philippines and China in a Standoff at Sea,” New York Times, April 12, 2012,
https://archive.nytimes.com/query.nytimes.com/gst/fullpage-9C05E1D91431F931A25757
C0A9649D8B63.html; interview KZ-#34, Haikou, China, January 8, 2016; interview KZ-#84,
Guangzhou, China, May 21, 2016; and interview KZ-#91, Beijing, China, June 7, 2016.
220
Interview KZ-#106, Washington, D.C., USA, September 22, 2016.
221
Interview KZ-#92, Xiamen, China, June 13, 2016; Chinese Embassy in Manila, “Huangyandao
shiwen [10 Questions Regarding the Scarborough Shoal],” June 15, 2012, www.fmprc.gov.cn/
ce/ceph/chn/zgxw/t941671.htm; and Whaley, “Philippines and China in a Standoff at Sea.”
222
“Philippines, China ‘Set Aside’ Protests to Ease Tensions Over Sea Dispute,” BBC Monitoring
Asia Pacific, April 14, 2012.
82 Coercion in the South China Sea

dispatched four more maritime surveillance ships.223 By May 9, China had

blocked Philippine fishermen from entering the shoal, forcing them to leave,
followed by starting and continuing regularized patrols around the shoal.224
The Philippines eventually withdrew, but China did not.225 Second, China
imposed economic sanctions beginning in early May 2012 by quarantining
Philippine fruits. Beginning on May 11, China blocked 1,500 containers of
Philippine bananas entering Chinese ports for “pest infestation.”226 Philippine
media estimated that the ban, which lasted for about a month, led to the loss
of 1 billion Philippine pesos (about $23 million).227 Third, China imposed
diplomatic sanctions on the Philippines, terminating all senior-level bilateral
visits. From 2013 to 2015, no formal meetings were held between the foreign
ministers of the states.228
China’s direct goal was to stop the Philippines from controlling the
Scarborough Shoal, with the Chinese MFA repeatedly demanding that
Philippine vessels withdraw.229 Furthermore, it demanded that the Philippines
return to bilateral talks and accept Chinese sovereignty claims.230 The broader
goal was to stop other states from viewing China as weak and engaging in

223
Carnegie Endowment, “Nanzhongguohai dashiji [A Chronology of South China Sea Events],”
September 4, 2012, http://carnegieendowment.org/files/SCS_Timeline_since_2006.pdf.
224
CIMA (2014, p. 347).
225
“U.S. Strategists Face Dilemma over Beijing Claim in South China Sea,” Financial Times, July
9, 2014, www.ft.com/content/b2176dea-0732-11e4-81c6-00144feab7de; Rodel Rodis, “Did
Trillanes Commit Treason in the Loss of Scarborough Shoal?” Inquirer, May 25, 2016, http://
globalnation.inquirer.net/139658/139658.
226
“Feilvbin xiangjiaoshang: 3yue yilai yizai zhongguo sunshi yue 10yi bisuo [Philippine Banana
Sellers Have Lost About 1 Billion Pesos in China Since March],” Qianjiang Wanbao [Qianji-
ang Evening News], May 14, 2012, http://news.ifeng.com/mainland/special/nanhaizhengduan/
content-3/detail_2012_05/14/14502214_0.shtml?_from_ralated.
227
“Feixiangjiao sunshi yida 1.5yi renminbi, nongye guanyuan fanghua qiuqing [The Philippine
Banana Loss has Reached 0.15 Billion RMB, Agricultural Officials Visited China for Forgive-
ness],” Renmin Wang [People’s Net], May 17, 2012, http://news.ifeng.com/mainland/special/
nanhaizhengduan/content-3/detail_2012_05/17/14608569_0.shtml?_from_ralated. People’s
Net is the internet complement of People’s Daily.
228
Interview KZ-#9, Beijing, China, October 9, 2015; interview KZ-#17, Guangzhou, China,
December 1, 2015. See also Ge Hongliang, “Nanhai diqu anquan xingshi [Security Situations
in the South China Sea Region],” in Ju (2015, p. 7).
229
MFA press conference, April 12, 2012, www.mfa.gov.cn/ce/ceee/chn/ztlm/zgwjbfyrth/
t922354.htm; MFA press conference, April 27, 2012, www.mfa.gov.cn/web/fyrbt_673021/
jzhsl_673025/t927033.shtml; MFA press conference, April 28, 2012, www.fmprc.gov.cn/web/
fyrbt_673021/dhdw_673027/t927488.shtml; MFA press conference, April 30, 2012, www​
.fmprc.gov.cn/web/fyrbt_673021/dhdw_673027/t927973.shtml; MFA press conference, May
11, 2012, www.mfa.gov.cn/ce/ceee/chn/ztlm/zgwjbfyrth/t930962.htm; and MFA press confer-
ence, May 30, 2012, www.fmprc.gov.cn/ce/ceae/chn/wjbfyrth/t936494.htm.
230
MFA press conference, April 27, 2012, www.mfa.gov.cn/web/fyrbt_673021/jzhsl_673025/
t927033.shtml; MFA press conference, April 30, 2012, www.fmprc.gov.cn/web/fyrbt_673021/
dhdw_673027/t927973.shtml; MFA press conference, May 11, 2012, www.mfa.gov.cn/ce/
ceee/chn/ztlm/zgwjbfyrth/t930962.htm; and MFA press conference, May 30, 2012, www​
.fmprc.gov.cn/ce/ceae/chn/wjbfyrth/t936494.htm.
3.5 Divergent Reactions 83

actions that threatened Chinese interests in the South China Sea.231 The
following passages use the most-similar case research design and apply the
cost-balancing theory to explain why China used coercion in 2012 but not in
2001 over the Scarborough Shoal.

3.5.1 Why China Used Coercion in 2012 but Not in 2001

China’s need to establish a reputation for resolve was high in the 2012 case.
The Philippines had been trying to increase the international salience and expo-
sure of South China Sea disputes, and Chinese policy analysts believed that the
Philippines had been vocal about the South China Sea.232 Immediately prior
to the 2012 incident, the Philippines had also increased the frequency of small
challenges in the South China Sea. In May 2011, the Philippine Navy removed
three markers that China had placed on reefs and banks in the Spratlys.233 In
June, it also announced plans to award offshore gas and oil drilling rights to
foreign companies in the Spratlys, with China asserting that two of the three
blocks lay within its Nine-Dash Line.234 In July, it announced plans to build a
loading ramp and upgrade a runway on Thitu Island.235
Additionally, the number of Philippine media reports on the South China
Sea witnessed a sharp increase in 2011, more than doubling the number in
2008.236 This media exposure increased pressure on China to establish resolve.
In addition, despite Beijing’s rejection of Manila’s request for UN arbitration,
Philippine President Aquino III told Reuters that his government was seeking
other options in September 2011.237 One alternative was the Philippines’ push
for a joint statement on the South China Sea during the ASEAN leaders’ meet-
ing in November 2011.238 In particular, the Philippines publicized the arrest
of the Chinese fishermen prior to China’s decision to take coercive action. The
Philippine Navy and Foreign Ministry released photos of the arrested Chinese

231
Interview KZ-#54, Haikou, China, April 8, 2016; interview KZ-#57, Haikou, China, April 14,
2016; and interview KZ-#69, Shanghai, China, May 5, 2016.
232
Zhang (2013, p. 109).
233
Barbara Mae Dacanay, “Navy and Coast Guard Remove Chinese Markers,” Gulf News, June
16, 2011.
234
Lindsay Murdoch, “Islands Off Agenda but Still Split ASEAN,” The Age, April 4, 2012;
Agence France-Presse, “Philippines to Ramp Up Oil Exploration,” April 26, 2011, https://m​
.vietnambreakingnews.com/2011/04/philippines-to-ramp-up-oil-exploration/.
235
Agence France-Presse, “Filipinos Fly Flag in South China Sea,” Times of Oman, July 23, 2011.
236
Data on the Philippines come from Factiva searches of the Philippine Daily Inquirer, the
Manila Times, and the Philippine Star. The wording of the searches includes “South China
Sea,” “West Philippine Sea,” and “Spratlys.”
237
“Interview, Philippines: S. China Sea Code Doesn’t Solve Sovereignty,” Reuters, September
16, 2011.
238
Manuel Mogato and Paul Eckert, “Clinton in Manila Amid ASEAN Row Over South China
Sea,” Reuters, November 15, 2011, www.reuters.com/article/us-asean-usa-southchinasea-idUS
TRE7AE0RW20111115.
84 Coercion in the South China Sea

fishermen with an armed Filipino naval officer standing behind them.239 Reuters
and AFP reprinted these photos, all before China responded.240 By contrast,
the Philippines’ actions were more demure and less frequent in 2001, and the
level of media exposure was much lower than in 2012, as shown earlier.
None of the above Philippine actions was enough to tilt the balance of power
in the South China Sea. Still, the Chinese government was unhappy. As early as
August 2, 2011, zhongsheng, a semiofficial government source, had noted that
Philippines’ infrastructure project on Flat Island would soon be completed.241
Zhongsheng continued that China’s principle of “shelving disputes for joint
development” did not mean that China would let the Philippines take this as
an opportunity to encroach upon China’s territory and that if the Philippines
had a serious strategic miscalculation, it would “pay the price.”242 Similarly,
another semiofficial government source – a January 2012 regional security
assessment of CASS – noted the abovementioned Philippine actions in 2011.243
On February 28, 2012, a Chinese MFA spokesperson warned that the
Philippines should not “take actions that further complicate and expand the
South China Sea disputes.”244 The following day, in response to the Philippines’
energy bidding in blocks in EEZs claimed by China, zhongsheng blamed the
Philippines for “instigating trouble” in the South China Sea.245 It stated that
the Philippines would be wrong to view China’s efforts to push for coopera-
tion among South China Sea claimants as “a sign of weakness.”246 Zhongsheng
further emphasized that “China was resolute in defending its sovereignty and
would take necessary measures.”247 During the standoff, China’s Deputy Foreign
Minister Fu Ying summoned Philippine diplomats on May 7, stating that the
Philippines had failed to realize its grave mistake in the past month and had

239
For example, “China-Philippines Dispute: Timeline,” Wall Street Journal, https://graphics.wsj​
.com/embeddable-carousel/?slug=Hague-china; Jim Gomez, “Philippine Warship in Standoff
with China Vessels,” Star Advertiser, April 10, 2012, www.staradvertiser.com/2012/04/10/
breaking-news/philippine-warship-in-standoff-with-china-vessels/.
240
Manuel Mogato, “Manila Summons China’s Envoy over South China Sea Standoff,” Reuters, April
10, 2012, www.reuters.com/article/us-philippines-china-sea/manila-summons-chinas-envoy-
over-south-china-sea-standoff-idUSBRE83A02G20120411.
241
Zhongsheng, “Yanzhong de zhanlue wupan [A Serious Strategic Miscalculation],” People’s
Daily, August 2, 2011, section 3, http://military.people.com.cn/GB/15305363.html.
242
Ibid.
243
Zhang and Zhong (2012, pp. 97–98).
244
MFA press conference, February 28, 2012, www.fmprc.gov.cn/web/fyrbt_673021/jzhsl_673025/
t909155.shtml; for similar Chinese accusations, see MFA press conference, March 29, 2012,
www.fmprc.gov.cn/web/fyrbt_673021/jzhsl_673025/t918673.shtml; and MFA press confer-
ence, March 22, 2012, www.fmprc.gov.cn/web/fyrbt_673021/jzhsl_673025/t916303.shtml.
245
Zhongsheng, “Feilvbn zai naihai wenti shang xuxuehui ziwo yueshu [The Philippines Should
Learn about Self-Restraint in the South China Sea Issue],” People’s Daily, February 29, 2012,
http://world.people.com.cn/GB/17248392.html.
246
Ibid.
247
Ibid.
3.5 Divergent Reactions 85

instead made matters worse. Fu urged the Philippines to withdraw its ships.248
She emphasized that the Philippines should not miscalculate the situation and
that China was prepared to act.249 Fu’s statement demonstrates that China did
not want the Philippines to think that it lacked resolve in this situation. On May
8, the People’s Daily underscored China’s position: “The Philippines thought
that China wanted to avoid trouble…. Yet the Philippines did not see things
clearly – China would not give in to issues of sovereignty, the Philippines should
not view China’s friendliness as weak and susceptible to bullying… China would
not mind creating a ‘Scarborough model’ to stop the opponent and to deter
any transgression.”250 This statement also appeared on the front page of the
overseas version of the People’s Daily, intended for an international audience.
On May 15, State Councilor Dai Bingguo, one of the highest-ranking figures in
Chinese foreign policy, reaffirmed that being modest did not mean that China
would stand being bullied by other countries, “especially small countries like
the Philippines.”251 Chinese officials’ statements before and during the 2012
Scarborough incident showed consistency and were not post hoc justifications.
By contrast, Deputy Chinese Foreign Minister Fu Ying recalled the 2001
Scarborough incident in her memoir, indicating that the Philippines’ actions in
the early 2000s differed from the post-2010 period. Having served as deputy
foreign minister in charge of managing the 2012 Scarborough Shoal incident
and previously as Chinese ambassador to the Philippines, Fu’s memoir is sig-
nificant in revealing China’s rationale. According to Fu, the Philippines gen-
erally took a cooperative stance regarding the South China Sea disputes and
engaged in diplomatic negotiations to reach consensus.252 From Fu’s perspec-
tive, the Philippines began to take drastic measures concerning the South China
Sea beginning in 2010 and continued to challenge China, which Fu viewed
as turning away from the cooperative approach the Philippines took in the
early 2000s.253 Fu accused the Philippines in the post-2010 period of doing
too much to challenge China, including arresting Chinese fishermen around the
Scarborough Shoal much more frequently than in the early 2000s.254 She deemed
the 2012 Scarborough Shoal as the final straw that broke the camel’s back.255

248
“Zhongguo jiu huangyandao zhize feilvbin kuoda shitai [China Accused the Philippines of
Escalating Tension in the Scarborough Shoal],” BBC News (Chinese), May 8, 2012, www​
.bbc.com/zhongwen/simp/chinese_news/2012/05/120508_china_philippines.
249
Ibid.
250
Qin Hong, “Miandui feilvbin, women you zugou shouduan [Faced with the Philippines, We
Have Adequate Means],” Overseas Edition of People’s Daily, May 8, 2012, http://cpc.people​
.com.cn/pinglun/GB/17831131.html.
251
“Dai Bingguo: Fei deng xiaoguo buneng qifu daguo [Dai Bingo Said that Small States Like
the Philippines Must not Bully Great Powers],” Nanyang Sin-Chew Lianhe Zaobao, May 16,
2012, www.zaobao.com.sg/wencui/politic/story20120516-178565.
252
Fu (2021, pp. 241–270).
253
Ibid.
254
Ibid.
255
Ibid.
86 Coercion in the South China Sea

Fu voiced concerns that she was afraid that if China did not take action, the
Philippines would have challenged it even further (decun jinchi).256 In par-
ticular, Fu noted that the Philippines liked to deal with the 2012 incident by
“speaking through the mic,” that is, using media channels as well as inviting
third-country personnel to enter the Scarborough Shoal.257 Such high media
salience was quite similar to the Philippines’ actions in the 1994–1995 Mischief
Reef incident, therefore increasing China’s need to establish resolve.
Interviews with government policy analysts, former government officials,
and scholars confirm China’s need to establish resolve in the 2012 case, but
not in the 2001 case. One former senior SOA official who was involved in
the Scarborough incident bluntly stated that China took measures in 2012
because the Philippines “had done too much in the past.”258 Another for-
mer official agreed that China was pressured to establish resolve to defend its
rights in this incident.259 One former diplomat explained that China thought
that if it withdrew, the Philippines would believe that China would compro-
mise yet again.260 Other government policy analysts noted that if China did
not take coercive measures, it would give a green light to the Philippines and
Vietnam, thereby encouraging more states to encroach on China’s sover-
eignty.261 A senior government policy analyst stressed that China needed to
“achieve a deterrent effect on surrounding countries,” termed explicitly by
another scholar as “establishing resolve” (li wei).262 Moreover, one former
government analyst even noted that China also had Japan in mind during the
Scarborough Shoal incident, since the Senkaku dispute between China and
Japan began to heat up roughly around the same time, which was corrobo-
rated by a Japanese diplomat.263 These interviewees, however, indicate that
the Philippines’ actions were not as frequent in the early 2000s as they were
in the post-2007s, indicating that the need to establish resolve was not as high
in 2001 as it was in 2012.
The economic cost of coercing the Philippines was low in 2012. China
was the Philippines’ third-largest trading partner in 2010.264 By 2011,

256
Ibid.
257
Ibid.
258
Interview KZ-#88, Guangzhou, China, May 25, 2016.
259
Interview KZ-#54, Haikou, China, April 8, 2016.
260
Interview KZ-#112, Beijing, China, December 27, 2016.
261
Interview KZ-#58, Haikou, China, April 14, 2016; interview KZ-#20, Beijing, China,
­December 9, 2015.
262
Interview KZ-#57, Haikou, China, April 14, 2016; interview KZ-#84, Guangzhou, China, May
21, 2016, respectively; interview KZ-#92, Xiamen, China, June 13, 2016; interview KZ-#64,
Beijing, China, April 27, 2016; and interview KZ-#6, Beijing, China, September 28, 2015.
263
Interview KZ-#10, Beijing, China, October 13, 2015; interview KZ-#148, Palo Alto, USA,
October 6, 2018.
264
Economic and Commercial Counselor’s Office of the Chinese Embassy in the Philippines,
“Zhongfei jingmao guanxi gaikuang [Overview of Sino-Philippine Relations],” January 26,
2010, http://ph.mofcom.gov.cn/article/zxhz/hzjj/201001/20100106762477.shtml.
3.5 Divergent Reactions 87

China had become the Philippines’ third-largest export destination.265 China

is the second-largest export destination for Filipino Banana Growers and
Exporters Association (PBGEA) member companies, constituting about
twenty-five percent of PBGEA annual exports. China is also the largest export
market for non-PBGEA member companies (i.e., independent growers and
cooperatives).266 By contrast, the Philippines was only China’s sixth-largest
trading partner among China’s bilateral trade with ASEAN countries.267 This
asymmetry gave China leverage.
Speech evidence concurs with objective measures of economic costs. Chinese
government officials and policy analysts had noted China’s economic impor-
tance to the Philippines long before the Scarborough incident.268 Bai Ming, an
official in China’s Ministry of Commerce, stated that Sino-Philippine trade was
asymmetrical, with bilateral trade constituting thirty percent of total Philippine
trade but only 0.89 percent for China.269 Bai emphasized that China “could
impose economic sanctions and isolate the Philippines” while strengthening
economic relations with other ASEAN countries.270 Former government offi-
cials also stated that using coercion would hurt the Philippines much more
than it would China, given the size of the Chinese economy and the greater
Philippine reliance on China.271
However, as shown earlier, China was trying to enter the WTO and nego-
tiate FTAs with ASEAN countries in the early 2000s, especially in 2000 and
2001. Therefore, the economic cost of coercing the Philippines over the 2001
incident would have been high, whereas the need to establish resolve was rela-
tively low. As such, China coerced the Philippines over the 2012 Scarborough
incident but not the 2001 incident.
The geopolitical backlash cost for China was high in the 2012 case, which
limited China’s choice of coercive tools. Concerned about a potential back-
lash, especially immediate escalation, China chose nonmilitarized coercive
tools.272 Chinese government policy analysts believed it was fine to use coercive

265
Data from the World Bank, https://wits.worldbank.org/CountryProfile/en/Country/PHL/Year/
2011/TradeFlow/EXPIMP/Partner/all.
266
Slides from Pilipino Banana Growers and Exporters Association, “Philippine Banana Exports
to China: Dealing with Sanitary and Phytosanitary Concerns,” June 11, 2015, http://appfi.ph/
images/2015/presentations/6_Pres_PBGEA_Philippine_Banana_Exports_to_China.pdf.
267
Economic and Commercial Counselor’s Office of the Chinese Embassy in the Philippines,
“Zhongfei jingmao guanxi gaikuang.”
268
He Shengda, “Dongmeng duihua guanxi de xianzhuang yu weilai [The Reality and Future of
Sino-ASEAN Relations],” in Zhang (2008, p. 92).
269
Chinese Ministry of Commerce report, “Fei suowei jingjizhicai zitaokuchi [The Philippines
Would be Asking for Trouble If It Sough Economic Sanctions],” May 14, 2012, http://­
chinawto.mofcom.gov.cn/article/e/s/201205/20120508122972.shtml.
270
Ibid.
271
Interview KZ-#54, Haikou, China, April 8, 2016; interview KZ-#57, Haikou, China, April 14,
2016; and interview KZ-#69, Shanghai, China, May 5, 2016.
272
Interview KZ-#12, Beijing, China, October 21, 2015.
88 Coercion in the South China Sea

measures, but militarization would escalate the disputes and push ASEAN
countries closer to the United States.273 Former Deputy Foreign Minister Fu
Ying also noted that she was concerned about the US-Philippine alliance and
the escalation risk arising from the standoff between China and the Philippines
inside the Scarborough Shoal.274
Indeed, the United States was the most critical factor in restraining China’s
choices of coercive tools. In internal conferences and internal publications,
Chinese government policy analysts stressed that China needed to avoid direct
confrontation with the United States in the South China Sea, fearing US mil-
itary containment.275 One former official in the PLA Navy was particularly
concerned that if China used military coercion, the US Navy might be directly
involved, admitting that the United States was still the “no. 1.”276 In short,
China believed that military means were too costly to use in South China Sea
disputes, and peace remained the priority.277
Semiofficial Chinese assessments prior to China using coercion in the
Scarborough incident indicated US unwillingness to use force to intervene
in territorial disputes in the South China Sea.278 Government policy analysts
and scholars emphasized that the United States would not start a “backlash”
against China, especially when the Philippines lost legitimacy by sending in
naval vessels.279 During an internal conference, one government policy analyst
noted that when US Secretary of State Hillary Clinton met with Philippine
Foreign Minister Albert del Rosario on June 23, 2011, “Clinton avoided
promising to unconditionally support the Philippines in South China Sea dis-
putes.”280 Despite del Rosario’s demand, Clinton did not explicitly state that
the US-Philippine Mutual Defense Treaty was applicable to South China Sea
issues.281 The analyst concluded that the United States did not want direct

273
Xue Li and Hu Bo, “Shendu jiexi zhongguo de haiyang qiangguo zhilu [A Deep Analysis
of China’s Path to Becoming a Maritime Power],” Sina Blog, http://blog.sina.com.cn/s/blog_
4e32b1a50102wbq2.html; interview KZ-#85, Guangzhou, China, May 23, 2016; interview
KZ-#92, Xiamen, China, June 13, 2016; and interview KZ-#106, Washington, D.C., USA,
September 22, 2016.
274
Fu (2021, pp. 241–270).
275
Liu Zaorong, “Meiguo nanhai zhengce xin dongxiang [New Moves in U.S. South China Sea
Policy],” p. 232, presented at a seminar held in Beijing by the Collaborative Innovation Center
of South China Sea Studies from August 15 to 16, 2015. This is a print copy of the conference
materials, internally circulated and available at the China Institute of Boundary and Ocean
Studies of Wuhan University; Wu (2005, p. 189).
276
Interview KZ-#84, Guangzhou, China, May 21, 2016.
277
Interview KZ-#4, Beijing, China, September 15, 2015.
278
Ju (2011, p. 111); interview KZ-#85, Guangzhou, China, May 23, 2016.
279
Interview KZ-#57, Haikou, China, April 14, 2016; interview KZ-#64, Beijing, China, April
27, 2016; and interview KZ-#90, Guangzhou, China, May 25, 2016.
280
Liu, “New Moves in U.S. South China Sea Policy,” p. 229.
281
Ibid.; interview KZ-#103, Philadelphia, USA, September 2, 2016; and interview KZ-#106,
Washington, D.C., USA, September 22, 2016.
3.6 Alternative Explanations 89

conflict with China.282 Scholars and government policy analysts indicated that
China’s rationale in the Scarborough incident was that as long as Chinese
action remained controlled and nonmilitarized, the United States would not
get involved.283 Fu Ying’s recollection of her assessment of the US factor in
the 2012 Scarborough Shoal concurred with government analysts’ accounts.284
Chinese analysts were probably right. On April 22, 2012, US Lt. Gen.
Duane Thiessen took a Filipino reporter’s question about the applicability of
the US-Philippines Mutual Defense Treaty to the Scarborough Shoal. The gen-
eral answered ambiguously that the treaty “guarantees that we get involved in
each other’s defense and that is self-explanatory.”285 He did not elaborate on
what kind of assistance the United States would provide, stating that “there
is no tie between Scarborough Shoal and US movement in the Pacific.”286
Similarly, when the US Secretary of Defense and Secretary of State met with
their Philippine counterparts on April 30, they did not clarify whether the
treaty covered the Philippines’ offshore claims, nor did they promise any direct
US intervention.287 Fu Ying’s memoir also noted these US statements.288

3.6 Alternative Explanations

Now that we have examined the general trend and specific cases of China’s
coercion in the South China Sea, the following section looks at the competing
explanations.

3.6.1 Individual Leaders

The leadership alternative predicts that certain leaders, such as hawkish lead-
ers, will be more prone to use coercion, despite disagreements with other lead-
ers. Among Jiang Zemin, Hu Jintao, and Xi Jinping, Hu is said to have been the
weakest leader and Xi the most assertive.289 If individual leaders are critical,

282
Above interviews.
283
Interview KZ-#53, Atlanta, United States, March 17, 2016; interview Beijing, China, June 30,
2014; and interview KZ-#106, Washington, D.C., USA, September 22, 2016.
284
Fu (2021, pp. 241–270).
285
Agence France-Presse, “U.S. Commander Reaffirms Philippines Defense Treaty,” Rappler, April
22, 2012, www.rappler.com/nation/4205-us-commander-reaffirms-philippines-defense-treaty.
286
Ibid.
287
Hillary Clinton et al., “Remarks with Secretary of Defense Leon Panetta, Philippines Foreign
Secretary Albert del Rosario, and Philippines Defense Secretary Voltaire Gazmin after Their
Meeting” (Washington, D.C.: U.S. Department of State, April 30, 2012); U.S. Department of
State, “Joint Statement of the United States-Philippines Ministerial Dialogue,” press release
(Washington, D.C.: U.S. Department of State, April 30, 2012), quoted in Michael Green et al.,
“Countering Coercion in Maritime Asia: The Theory and Practice of Gray Zone Deterrence,”
p. 110.
288
Fu (2018, p. 265).
289
Interview KZ-#69, Shanghai, China, May 5, 2016; Wen and Ren (2010); and Gao (2010).
90 Coercion in the South China Sea

then instances of Xi coercing other countries should have been more numer-
ous than instances of Jiang or Hu doing so. However, China used coercion
seven times in the 1990s during Jiang’s rule, some of them militarized. China
again began taking coercive measures in 2007, during Hu’s term. Despite his
supposed weakness, Hu’s China pursued more coercion than Jiang’s, using
coercion ten times. In an internal speech during the Central Foreign Affairs
Conference in August 2006, Hu stated that “China needed to be more pro-
active in foreign affairs,” which undermines the notion that it was Xi who
emphasized proactivity.290
As of publication, episodes of coercion in the South China Sea under Xi
Jinping have not been militarized. One of Xi’s former political secretaries
revealed that Xi’s viewpoints on coercion were highly in line with the cen-
ter.291 Interviews with Chinese government analysts also confirm that indi-
vidual leadership does not dictate coercion decisions.292 One government
policy analyst indicated that all decisions about coercion were decided at
the Politburo Standing Committee (PBSC) and individual leadership was not
crucial.293 China’s more recent use of coercion in maritime disputes began
during Hu’s second term, refuting the notion that individual leadership is
the central factor.294 Hu Jintao and Xi Jinping are similar when it comes to
reactions to external events: Both acted similarly to establish a reputation
for resolve vis-à-vis other states.295 It is possible that Chinese leaders are all
what Yarhi-Milo calls “high self-monitors.” Nevertheless, Chinese leaders
still conduct a rational cost-benefit calculation of coercion, refraining when
the economic is high.

3.6.2 Bureaucracies and Interest Groups

In this view, coercion is a result of bureaucratic politics or interest groups
rather than centralized cost-benefit calculation. However, official docu-
ments and interviews make it clear that China’s coercion regarding disputes
in the South China Sea has been centralized. There are detailed and modu-
larized plans regarding how maritime surveillance and fishery administrative
ships should behave when faced with maritime incidents involving foreign
counterparts. For example, Guangdong Province stipulates that when
foreign fishing vessels engage in illegal fishing in Chinese EEZs or when
foreign administrative ships attempt to harass Chinese fishermen, fishery

290
Vol. 2 of Hu (2016, p. 518). Hu’s speech during this conference was not previously made
public.
291
Liang (2012, p. 498).
292
Interview KZ-#103, Philadelphia, USA, September 2, 2016.
293
Ibid.
294
Interview KZ-#7, Beijing, September 29, 2015.
295
Interview KZ-#8, Beijing, September 29, 2015.
3.6 Alternative Explanations 91

administrative ships should report to the command center of the FAB.296

Measures such as expelling foreign ships must be approved by sub-bureaus
of the SOA.297
Interviews with scholars and former officials also indicate that the cen-
tral government is in control of coercion decisions, with bureaucracies such
as the MFA implementing decisions made by the central government.298 For
example, every incident involving foreign countries was reported to the cen-
ter (yishi yibaodao).299 Citing internal seminars by officials from the SOA,
China Coast Guard, and Maritime Surveillance Agency, government policy
analysts from different localities in China noted that when carrying out patrol
missions, Chinese maritime law enforcement ships strictly followed instruc-
tions and orders from above and proceeded according to plans (an yu’an jinx-
ing).300 One former military official previously involved in the PLA’s patrol of
the South China Sea confirmed this observation.301 Even if the PLA is more
hawkish than civilians, one senior government policy analyst indicated that
final decisions about coercion were elevated to the PBSC.302 As stated in the
Mischief Reef incident, despite the fact that the Navy and the FAB had long
lobbied to take the reef, they waited until the central government told them to
and followed central orders unconditionally.
Moreover, Christopher Yung’s interviews with China’s Naval Research
Institute, the SOA, and other government think tanks in 2012 suggested that
the PLA supported the idea that “civilian law enforcement vessels should be on
the front line.”303 That is, even the PLA was well aware of the costs associated
with military coercion and therefore remained cautious. One former diplomat
also stressed that before maritime surveillance and fishery administrative ships
went to the South China Sea, “there had to be step-by-step authorization from
the center (bubu shouquan).”304 Several scholars pointed out that bureaucracies
may have some leeway in the specifics of carrying out orders from the center,
but the very decision about whether to coerce or not lay in the hands of the cen-
ter.305 Finally, even in periods before the 2013 reconfiguration of the Maritime
Surveillance Agency and the integration of fishery administrative ships into the

296
Li and Zhu (2007, p. 314).
297
China’s Ministry of Agriculture (2007).
298
Interview KZ-#17, Guangzhou, December 1, 2015; interview KZ-#53, Atlanta, United States,
March 17, 2016; interview KZ-#64, Beijing, China, April 27, 2016; interview KZ-#80, Shang-
hai, China, May 13, 2016; interview KZ-#113, Beijing, China, December 29, 2016.
299
Interview KZ-#7, Beijing, September 29, 2015; interview KZ-#34, Haikou, January 8, 2016.
300
Interview KZ-#24, Nanjing, December 29, 2015; interview KZ-#30, Haikou, January 6, 2015.
301
Interview KZ-#26, December 30, 2015.
302
Interview KZ-#103, Philadelphia, USA, September 2, 2016.
303
Christopher D. Yung, “The PLA Navy Lobby and Its Influence over China’s Maritime Sover-
eignty Policies,” in Saunders and Scobell (2015, p. 292).
304
Interview KZ-#91, Beijing, China, June 7, 2016.
305
Interview KZ-#29, Haikou, January 5, 2016; interview KZ-#35, Beijing, January 18, 2016.
92 Coercion in the South China Sea

China Coast Guard Agency, the separate agencies followed central leadership,
lacking a bottom-up mechanism suggested by the bureaucratic alternative.306
In the 1990s, the official chronology of former Vice Chairman of China’s
Central Military Commission and member of the PBSC Liu Huaqing suggests
that South China Sea issues were reported to the central leadership, and often
to the Chinese president himself. For example, Liu discussed the South China
Sea issue with senior naval officials on November 16, 1990 and April 28,
1994; discussed the Spratly issue with Chinese Premier Li Peng on July 20,
1992 and June 7, 1995; and then discussed the South China Sea issue with
Chinese President Jiang Zemin on April 5, 1996.307 In short, the discussion
of the South China Sea issue had been elevated to the highest decision-making
body in China, including the president and other members of the PBSC.
As for the Scarborough Shoal incident in 2012, one government policy ana-
lyst indicated that the center had a baseline (jidiao), according to which the
bureaucracies then took action, and if the center thought it necessary to take
action, the bureaucracies would then take action.308 Of course, the bureau-
cracies – the SOA, the military, and the MFA – had some discretion about the
specifics.309 As the Scarborough incident was “important and urgent,” it was
reported to the center.310 One former senior official at the SOA confirmed
that actions regarding important emergencies like the Scarborough incident
“had to be approved by the highest center because nothing was small when
it involved foreign relations.”311 Without authorization from the center, one
former SOA official stated that maritime surveillance ships could not be sent
during the standoff.312 Government policy analysts and scholars confirmed
that immediately after the Philippine Navy surrounded Chinese fishermen on
April 10, 2012, the PBSC convened a temporary meeting to make decisions
on how China should react.313 There were differences of opinion at the very
beginning, but the PBSC had reached a consensus to control the Scarborough
by early May.314 In this instance, decisions about what actions to take during
serious incidents such as the Scarborough Shoal standoff came from the high-
est decision-making body in China. As one former diplomat summarized,
important emergencies such as the Scarborough incident were all reported to
the center, and the decisions were centralized at the top.315

306
Interview KZ-#34, Haikou, January 8, 2016.
307
See Chronology of Liu Huaqing, compiled by Jiang (2016, pp. 898, 984, 1113, 1197, 1271).
308
Interview KZ-#35, Beijing, China, January 18, 2016.
309
Ibid.
310
Interview KZ-#85, Guangzhou, China, May 23, 2016.
311
Interview KZ-#88, Guangzhou, China, May 25, 2016.
312
Interview KZ-#92, Xiamen, China, June 13, 2016.
313
Interview KZ-#57, Haikou, China, April 14, 2016; another scholar also confirms, Interview
KZ-#90, Guangzhou, China, May 25, 2016.
314
Ibid.
315
Interview KZ-#77, Shanghai, China, May 12, 2016.
3.6 Alternative Explanations 93

Furthermore, if large state-owned energy companies determine when and

whom China coerces, then we should see China using coercion mostly toward
Malaysia because it reaps the most economic benefits from drilling for oil and
gas within the Chinese Nine-Dash Line in the South China Sea. Vietnamese
oil and gas drilling did not fall extensively within the Nine-Dash Line area,
and the Philippines did not have any operating oil and gas fields in the area at
all. Empirically, however, China coerced the Philippines the most and rarely
coerced Malaysia. This also indicates that SOE interests are not central in coer-
cion decisions. Countering the notion that large SOEs such as China National
Offshore Oil Corporation (CNOOC) and Sinopec pushed for coercion, one
former Chinese diplomat close to CNOOC stated that oil enterprises such as
CNOOC would send applications to explore the maritime area to the govern-
ment that had to be approved by the government on a yearly basis.316 If the
government does not approve, they would have to wait for another year or
so before applying to explore in that block again.317 According to this former
diplomat, both the National Development and Reform Commission (fagaiwei)
and the MFA would have to approve each application.318

3.6.3 Nationalism
If popular nationalism is crucial, then we wouldn’t expect a cyclical pattern of
coercion over time. Nationalism, which tends to be relatively stable over time,
should lead to stable occurrences in terms of coercion frequency. However,
empirically, the cases of China’s coercion in the South China Sea demonstrate
a cyclical pattern. Moreover, nationalist sentiments regarding the South China
Sea, if any, should be the same as those held for Vietnam, the Philippines, and
Malaysia. Even if we accede that popular nationalism is a more suitable expla-
nation for China’s coercion decisions, it does not explain why China would
focus more on coercing the Philippines than Malaysia, given that China does not
have a specific anti-Philippines or anti-Malaysia nationalism (there were periods
when anti-American or anti-Japan nationalism was present). Thus, if national-
ism drives China’s coercion decisions, we should expect to see China coercing
these three countries equally, which is not represented by empirical evidence.
Furthermore, if ultranationalists indeed drive Chinese foreign pol-
icy decision-making, we should expect to see a much higher frequency of military
coercion in the post-2007 period, as ultranationalists often accuse the central
Chinese government of being too dovish toward other South China Sea dispu-
tants. Specifically, regarding the 2012 Scarborough Shoal incident, the Chinese
public did not actually know about the Scarborough Shoal incident until after

316
Interview KZ-#91, Beijing, China, June 7, 2016.
317
Ibid.
318
Interview KZ-#112, Beijing, China, December 27, 2016; cross-checked with one government
policy analyst, interview KZ-#113, Beijing, China, December 29, 2016.
94 Coercion in the South China Sea

the Chinese government allowed official state news media to report this event.
No private media reports came out until Xinhua reported it. In addition, unlike
the Diaoyu-Senkaku issue, which the next chapter discusses, the Scarborough
Shoal is not even emphasized in Chinese high school history textbooks.
Finally, as noted in the refutations of the two abovementioned alternative
explanations, the central government has the ultimate say in coercion deci-
sions. In the author’s interviews with former officials and government analysts,
none indicated that popular nationalism had hijacked the decision-making
process about coercion.

3.6.4 Structural Realism and the Power Variable

If the argument of overall Chinese material power growth, especially offensive
realism, is central, then we should expect to see a linear progression of coercion.
That is, fewer cases of military coercion should increase to more cases of mili-
tary coercion over time. Moreover, we should not expect to see selective target-
ing cross-nationally at any point in time. However, the empirical evidence does
not support either prediction. For one, China used coercion more frequently in
the post-2007 period, but the yearly ratio of cases of coercion to incidents in the
South China Sea over the past thirty years has typically been around forty per-
cent.319 In other words, China has not gotten disproportionally more coercive
as its power has grown. For another, China empirically coerces the Philippines
and Vietnam much more than it does Malaysia. Linear power growth cannot
explain the cross-national variation in the frequency of coercion.
Some might argue that China does not use military coercion in the South
China Sea in the post-2007 period because it has more tools available, includ-
ing economic, diplomatic, and gray-zone coercion, which could be a function
of power growth. However, China utilized gray-zone coercion in the 1990s,
as demonstrated in the Mischief Reef case of 1994 and 1995, in addition to
military coercion. Furthermore, in the author’s previous research comparing
China’s coercion in the South China Sea and Sino-Indian land-border disputes,
China used military coercion against India in the post-2006 period, not gray-
zone coercion, even though gray-zone measures were available.320 The varia-
tion in China’s use of military coercion, therefore, has to do with differential
geopolitical backlash costs.321

3.6.5 The Utility of Military Coercion

Finally, if the argument favoring the utility of military coercion is correct, we
should expect to see an overall linear increase or even preclusive use of military

319
For specific data, see the online appendix.
320
Zhang (2022b).
321
Ibid.
3.7 Conclusion 95

coercion over time, which, again, is not supported by empirical evidence. As

shown, China prefers to use nonmilitary coercion in the South China Sea post-
2007, indicating that the utility argument is limited in terms of explaining
China’s choices of coercive tools.

3.7 Conclusion
This chapter examines the general temporal trend of China’s coercion in South
China while analyzing three case studies. It shows that the cost-balancing the-
ory explains when, why, against whom, and how China uses coercion over
disputes in the South China Sea. The balance of costs and benefits of coercion
influences China’s decisions to use coercion. When the need to establish a rep-
utation for resolve exceeds the economic cost, China uses coercion, but China
tends to use nonmilitarized coercion because of geopolitical backlash and eco-
nomic costs. These findings have theoretical and empirical implications.
Theoretically, states do calculate the costs and benefits of coercion, as
pointed out by previous scholars, but these costs and benefits need further
specification. China’s coercive behavior in South China Sea disputes indicates
that the three factors, external reputation for resolve, geopolitical backlash,
and economic cost, are crucial to China’s calculus. Rather than simply stat-
ing that “cost” matters, China balances specific kinds of costs and benefits.
Reputation for resolve matters greatly, with China believing that having capa-
bilities but not demonstrating a willingness to use them may lead to deter-
rence failure. In a sense, China is compelling to deter, blurring the line between
“compellence” and deterrence, which is traditionally distinguished by scholars
of coercion. To quote a Chinese proverb repeated by many interviewees, it is
killing the chicken to scare the monkey. Instead of a classic security dilemma,
there might be credibility dilemmas in the South China Sea. That is, the need
to demonstrate resolve pushes China to stand strong, leading to more coercion
and additional countermeasures.322
Furthermore, even though Daryl Press argues that adversaries do not take
past actions into account when assessing military threats, it is clear from
China’s coercion calculus that China did take US credibility into account when
calculating geopolitical backlash cost. Whether and how the United States will
get involved in South China Sea disputes significantly affects China’s deci-
sions regarding when and how to use coercion. For example, according to US
scholars, the closing of the Subic Bay did not cause instability.323 However, as
seen in the Mischief case, China took advantage of this geopolitical vacuum.

322
Wu Shicun states that there is a security dilemma in the South China Sea. See Wu Shicun,
“Zhongmei jidai pojie nanhai anquan kunjing [China and the United States Need to Solve the
Security Dilemma in the South China Sea],” Cankao News, August 22, 2016, www.nanhai​
.org.cn/index.php/Index/Research/review_c/id/175.html#div_content.
323
Johnson and Keehn (1995, p. 111).
96 Coercion in the South China Sea

Simply put, other countries, especially the United States, also must appear
credible in front of coercers like China. Thus, the United States might benefit
from “quiet rebalancing.”324 More actions and less talk on the part of the
United States, such as strengthening alliances and more frequent Freedom of
Navigation Operation while downplaying the publicity about disputes, might
increase China’s geopolitical backlash cost and reduce the need to establish a
reputation for resolve.
Moreover, China places equal weight on economic development, indicat-
ing that its decisions about national security issues are inseparable from eco-
nomic concerns. In 2006, President Hu Jintao internally stated that foreign
affairs should center around economic development, and developmental inter-
ests form the basis for security interests.325 Nevertheless, China uses coercion.
China’s coercion in maritime disputes counters the simple story that power
explains it all. China used coercion when it was weaker.
To conclude, China’s coercion in the South China Sea dispels the notion
that China did not become assertive until the late 2000s. If anything, China has
always been a risk-averse coercer, calculating and picking on smaller targets
attracting the most international attention, as opposed to larger targets that
are most threatening to China’s interests. China’s preference for civilian ships
instead of military coercion, along with its selectivity over which targets to
coerce, reflect the Goldilocks choice: Facing both the costs and benefits of coer-
cion, China chooses “the middle path,” which many former Chinese officials
and government analysts have emphasized.326 In the next chapter, we turn to
examine China’s coercion against Japan over disputes in the East China Sea.

324
For similar thoughts, see Zack Cooper and Jake Douglas, “Successful Signaling at Scar-
borough Shoal,” War on the Rocks, May 2, 2016, http://warontherocks.com/2016/05/
successful-signaling-at-scarborough-Shoal/.
325
Hu (2016, pp. 508–509).
326
Interview KZ-#6, Beijing, China, September 28, 2015; interview KZ-#57, Haikou, China,
April 14, 2016.
4

Sino-Japanese Disputes in the East China Sea

China has maritime territorial and jurisdictional disputes with Japan regarding
the sovereignty of the Senkaku/Diaoyu (hereafter Senkaku) Islands, located
in the East China Sea. The two countries also have disputes over maritime
delineation, including overlapping exclusive economic zone (EEZ) claims. For
example, China and Japan both claim that the Chunxiao oil field is part of
their EEZs.
According to China, its claims on the Senkaku (Diaoyu in Chinese) islands
are based on historical, geographical, and legal terms.1 Regarding historical
claims, China asserts that Japan performed an illegal “grab” over Chinese ter-
ritory in its Diaoyu Dao White Paper. Because China was forced to cede sov-
ereignty over the islands, it claims that documents like the Cairo Declaration
and Potsdam Proclamation invalidate2 all Japanese claims to the territory.3
However, Japan also claims the entirety of the Senkaku Islands.4 Unlike China,
Japan does not recognize the existence of a territorial dispute over the islands,
claiming that the islands are terra nullius5 and are not included in any of the
treaties that China cites for its claims.
The dispute began in 1895,6 when the Japanese government asserted control
over the Senkaku Islands. This control is the basis for Japanese claims, but it is

1
MFA, “Full Text: Diaoyu Dao, an Inherent Territory of China,” September 26, 2012, www​
.fmprc.gov.cn/mfa_eng/topics_665678/diaodao_665718/t973774.shtml.
2
Zhai (2019).
3
Ibid.
4
Ministry of Foreign Affairs of Japan, “Japanese Territory, Senkaku Islands Q&A,” April 13,
2016, www.mofa.go.jp/region/asia-paci/senkaku/qa_1010.html#q1.
5
Ibid.
6
Jon Lunn, “The Territorial Dispute Over the Senkaku/Diaoyu Islands,” Library of the House
of Commons of the United Kingdom, November 20, 2012, www.files.ethz.ch/isn/157093/
SN06475.pdf.

97
98 Sino-Japanese Disputes in the East China Sea

seen as illegal by the Chinese. After the conclusion of World War II, the United
States placed several islands, including the Senkaku, under occupation.7 The
United States administrated the Senkaku Islands after the 1951 Treaty of Peace
with Japan.8 However, the islands were included in the Okinawa Reversion
Treaty in 1971, which returned control of the islands to Japan. The inclusion
of the Sekakus in the treaty meant that they now fell under the same applica-
tion stipulated in the US-Japan Security Treaty. While the United States has
attempted to stay neutral,9 it has simultaneously reaffirmed the applicability
of the treaty.
There were few clashes between the claimants prior to the 1970s, but an
issue over the islands began to emerge in the late 1960s, when it was reported
that there were significant oil and gas reserves in the area. From then on, there
would be several flare-ups and intensification of Sino-Japanese tensions.10
The first flare-up was the 1970–1972 crisis,11 which began when the Japanese
ambassador to the Republic of China (ROC) asserted Japanese sovereignty
over the islands. This triggered anti-Japanese protests, ROC activists planting a
flag on one of the islands, and worsening relations between both governments.
The issue reignited in 1978, with the appearance of hundreds of Chinese fish-
ing vessels near the Senkaku Islands. While there was little coverage in Chinese
media, there was extensive Japanese coverage. However, the issue would be
“shelved” when the Chinese and Japanese signed the Japan-China Peace and
Friendship Treaty in 1978, choosing to focus on relations over the sovereignty
dispute. The concept of shelving disputes was advanced by Deng Xiaoping,
and its main concepts are to set aside disputes to focus on bettering relations
and joint development, before returning to the issue of sovereignty later.12

4.1 General Trends, Specific Cases, and Theoretical

Expectations of the Cost-Balancing Theory
China has been selective regarding when to use or threaten coercion on the
Senkaku issue, as seen in Figure 4.1.
There are two kinds of actions taken by the Japanese government, noted in
dark gray, that China views as threatening its sovereignty and maritime rights
in the East China Sea. The first is Japanese actions concerning the control of

7
Ibid.
8
Mark E. Manyin, “The Senkakus (Diaoyu/Diaoyutai) Dispute: U.S. Treaty Obligations,” Con-
gressional Research Service, March 1, 2021, https://crsreports.congress.govR42761.
9
Yoichiro Sato, “The Senkaku Dispute and the US-Japan Security Treaty,” Pacific Forum CSIS,
September 10, 2012, https://csis-website-prod.s3.amazonaws.com/s3fs-public/legacy_files/files/
publication/Pac1257.pdf.
10
Shaw (1999).
11
The following paragraph until the next footnote is ibid.
12
MFA, “Set Aside Dispute and Pursue Joint Development,” www.fmprc.gov.cn/mfa_eng/­zil
iao_665539/3602_665543/3604_665547/t18023.shtml.
 Figure 4.1 China’s coercion regarding maritime disputes in the East China Sea (1990–2012)
99
100 Sino-Japanese Disputes in the East China Sea

the Senkaku Islands. For example, the Japanese Coast Guard (JCG) arrested
Chinese activists in September and October 1996.13 The second kind involves
maritime EEZs in the East China Sea. For instance, Japan granted a license to
Tokyo-based Teikoku Oil Company to conduct exploration in the Chunxiao
oilfield area, which China claimed to be in its EEZ, in July 2005. We can see
that despite actions taken by Japan in 1996, 1997, and the early 2000s, China
did not use coercion until 2005. China used economic sanctions against Japan
over the JCG ship’s arrest of a Chinese captain in the disputed waters of the
Senkaku Islands in 2010, and it utilized diplomatic and gray-zone coercion
over Japan’s decision to nationalize three of the five Senkaku Islands in 2012.
In the same year, China began regular patrols inside the territorial waters of the
Senkaku Islands, which it has maintained ever since. However, China refrained
from escalating into militarized coercion. China has not coerced Japan since
the 2012 incident. There is therefore both temporal variation (when China
uses coercion) and variation in coercive tools.
As with South China Sea disputes, Sino-Japan maritime territorial dis-
putes are not part of China’s core interests. Unlike Tibet and Taiwan, which
China has made clear are core interests, official Chinese statements regarding
the Senkaku Islands have been ambiguous. For example, when Premier Wen
Jiabao met with Japanese Prime Minister Noda and discussed issues involv-
ing the Xinjiang region and the Senkakus, Wen Jiabao used the phrase that
“Japan should respect China’s core interests and significant concerns” (zun-
zhong zhongfang hexinliyi he zhongda guanqie).14 China considered Xinjiang
as its core interest, and it is intriguing that Wen intentionally discussed the
Xinjiang issue together with the Senkaku dispute, linking the phrases “core
interests” and “important concerns” with a conjunction.15 This suggests that
while the Senkaku disputes were indeed of significant concern to China, they
were not on par with Tibet and Taiwan, which China explicitly deemed as its
core interests.
As with the previous chapter on the South China Sea, the cost-balancing
theory predicts that China coerces Japan when the need to establish a repu-
tation for resolve is high and the economic cost is low, while refraining from
coercion when the economic cost is high and the need to establish resolve is
low. China is much more likely to choose such coercive tools as diplomatic
sanctions, economic sanctions, and gray-zone coercion when the geopolitical
backlash cost is high. The need to establish resolve is measured by objective
measures, including the number of incidents in the East China Sea and the level

13
See the online appendix.
14
Chinese Embassy in Malaysia, “Prime Minister Wen Jiabao Met with ROK President and
Japanese Prime Minister Separately,” May 14, 2012, http://my.chineseembassy.org/chn/zgxw/
t931418.htm.
15
MFA press conference, July 1, 2013, as reported in People’s Daily Overseas Edition, July 2,
2013, http://paper.people.com.cn/rmrbhwb/html/2013-07/02/content_1262387.htm.
4.1 Cost-Balancing Theory: General Trends 101

of media exposure of these incidents, as well as written and interview speech

evidence. Economic cost is measured by Japan’s trade and financial relations
with China. For example, is Japan a major export market for China or an
important source of import for key technologies or intermediary products in
China’s supply chain? Is Japan a critical Foreign Direct Investment (FDI) or
Official Development Aid (ODA) source for China? Does Japan control the
global financial network? Geopolitical backlash cost is measured by Japan’s
alliance relationship with the United States, its most important great power
ally. For instance, is the United States strengthening its alliance with Japan?
The cost-balancing theory would predict that in the 1990s and early
2000s, when China refrained from coercion, we should expect to see high
economic cost and low need to establish resolve. When China began using
nonmilitary coercion post-2005, we should see low economic cost, high need
to establish resolve, and high geopolitical cost. We might also see a cyclical
pattern of the frequency of coercion over time, in line with the varying need
to establish resolve.
As with the South China Sea cases, alternative explanations would yield
predictions different than the cost-balancing theory. First, if evidence sug-
gests that the Chinese president makes coercion decisions that contradict the
judgment of all other leaders, then there is strong support for the individual
leadership argument. Second, if domestic lobbies and interest groups dictate
coercion decisions, we should expect to see a bottom-up decision-making pro-
cess of coercion, instead of top-down. In particular, we should see China’s
state-owned energy companies making impacts on coercion decisions, since the
Chunxiao oil field was operated by China National Offshore Oil Corporation
and Sinopec, two of China’s largest state-owned energy companies. Third, if
popular nationalism is crucial, then we wouldn’t expect a cyclical pattern of
coercion over time. Given that nationalism is an ideational source of behavior
that tends to be stable over time, we should see stable coercion frequency occur-
rences. For example, we should see China using coercion in 1996 and 1997, as
it did in 2010 and 2012, particularly because of active Chinese nationalist pro-
tests against Japan regarding the Senkaku Islands. Fourth and similarly, if the
argument of overall Chinese material power growth is central, then we should
also see a linear progression of coercion, that is, from fewer cases of military
coercion to more over time. Finally, if the argument favoring the utility of mil-
itary coercion is correct, we should expect to see an overall linear increase or
even preclusive use of military coercion over time.
The remainder of the chapter first examines the overall trend regarding
China’s coercion toward Japan, including why China refrained from coercion
until the mid-2000s. It then applies the cost-balancing theory to explain the
temporal trend, followed by two detailed case studies – the 2010 boat clash
incident and Japan’s nationalization of the Senkaku Islands in 2012 – to illus-
trate the logic of the cost-balancing theory. The final section discusses alterna-
tive explanations before concluding.
102 Sino-Japanese Disputes in the East China Sea

4.2 Explaining the Temporal Trends: Why

China Refrained from Coercion Before 2005
The following paragraphs measure changes in the need to establish resolve,
economic cost, and geopolitical backlash cost. If the cost-balancing theory is
correct, we should see China using coercion when the need to establish a rep-
utation for resolve is high and economic cost is low. We should see it choos-
ing nonmilitarized coercive tools when the geopolitical backlash cost is high.
When the need to establish resolve and economic cost are both high, we would
expect China to refrain from coercion, given that the East China Sea issue is
not a core interest.

4.2.1 The Need to Establish a Reputation for Resolve

China’s need to establish a reputation for resolve was generally low in the pre-
2005 period (but high during the 1996 and 1997 period), became high in the
post-2005 period, and peaked around 2015, before decreasing. Prior to 2003,
there had only been incidents in 1996 and 1997. On September 26, 1996,
Hong Kong activists defending the Senkaku/Diaoyu islands were blocked by
the JCG.16 In October 1996, the JCG prevented Hong Kong activists’ ships
from approaching the Senkaku Islands.17 It blocked Hong Kong activists again
on May 26, 1997.18 In the same year, a Japanese legislator landed on one of
the Senkaku Islands.19 However, it was not until 2003 that incidents viewed as
threatening by China began to arise on a more regular basis. For example, on
January 1, 2003, the Japanese government rented three of the Senkaku Islands
to a private citizen.20 Also, Japan began challenging China’s oil and gas explo-
ration in the East China Sea, especially regarding the Chunxiao oil field. On
July 14, 2005, Japan granted a license to Tokyo-based Teikoku Oil Company
to conduct exploration east of the median line, the delineation of which China
disagreed.21 This trend is confirmed by objective measures of international
media exposure, as seen in Figure 4.2.
Figure 4.2 shows a Factiva search of reports containing either “East China
Sea” or “Senkaku” in Reuters, AFP, and AP.22 A higher exposure in these

16
See Edward A. Gargan, “Man Drowns During a Protest Over Asian Islets,” The New York
Times, September 27, 1996.
17
Michio Sakamura, “Japanese in Hong Kong Fret about Island Ire Political Groups Drive Sover-
eignty Protests Over Senkaku-Diaoyu Dispute,” The Nikkei Weekly, October 14, 1996.
18
Russell Skelton, “Japanese Turn Back Island Activists,” The Age, May 27, 1997.
19
Emmers (2009, p. 52).
20
“Govt Renting 3 Senkaku Islands,” The Daily Yomiuri, January 1, 2003.
21
Anthony Faiola, “Relations Already Uneasy as Tokyo Accuses Beijing of Tapping Disputed
Fields,” The Washington Post, October 22, 2005.
22
The search is as follows: “(East China Sea or Senkaku) not (typhoon or storm or piracy or
pirate or rescue or refugee or basing or pirates or earthquake or earthquakes or base or bases
or South Korea or South Korean or Cheju or Jeju or missile or exercise or exercises or missiles
 Figure 4.2 Factiva search of “East China Sea” and “Senkaku” in Reuters, AP, and AFP (1990–2016)
103
104 Sino-Japanese Disputes in the East China Sea

sources would increase the salience of the East China Sea issue and the pres-
sure to establish a reputation for resolve. International media exposure was
generally low in the pre-2005 period except for 1996 and 1997. However, it
picked up after 2004, especially in 2010 and 2012, but gradually decreased
post-2015.
Semiofficial Chinese sources and interviews with government policy analysts
indicate that China did acknowledge the restraint Japan exercised in the 1990s and
early 2000s. For example, the 2013 Chinese Academy of Social Sciences (CASS)
annual bluebook on Japan pointed out that the Japanese government did try to
control the activities of right-wing nationalists in the 1990s to reduce damages
to Sino-Japanese relations, including prohibiting them from bringing permanent
infrastructure materials to the Senkakus.23 Interviews with Chinese government
policy analysts also indicated that China believed Japanese actions in the 1990s
to be mainly nongovernmental.24 One former official from the State Oceanic
Administration (SOA) stated that Japan’s ruling party – the Liberal Democratic
Party – exercised restraint regarding the Senkaku dispute in the 1990s.25
In other words, the Japanese government maintained a low profile when
it came to the Senkaku dispute. The Daily Yomiuri noted Prime Minister
Hashimoto’s silence about the Senkaku Islands during the fall 1996 incidents.26
Interestingly, unlike subsequent Japanese governments in the late 2010s, the
government in 1996 was not vocal about the Senkakus belonging to Japan
and did not deny the dispute, at times even hinting at its existence. For exam-
ple, the Daily Yomiuri noted that Japanese Foreign Minister Yukihiko Ikeda
“originally planned to discuss the dispute over ownership of islands in the East
China Sea in a meeting with China to be held in New York” on September
20, 1996.27 More importantly, the report emphasized that Ikeda was expected
to stress to Chinese Foreign Minister Qian Qichen that “he hopes the dis-
pute over the Senkaku Islands will not sour bilateral relations, according to
[Japanese] foreign ministry sources.”28 The 2013 CASS bluebook on Japan
confirmed that during the meeting between Ikeda and Qian, Ikeda said that
“despite different stances on this issue, [both sides] should calm down and
avoid damage to bilateral relations.”29

or tests or test).” I also read every article to exclude Chinese coercive actions, positive devel-
opments, and irrelevant events, such as Okinawa basing issues, typhoons, oil tanker collisions,
and the North Korean spy ship.
23
Li (2013, p. 43).
24
Interview KZ-#45, Beijing, China, February 2, 2016.
25
Interview KZ-#71, Shanghai, China, May 6, 2016.
26
Masahiko Sasajima and Chiharu Mori, “Japan Silent amid China Protest Over Senkaku,” The
Daily Yomiuri, September 21, 1996.
27
“Japan, China to Discuss Senkaku Is. Row,” The Daily Yomiuri, September 20, 1996.
28
Ibid.
29
Li (2013, p. 42); indeed, the official 1996 Japanese National Defense Program Guidelines
did not even mention the Senkakus or offshore islands, whereas later versions – starting from
4.2 Explaining the Temporal Trends 105

Furthermore, Deputy Japanese Foreign Minister Hitoshi Tanaka stated,

on November 15, 1996, that it was US policy to maintain a neutral stance on
territorial disputes between other nations, and “therefore, the United States
[did] not speak of applying the treaty (to the Senkaku Islands dispute).”30
The Japanese government was discrete about the Senkaku issue, at times only
hinting about it, as opposed to the post-2005 period. Meanwhile, the actions
taken by the Japanese government were also highly restrained. For example,
in 1998, in reference to Chinese vessels entering the Senkakus, an official of
the Japanese Maritime Safety Agency’s Guard and Rescue Department said,
“all we can do is [to] issue warnings. We cannot interfere.”31 As former mili-
tary attaché Zhang Tuosheng pointed out, Japan exercised restraint and was
relatively silent about maritime disputes in the East China Sea in the 1990s
and early 2000s.32 Scholar Jessica Chen Weiss also noted that both China and
Japan engaged in cooperation in the first few years of the 1990s.33 As such,
the need to establish resolve was generally low. It briefly rose in 1996–1997
due to the level of media exposure but was not nearly as high as it became
post-2005, and China viewed the Japanese government as more cooperative
in 1996 and 1997.
Beginning around 2005, China perceived Japan to be gradually changing
its stance by engaging in more actions while being vocal about issues in the
East China Sea. Official and semiofficial Chinese sources view Japan as creating
pressure on China to establish a reputation for resolve, in contrast to the 1990s.
For example, in 2005, then-State Councilor Tang Jiaxuan pointed out that
Japan’s drilling activities on the eastern side of Japan’s median line in the East
China Sea would only make the situation there more complicated and salient
(jianrui), which would lead to a fundamental change in the nature of the issue.34
Furthermore, China believed that Japan had stepped up its activities pertaining
to the Senkaku dispute. Unlike in the 1990s, when the Japanese government
tried to constrain right-wing nationalists, then-Chinese Foreign Minister Li
Zhaoxing claimed that “the Japanese government was not doing enough and
was at times even permissive” when it came to right-wing nationalists’ activity
on the Senkakus in April 2005.35 Moreover, Japan was silent about the dispute
in the Senkakus in the 1990s, at times even hinting at its existence, but Japan
denied the dispute explicitly beginning in 2007. For example, Chief Cabinet

2005 – mention the defense of offshore islands. See www.mofa.go.jp/policy/security/defense96/;

www.mod.go.jp/e/d_act/d_policy/pdf/national_guidelines.pdf.
30
“Security Treaty Likely Covers Senkakus,” The Daily Yomiuri, November 16, 1996.
31
Hidemichi Katsumata, “How Safe is Japan? Land Disputes Expose Weaknesses,” The Daily
Yomiuri, April 21, 1998.
32
See former military attaché Zhang Tuosheng’s article in 2005 in Chen (2006, p. 35).
33
Weiss (2014, p. 104).
34
Dangqian zhongri guanxi he xingshi jiaoyu huoye wenxuan [Current Sino-Japan Relations and
Education Regarding the Situation] (Beijing: Hongqi [Red Flag] Press, 2005), p. 9.
35
Ibid., p. 24.
106 Sino-Japanese Disputes in the East China Sea

Secretary Nobutaka Machimura denied the existence of the dispute, stating in

2007 that “there is no territorial dispute between (Japan and China).”36 This
explicit denial of the existence of a dispute continued on November 16, 2010,
with Japanese Prime Minister Naoto Kan telling Chinese President Hu Jintao
that “there is no territorial dispute” in the East China Sea.37
The writings of Chinese government policy analysts and former officials
indicated that China believed that Japanese actions and statements raised the
need for China to take strong measures to establish its reputation for resolve.
For example, in a December 2005 conference, CASS analysts stated that recent
Japanese activities aimed at “forcing China to accept the median line divi-
sion of the EEZ in the East China Sea.”38 At the same conference, one SOA
official noted that Japan’s action of authorizing oil companies to drill in the
East China Sea demonstrated the salami-slicing strategy, which had to do with
“China’s lack of response and assertive measures” [prior to 2005].39 The offi-
cial argued that China should react with “measured responses that did not
show weakness.”40 CASS analyst Wang Hanling laid out specific measures
during an internal conference held by the Navy in 2006: China should use
maritime surveillance ships to disrupt and stop the activities by Japanese com-
panies in disputed waters in the East China Sea.41 The aim, according to Wang,
was to stop Japan’s exploration activities, delegitimize its “median-line” claim,
and force it back to the position of “tabling disputes for joint development.”42
Interviews with former officials and government policy analysts also indi-
cated China’s concern that appearing weak in front of Japan would lead Japan
to strengthen its “median-line” claim, while halting the prospects of tabling
disputes for joint development. One former SOA official expressed that Japan
did not start raising the “median-line” until the 2004–2005 period.43 A gov-
ernment policy analyst close to both the Chinese Ministry of Foreign Affairs
(MFA) and SOA recalled that these two agencies believed that if China did
not take action, Japan would become even more assertive in the future, which
led to the decision for patrols by maritime surveillance ships.44 Pointing out
that Japan began to publicize maritime disputes in the East China Sea in 2005,

36
“JCGs Stop Following Chinese Protest Boat,” BBC Monitoring Asia Pacific, October 29, 2007.
Text of report in English by Japanese news agency Kyodo, Fukuoka.
37
Cameron McLauchlan and Hiromu Namiki, “Kan to Hu: Senkakus are Japan’s Territory,” The
Daily Yomiuri, November 16, 2010.
38
Zhao and Sun (2006, p. 15).
39
Ibid., p. 45.
40
Liu (2006, p. 32).
41
Wang Hanling from CASS, “The Sino-Japan Disputes and China’s Countermeasures,” in Hai-
jun 2006nian haiyangfa yu guojia anquan xueshu taolunhui lunwenji shangce [Papers in the
Navy 2006 Conference on Maritime Law and Maritime Security] (Internal circulation: August
2006), pp. 172, 174.
42
Ibid.
43
Interview KZ-#71, Shanghai, China, May 6, 2016.
44
Interview KZ-#40, Beijing, China, January 22, 2016.
4.2 Explaining the Temporal Trends 107

other government policy analysts concurred that if China did not take action
to halt Japanese activities, especially regarding the Chunxiao oil field, it would
give Japan the impression that China had accepted the “median-line” claim.45
Another government policy analyst concluded that China needed to send sig-
nals to Japan to defend its sovereign rights.46 In short, both objective measures
and speech evidence suggest that the need to establish resolve was low in the
pre-2005 period (except for 1996–1997) and became high after 2005.
It is important to note that international media exposure of the East China
Sea disputes in the post-2015 period, as measured by Reuters, AP, and AFP
reports, has dropped. Moreover, the Japanese government began to take a
more cooperative approach toward the East China Sea issue. For example, in
the first round of the Sino-Japanese senior official meeting on maritime affairs
in May 2012, prior to China’s coercion, the JCG and the Chinese Coast Guard
(CCG) were not participants.47 In fact, there was very little contact between
the Coast Guards of the two countries. By the end of 2015, when the media
exposure of the East China Sea disputes decreased, the JCG and the CCG
were both participants in the fourth round of the same meeting. In addition,
the two agencies agreed to improve communication, exchange information,
encourage visits of personnel between the two, and build trust, which JCG
would not agree to earlier.48 Subsequent rounds of the Sino-Japanese senior
official meeting on maritime affairs reiterated the same collaborative spirit.
In the 13th round in December 2021, for example, both sides agreed to sup-
port exchange activities between the CCG Academy and the JCG Academy.49
Chinese analysts also noted that the CCG and the JCG devote more resources
to controlling nationalists and fishermen in their respective countries in more
recent years instead of facing off against each other. They are more interested
in crisis management and escalation control.50
As a result, China has not coerced Japan since the 2012 incident. Even the
frequency of China’s regularized patrols around the Senkaku Islands, which
began in 2012, has decreased in more recent years. The patrol peaked with
a frequency of fifty-four times in 2013, dropped to thirty-one times in 2019,

45
Interview KZ-#51, Beijing, China, March 8, 2016.
46
Interview KZ-#41, Beijing, China, January 22, 2016.
47
MFA, “Zhongri juxing diyilun haiyangshiwu gaojibie cuoshang” [China and Japan Held the
First Round of Senior Official Meeting on Maritime Affairs], May 16, 2012, www.fmprc.gov.cn/
web/wjb_673085/zzjg_673183/bjhysws_674671/xgxw_674673/201205/t20120516_7671338​
.shtml.
48
MFA, “Zhongri juxing disilun haiyangshiwu gaojibie cuoshang [China and Japan Held the
Fourth Round of Senior Official Meeting on Maritime Affairs],” December 9, 2015, www​
.fmprc.gov.cn/web/wjb_673085/zzjg_673183/bjhysws_674671/xgxw_674673/201512/
t20151209_7671451.shtml.
49
MFA, “Zhongri juxing dishisanlun haiyangshiwu gaojibie cuoshang [China and Japan Held the
13th Round of Senior Official Meeting on Maritime Affairs],” December 20, 2021, www.mfa​
.gov.cn/wjbxw_673019/202112/t20211220_10472052.shtml.
50
Interview KZ-#71, Shanghai, China, May 6, 2016.
108 Sino-Japanese Disputes in the East China Sea

and further decreased to fifteen times in 2020.51 Although a regularized patrol

is not coercion, it is indicative of whether China has stepped up or reduced
its measures in the East China Sea. Gradually decreasing international media
exposure, together with the increasingly cooperative stance from Japan, sug-
gest that the need to establish resolve became lower in the post-2015 period,
thereby resulting in a cyclical pattern of coercion frequency similar to the pat-
tern in the South China Sea.

4.2.2 Economic Cost

Despite the reputational benefit of coercion, coercion entails economic cost.
Economic cost was high in the pre-2005 period (especially the 1990s) and
became lower after 2005. As shown in Chapter 3, Chinese exports to Japan
constituted more than fifteen percent of Chinese exports in the 1990s. In the
mid-2000s, however, Chinese exports to Japan dropped drastically to around
eight percent. Japan was China’s most important export market, particularly
in the 1990s, but it was overtaken by the United States, the EU, and, to a lesser
extent, the Association of Southeast Asian Nations beginning in the mid-2000s.
The above trend is similar to overall trade relations with Japan. According
to data in the CASS bluebook on Japan, Japan’s contribution to China’s for-
eign economic growth decreased starting around the mid-2000s; from 2005
to 2007, the average annual growth of Sino-Japanese trade was merely twelve
percent, in contrast to the overall twenty-three percent annual growth rate, as
well the annual growth rates of Sino-US, Sino-EU, and Sino-Korean trade.52
According to Chinese customs data, Sino-Japanese trade volumes decreased
from twenty-one percent of total Chinese foreign trade in 1996 to barely nine
percent in 2011.53 From 1993 to 2003, Japan was China’s largest trading part-
ner, but it was reduced to the third-largest trading partner, trailing behind the
EU and the United States, beginning in 2004.54
Japan’s importance as a source of FDI in China has also been waning, as
seen in Figure 4.3.55
Along with the United States and the EU, Japan was an important source of
FDI in China until the mid-2000s. By 1993, Japan had become China’s largest
foreign investor in terms of actual investment and was among the major countries

51
See SOA data www.diaoyudao.org.cn/node_7225655.htm; official Weibo account of the CCG:
https://weibo.com/u/6586732953?is_hot=1. The Japanese Foreign Ministry (MOFA) has spe-
cific monthly statistics about entry of Chinese vessels into the territorial waters of the Senkaku
Islands, but it does not distinguish between Coast Guard ships and fishing vessels. See www​
.mofa.go.jp/files/000170838.pdf.
52
Wang (2008, p. 13).
53
Ibid., p. 14; CASS, Wang (2009, p. 17).
54
Wang (2008, p. 392).
55
Data comes from China Customs Data, available in the China Premium Database at CEIC
database, available at www.ceicdata.com/en/products/china-economic-database.
 Figure 4.3 EU, Japanese, and US FDI as share of total FDI in China (1997–2015)
109
110 Sino-Japanese Disputes in the East China Sea

from which China imported technology.56 Beginning in 2006, though, Japan’s

share of total FDI in China dropped from an average of ten percent to around
five percent yearly. By contrast, FDI from Hong Kong – the all-time largest source
of FDI in China – has increased from approximately thirty percent to more than
fifty percent since the mid-2000s. In short, objective trade and FDI data indicate
that Japan’s economic importance to China has decreased since the mid-2000s.
Official and semiofficial documents and interviews concur with the statis-
tics, indicating high pre-2005 economic costs. China’s official 1992 government
work report noted the need to welcome more foreign investors in China.57 Japan
was one of the main investors China wanted to attract. For example, the 1992
China’s Foreign Affairs Overview indicated that Japan was “China’s largest aid
provider and trade partner.”58 Then-Deputy Foreign Minister Tian Zengpei
acknowledged that Japan was “an important part” of China’s overall foreign
economic relations in 1993.59 Chinese diplomats stated that China imported sig-
nificant amounts of capital and technical equipment from Japan, which was cru-
cial to China’s modernization.60 China’s official 1997 White Paper on Foreign
Trade and Economic Cooperation also stated that Japan was the country that
promised the most government loans to China.61 Government analysts under
the Chinese Ministry of Foreign Economics and Trade added that Japan had
been China’s largest trading partner and foreign investor in 1997.62 Even in the
early 2000s, the CASS annual report on Japan noted that China still needed
investment and aid from Japan.63 CASS Japan specialist Feng Zhaokui noted,
in 2003, that Japan’s foreign direct investment in coastal cities in China was
crucial.64 From a supply chain perspective, Feng emphasized the necessity of
acquiring technology from Japan, as well as importing Japanese intermediary
machineries.65 Feng pointed out that Japan’s contribution to China in terms of
technology provision was greatest in the 1990s, concluding that Japan was the
largest technology provider during China’s industrialization process.66 Research
from Weiss also confirmed China’s economic need, especially in the 1990s.67

56
See Diplomatic history editorial office of the MFA (1995, p. 44); Diplomatic history editorial
office of the MFA (2005, p. 185), among others.
57
1992 Government Work Report from the State Council, www.gov.cn/test/2006-02/16/­
content_200922.htm.
58
Diplomatic history editorial office of the MFA (1992, p. 49).
59
Tian (1993, p. 367).
60
Ibid.
61
The editorial board of China’s White Paper on Foreign Trade and Economic Cooperation
(1997, p. 272). See also the editorial board of China’s White Paper on Foreign Trade and Eco-
nomic Cooperation (1999, p. 261).
62
Li (1997).
63
Gao (2001, p.130).
64
Feng (2003).
65
Ibid.
66
Ibid.
67
Weiss (2014, chapter 5).
4.2 Explaining the Temporal Trends 111

Interviews with Chinese government policy analysts and scholars also indi-
cated that the economic factor was significant for China in the 1990s and
early 2000s. During this period, China needed Japan for aid, technology, and
a smooth entry into the World Trade Organization (WTO).68 One government
policy analyst conceded that China was economically dependent upon Japan,
including its ODA, in the 1990s, as shown in Figure 4.4.69
In the 1990s, “about one-quarter of China’s basic infrastructure budget was
provided by Japanese ODA,” and, according to one analyst, China’s economic
development was “in large part due to Japan’s aid.”70 This analyst’s claim can
be confirmed by publicly available data.71 Particularly in 1996, when Japan
blocked Hong Kong activists, China could not afford to use coercion, espe-
cially given that Japan was in the process of suspending its ODA to China due
to China’s underground nuclear tests.72 CASS specialist Feng Zhaokui noted
that Japan was China’s largest ODA contributor, dwarfing even the World
Bank and the Asian Development Bank. It greatly facilitated China’s industri-
alization by improving China’s basic infrastructure, such as railways, ports,
and wastewater management.73 In short, China was heavily dependent upon
Japan in this period for its capital, ODA, and technology.
Beginning in the mid- and especially late 2000s, however, the asymmet-
rical Chinese economic dependence on Japan lessened. To be clear, China
still needed Japan, but Sino-Japanese economic relations had become more
balanced, with China beginning to believe that Japan and China needed one
another economically. As the CASS bluebook on Japan summarized, Sino-
Japanese trade relations had entered into a stage of “stagnation.”74 They still
constituted about one-tenth of China’s foreign trade, but other states began to
catch up and assume greater shares of China’s foreign trade.
Moreover, as CASS analyst Zhang Jifeng noted, China had replaced the
United States to become Japan’s largest trading partner by 2004, and China
and Japan had entered into a stage of mutual economic dependence, with China
utilizing Japan’s capital and technology and Japan benefiting from the Chinese
market, as well as its natural resources.75 Similarly, in 2005, government

68
Interview KZ-#13, Beijing, China, November 16, 2015.
69
Interview KZ-#41, Beijing, China, January 22, 2016; data for the figure below comes from
www.econstats.com/wdi/wdiv__95.htm
70
Interview KZ-#75, Shanghai, China, May 12, 2016; interview KZ-#93, Beijing, China, June 16,
2016.
71
Feng (2008).
72
Koga (2016).
73
Feng (2003).
74
Wang (2008, p. 14).
75
Zhang Jifeng from the Japan Institute at CASS, “Zhongri jingji guanxi de xinbianhua yu woguo
de duice [New Changes in Sino-Japan Economic Relations and China’s Policies],” Zhongguoji
jingji guanxi xuehui dijiuci daibiao dahui ji xueshu yantaohui huiyilunwen [Conference Paper
of China’s 9th Annual Conference on International Economic Relations], 2005, p. 102.
112

Figure 4.4 Japanese ODA to China

4.2 Explaining the Temporal Trends 113

analysts from the Chinese Ministry of Commerce stated that as Japan con-
tinuously decreased its ODA to China, Sino-Japanese economic cooperation
gradually turned into normal economic cooperation: The development of
the Japanese economy needed China and vice versa.76 The 2020/2021 China
Institutes of Contemporary International Relations (CICIR) annual report also
noted that Sino-Japanese economic and trade relations have a solid foundation
and huge potential, citing China’s attraction to Japan as its largest export mar-
ket and China’s need for Japanese technology.77
Interviews with government policy analysts and former officials also indicate
that China perceived this objective change in Sino-Japanese economic relations.
Senior government policy analysts stated that Chinese economic dependence
on Japan decreased beginning in the mid-2000s, especially as China’s economic
volume grew and its economy diversified; after 2007, Japan began to need the
Chinese market even more.78 This did not mean that China no longer needed
Japan, as its technology and key intermediary products remain important to
China’s supply chain. Rather, the Sino-Japanese economic relationship had
become one of interdependence instead of asymmetrical dependence.79 China
no longer needs Japanese ODA. Japanese FDI to China, although significant,
has decreased both in proportion and importance. As China further industri-
alizes, it has nurtured and created its own domestic high-tech industries, such
as semiconductor and telecommunication industries. As such, the economic
cost of coercing Japan became lower compared to the 1990s and early 2000s.

4.2.3 Geopolitical Backlash Cost

Geopolitical backlash cost is relevant for choices of China’s coercive tools.
Geopolitical backlash cost was low in the pre-2005 period (especially in the
1990s) and became high afterward. As noted in Chapter 3, the US priority in
the 1990s was still Europe, and the United States did not reorient its atten-
tion back to the Asia-Pacific region until after the War on Terror in the early
2000s. The MFA’s official China’s Foreign Affairs Overview noted that eco-
nomic conflicts of interest between Japan and the United States sharpened in
1990 before relaxing in 2001.80 Also, although the United States stated that

76
Dangqian zhongri guanxi he xingshi jiaoyu huoye wenxuan [Current Sino-Japan Relations and
Education Regarding the Situation] (Beijing: Hongqi [Red Flag] Press, 2005), p. 63.
77
CICIR (2020, p. 118).
78
Interview KZ-#40, Beijing, China, January 22, 2016; interview KZ-#41, Beijing, China, ­January
22, 2016; and interview KZ-#45, Beijing, China, February 2, 2016.
79
Interview KZ-#51, Beijing, China, March 8, 2016; interview KZ-#97, Beijing, China, July
18, 2016.
80
See Diplomatic history editorial office of the MFA (1991, p. 6); Diplomatic history editorial
office of the MFA (2002, p. 451). The United States viewed Japan as a “competitive threat,”
particularly in the 1980s and early 1990s, and political frictions erupted between the two
countries. See http://fpc.state.gov/documents/organization/222078.pdf, accessed February 16,
114 Sino-Japanese Disputes in the East China Sea

the Senkaku Islands came within the scope of the Japan-US security treaty, the
Japanese media pointed out that the two nations had yet to “work out exactly
how the treaty would function in the area” in 1998.81 Given US prioritization
of Europe and economic conflicts between Japan and the United States, the
geopolitical backlash cost to use military coercion was low in this period.
However, the cost began to increase when the United States poured greater
effort back into Asia after 9/11. As 2002 China’s Foreign Affairs indicated,
the United States began to strengthen its alliance with Japan after 9/11.82
Similar statements about the strengthening of the US-Japan alliance consis-
tently appeared in later versions of China’s Foreign Affairs.83 China’s 2004
and 2006 official defense white papers also pointed out that the United States
pushed for a more integrated military alliance with Japan.84
Furthermore, such semiofficial Chinese sources as the 2005 annual report of
CICIR stated that Japan’s emphasis on defense had shifted from the northern
area to the southwest since 2004.85 The 2006 CASS annual report echoed the
CICIR observation that Japan had been further strengthening the US-Japan alli-
ance since 2004.86 Such concerns continued, as manifested in CASS, CICIR, and
China Institute of International Studies (CIIS) reports in 2018, 2020, and 2021,
respectively.87 In this sense, the United States returning its focus to Asia due to
counterterrorism and the strengthening of the US-Japan alliance increased the
general geopolitical backlash cost for China in the post-2005 period.

4.2.4 Result: Temporal Variation of Chinese

Coercion and Choices of Coercive Tools
When the need to establish a reputation for resolve was generally low and
economic cost was high in the pre-2005 period, China refrained from using
coercion. During the 1996–1997 period, the need to establish a reputation
for resolve was higher than in the early 1990s due to intense international
media exposure, which made the need to establish a reputation for resolve
and economic cost equally high. However, China still refrained from using
coercion. As the cost-balancing theory indicates, the issue importance of East

2017; cross-checked with one former U.S. official, interview KZ-#119, Washington D.C., USA,
­February 16, 2017; see also Schoff (2017, pp. 44–48).
81
Hidemichi Katsumata, “How Safe Is Japan? / Land Disputes Expose Weaknesses,” The Daily
Yomiuri, April 21, 1998.
82
Diplomatic history editorial office of the MFA (2002).
83
Diplomatic history editorial office of the MFA (2004, p. 15); Diplomatic history editorial office
of the MFA (2005, p. 2); and Diplomatic history editorial office of the MFA (2007, pp. 11–12).
84
China’s National Defense White Paper 2004, www.mod.gov.cn/regulatory/2011-01/06/­
content_4617807.htm; China’s National Defense White Paper 2006, www.mod.gov.cn/­
regulatory/2011-01/06/content_4617808.htm.
85
CICIR (2006, pp. 211, 213, 225).
86
CASS (2006, p. 122).
87
CICIR (2020, p. 116); CIIS (2021, p. 116); and Zhang (2018, p. 57).
4.3 The 2010 Boat Clash Incident 115

China Sea disputes is not high enough for China to use coercion when both
the costs and benefits of coercion are high. Weiss notes that 1996 and 1997
coincided with China’s coercion toward Taiwan in the Taiwan Strait Crisis,
which was a much more pressing concern for China.88 She suggests that China
refrained from drastic measures against Japan to mitigate Japan’s concerns
over the Taiwan Strait Crisis, which further proves that issue importance mat-
ters. Disputes in the East China Sea are simply not as critical as issues involving
Cross-Strait relations, which the next chapter examines.
Beginning in the mid-2000s until around 2015, however, the need to estab-
lish a reputation for resolve became high while economic cost became lower,
and China began to coerce Japan over disputes in the East China Sea. However,
because the geopolitical backlash cost also became high, Chinese coercion
remained nonmilitarized. The following passages utilize two case studies to
illustrate the dynamics in the post-2005 development of East China Sea dis-
putes, analyzing in-depth the need to establish resolve, the economic cost, and
the geopolitical backlash cost.

4.3 The 2010 Boat Clash Incident

On September 7, 2010, the fishing boat of Chinese captain Zhan Qixiong col-
lided with two JCG vessels in the territorial waters of the Senkaku Islands.
Initially, Japanese authorities “took into custody the entire crew of the ship.”89
According to a well-informed former US government official, the standard prac-
tice prior to this incident was for Chinese fishermen to sign an apology, after
which they would be sent home.90 However, because they failed to sign the
apology during this incident, Japan arrested them according to domestic law.
China reacted drastically.91 On the evening of September 7, the Chinese
Ambassador to Japan lodged a strong protest and demanded that Japan release
the boat and all the crew on board immediately.92 On September 10, Japan fur-
ther angered the Chinese government when the Minister of Land, Infrastructure,
and Transport stated that territorial disputes did not exist in the East China
Sea.93 Chinese Foreign Ministry spokesperson Jiang Yu immediately responded
that “if Japan continued to take reckless actions, it would have to bear the

88
Weiss (2014, p. 105).
89
William Wan, “Boat Collision Sparks Anger, Breakdown in China-Japan Talks,” Washing-
ton Post, September 20, 2010, www.washingtonpost.com/wp-dyn/content/article/2010/09/20/
AR2010092000130.html. Interview KZ-#118, Washington D.C., USA, February 13, 2017.
90
Interview KZ-#104, Washington D.C., USA, September 6, 2016.
91
Ibid.
92
Li (2011, p. 103).
93
Ibid., p. 104; cross-checked with “Diaoyudao shijian zhongri shuangfang taidu gengqu qiangy-
ing” [China and Japan Became More Confrontational Following the Senkaku/Diaoyu Incident],
September 10, 2010, BBC News, www.bbc.com/zhongwen/simp/china/2010/09/100910_us_
japan_diaoyu_row.shtml?print=1.
116 Sino-Japanese Disputes in the East China Sea

consequences.”94 State Councilor Dai Bingguo also summoned the Japanese

Ambassador to China, warning Japan that it should not “miscalculate the situ-
ation” and should immediately release all Chinese crew and the fishing boat.95
Japan subsequently released all members except the captain on September 13
and planned for a domestic trial against the captain. MFA spokesperson Jiang
Yu demanded that Japan refrain from the legal trial on September 14.96 On
September 19, Chinese Foreign Ministry spokesman Ma Zhaoxu demanded that
“Japan immediately release the captain without any preconditions.”97 Ma fur-
ther emphasized that if Japan heedlessly continued to proceed with the trial,
China would take “drastic countermeasures.”98 Jiang again urged Japan to “cor-
rect its mistakes and to release the captain” on September 22.99 Simultaneously,
then-Chinese Premier Wen Jiabao repeated Ma’s statements, warning that if
Japan continued recklessly, China would have to take countermeasures.100
Still, Japan did not relent, which led to China using the following kinds
of coercion. First, it used diplomatic sanctions, terminating all senior-level
exchanges (ministerial level and above) between the Chinese and Japanese
governments.101 Exchanges did not resume until March 2011, as confirmed
through interviews with a Japanese diplomat based in Beijing at that time and
Chinese government policy analysts.102
Second, China used economic sanctions. According to the Japanese diplomat
based in Beijing, China imposed a ban on its rare earth exports to Japan for two
months, which affected Japanese IT firms in particular.103 According to the New
York Times, industry officials said that China’s customs agency had notified com-
panies that they were not allowed to ship rare earth materials to Japan, although
they were still allowed to go to Hong Kong, Singapore, and other destinations.104

94
Ibid.
95
Ibid.
96
Li (2011, p. 236).
97
Wan, “Boat Collision Sparks Anger, Breakdown in China-Japan Talks.”
98
Li (2011, p. 236).
99
MFA press conference, September 22, 2010, http://news.163.com/10/0922/20/6H7CKLI
700014JB5.html.
100
Li (2011, p. 237).
101
Ibid.
102
Interview, Beijing, China, July 15, 2014; interview KZ-#10, Beijing, China, October 13, 2015;
interview KZ-#45, Beijing, China, February 2, 2016; and interview KZ-#99, Beijing, China,
July 21, 2016.
103
Interview, Beijing, China, July 15, 2014; also confirmed by a U.S. policy analyst and former U.S.
officials, interview KZ-#109, Washington D.C., USA, December 5, 2016; interview KZ-#118,
Washington D.C., USA, February 13, 2017; and interview KZ-#119, Washington D.C., USA,
February 16, 2017. Although some say that there was still rare-earth flow from China to Japan,
it was merely an indication of unsuccessful coercion: Local Chinese companies were selling
rare-earth materials to Japan.
104
Keith Bradsher, “Amid Tension, China Blocks Vital Exports to Japan,” September 22, 2010,
New York Times, www.nytimes.com/2010/09/23/business/global/23rare.html?pagewanted=
all&_r=2&.
4.3 The 2010 Boat Clash Incident 117

In the WTO lawsuit that Japan subsequently filed regarding the rare-earth
embargo, Japan listed “the imposition and administration of restrictions through
unpublished measures” as one area where China did not conform to the WTO,
indicating that there indeed was an export ban.105 Many Chinese government
policy analysts also admitted that China used economic sanctions via the export
ban on rare-earth materials.106 One former Chinese diplomat based in Japan at
that time indicated that although China had reduced its rare-earth exports due
to environmental concerns since summer 2010, the timing of the complete ban
of rare-earth export to Japan in September of 2010 proved that this was an eco-
nomic countermeasure for the boat clash incident.107
Third, China used gray-zone coercion in two forms. China arrested four
Japanese citizens in China for espionage, subsequently releasing three of
them while keeping the alleged “leader,” mirroring Japan’s arrest of the cap-
tain.108 Japan released the captain on September 25, 2010.109 Interestingly,
China continued to use gray-zone coercion via its fishery administrative
ships. Chinese fishery administrative ships no. 201 and 203 had a standoff
with JCG ships on September 2, and ship no. 201 began patrolling around
the Senkakus for the first time on September 30.110 Beginning in November
2010, the Chinese government announced that China’s fishery adminis-
trative ships would conduct regularized patrols around the waters of the
Senkakus.111
The goal of these coercive actions is clear. As the official statements above
indicate, the immediate goal was to force Japan to release the captain prior to
a domestic trial. Interviews with a former Chinese diplomat based in Tokyo
at that time and government policy analysts also confirmed this goal.112
Furthermore, since Japan denied the existence of a dispute, China wanted to
coerce Japan so it would return to the tacit consensus that there was a dispute

105
“DS431: China – Measures Related to the Exportation of Rare Earths, Tungsten and Molybde-
num,” WTO Dispute Settlement, www.wto.org/english/tratop_e/dispu_e/cases_e/ds431_e.htm.
106
Interview KZ-#41, Beijing, China, January 22, 2016; interview KZ-#67, Shanghai, China,
May 4, 2016.
107
Interview KZ-#66, Shanghai, China, May 4, 2016.
108
Interview KZ-#10, Beijing, China, October 13, 2015; interview KZ-#93, Beijing, China, June
16, 2016; interview KZ-#104, Washington D.C., USA, September 6, 2016; and cross-checked
by Tong Qian, “Zai zhongguo beibu de ribenren huohan tuobeizhe [Japanese Arrested in
China might Include Those Who Escaped from North Korea],” BBC News, October 2, 2015,
www.bbc.com/zhongwen/simp/world/2015/10/151002_china_japan_espionage_nkorea.
109
Xinhua News, September 25, 2010, http://news.163.com/10/0925/04/6HDCMAMM0001124J​
.html.
110
Zhang (2013, p. 197). For recollections from one of the crew members on board, see Cheng
Gang, “Zhongri jianchuan duizhi jinru diliutian [The Sino-Japanese Standoff Entered Day 6],”
Global Times, September 30, 2010, http://war.news.163.com/10/0930/10/6HQSIKAN00011
MTO.html.
111
Zhang and Yang (2011, p. 19).
112
Interview KZ-#66, Shanghai, China, May 4, 2016.
118 Sino-Japanese Disputes in the East China Sea

regarding the Senkakus and that both sides would table the dispute.113 The fol-
lowing passages demonstrate how the cost-balancing theory explains this case.
Turning first to the need to establish resolve, prior to the boat clash inci-
dent, semiofficial assessments from both the CIIS and CICIR’s annual reports
indicated that the Japanese media had begun to publicize disputes regarding oil
fields in the East China Sea in late 2009, and officials like Seiji Maehara took
quite a hawkish stance on these disputes.114 The 2010 boat clash incident itself
gained international salience, especially because of coverage by such major
media outlets as the New York Times and CNN.115
China’s logic can also be discerned from the statements made by Chinese offi-
cials. When State Councilor Dai Bingguo warned Japan to avoid “miscalculating
the situation,” he wanted to send a message to Japan (prior to the use of coer-
cion) that it should not view China as unresolved and unwilling to defend its
territorial claims. In fact, Dai Bingguo had been using the term “miscalculation”
for several years. In his memoir, Dai suggested to then-Japanese Chief Cabinet
Secretary Fukuda Yasuo that if Japan did not make statements to harshly sup-
press Taiwan’s pro-independence activities in 2004, Taiwanese President Chen
Shui-bian would miscalculate the situation.116 Dai explained by stating that if
[China and Japan] let our guard down, Taiwan would “miscalculate and venture
further into the danger [of independence], which is why Japan should send clear
signals to Taiwan [to suppress its pro-independence activities].”117 Dai’s repeated
sending of clear signals so that targets would not miscalculate in both the Taiwan
and Japan cases laid out Chinese leaders’ logic: Take actions to demonstrate your
resolve so that your target does not view you as weak and unresolved.
Interviews with government policy analysts and scholarly writing further
flesh out this logic of demonstrating resolve. Government policy analysts
stated, for instance, that if China did not use coercive measures to stop Japan’s
plan for a domestic trial, it would signal to Japan that China had acceded to
Japan’s territorial claims, and especially legal claims, over the Senkakus.118
Other government policy analysts emphasized that China feared that if it did
not act, it would be viewed as weak.119

113
Interview KZ-#97, Beijing, China, July 18, 2016; interview KZ-#98, Beijing, China, July 20,
2016.
114
CIIS (2010, p. 234); CICIR (2010, p. 347). Both annual reports were published in 2010 but
before the incident.
115
Elise Labott, “U.S. Walks Tightrope in China-Japan Dispute,” CNN, September 24, 2010,
www.cnn.com/2010/POLITICS/09/24/us.china.japan/; Martin Fackler and Iain Johnson,
“Arrest in Disputed Seas Riles China and Japan,” New York Times, September 19, 2010,
www.nytimes.com/2010/09/20/world/asia/20chinajapan.html.
116
Dai (2016, p. 92).
117
Ibid. Dai also repeated this phrase during his discussion with U.S. officials regarding Chen
Shui-bian’s pro-independence activities in 2004. See p. 69 of ibid.
118
Interview KZ-#75, Shanghai, China, May 12, 2016; interview KZ-#93, Beijing, China, June
16, 2016.
119
Interview KZ-#97, Beijing, China, July 18, 2016.
4.4 Japan’s Nationalization of the Senkaku Islands in 2012 119

Regarding economic cost, China still needed to import high-tech interme-

diary products,120 but following the post-2005 trend, Sino-Japanese economic
relations had become more balanced.121 In particular, as indicated in the 2008
CASS annual report on Japan, Japanese ODA to China would end in 2008, fol-
lowed by Sino-Japanese economic relations entering into a period of “increas-
ing parity.”122 The 2010 CIIS annual report (prior to the boat clash incident)
also noted that the Japanese economy had lost the momentum it enjoyed in
the 1990s.123 According to official data released by the Japanese government
on August 16, 2010, China’s GDP would surpass that of Japan by 2010.124
Chinese media immediately and extensively reported this data, which came out
three weeks before the boat clash incident.125 In short, and as noted in the pre-
vious section, Sino-Japanese economic relations had become more balanced.
As for geopolitical backlash cost, the United States continued to strengthen
the US-Japan alliance in the post-2005 period. The 2008 annual report of the
CIIS stressed that the United States had further bolstered its forward presence
in China’s periphery, while encouraging Japan to become a “normal nation” to
balance China.126 The 2008/2009 CICIR annual report also noted that Japan’s
importance to the United States as a strategic foothold in the Asia-Pacific had
become on par with Guam.127
To summarize, as the Senkaku dispute became more publicized, China
felt a greater need to demonstrate its resolve to defend the sovereignty of the
Senkakus. As the economic cost lowered and only the geopolitical backlash
cost remained high, China used nonmilitarized coercion in the 2010 incident.
The next case study illustrates a similar dynamic.

4.4 Japan’s Nationalization of the

Senkaku Islands in 2012
In early September 2012, the Japanese government decided to nationalize three
of the Senkakus, announcing that it had bought them from private Japanese

120
Greaney and Li (2009); Yuqing Xing, “Foreign Direct Investment and China’s Bilateral
Intra-industry Trade with Japan and the US,” Institute for Economies in Transition, Bank of
Finland, BOFIT Discussion Papers, 1/2007.
121
Wang (2009, p. 18).
122
Wang (2008, p. 16).
123
CIIS (2010, p. 2).
124
Zhu Changzheng and Wang Jing, “GDP shijie di’er yiran kunrao zhongguo ren [China Still
Troubled Despite Ranking 2nd in GDP],” Caixin News, August 18, 2012, http://finance.sina​
.com.cn/review/20100818/10378502433.shtml.
125
See, for example, “Zhongguo GDP chaoriben nan lingren xinxi [It is Not Exciting that China’s
GDP Surpassed that of Japan],” Renmin Wang [People Net], August 20, 2010, http://japan​
.people.com.cn/35464/7110727.html; Zhu Changzheng and Wang Jing, “GDP shijie di’er
yiran kunrao zhongguo ren.”
126
CIIS (2008, p. 8).
127
CICIR (2009, p. 327).
120 Sino-Japanese Disputes in the East China Sea

owners.128 Reacting to this agreement, Chinese MFA spokesperson Hong Lei

stated that China was resolved in defending its territories and would take nec-
essary measures to defend its sovereignty on September 5.129 After Japan offi-
cially signed the contract to formally nationalize the Senkakus on September
11, Hong repeated that China was resolute in defending its territory, urging
Japan to terminate the action of nationalizing the Senkakus and return to using
negotiations to resolve the Senkaku dispute.130
When Japan ignored China’s protests, China began taking coercive mea-
sures.131 First, China used gray-zone coercion, with Chinese maritime sur-
veillance ships expelling Japanese vessels for the first time on October 30.132
Second, China utilized diplomatic sanctions. According to an interview with
a Japanese diplomat based in Beijing at that time, senior-level exchanges
(ministerial level and above) were cut off, and the diplomat’s Chinese
counterparts would not reply to emails, phone calls, or requests for meet-
ings.133 According to this diplomat, the termination of exchanges took place
despite the Japanese counterparts’ repeated attempts and wishes to resume
communications.134 This episode of diplomatic sanctions lasted until April
2014, when China finally received a group of Japanese Diet members.135
Chinese government policy analysts and scholars confirmed this duration.136
Third, small-scale economic sanctions also ensued. For one, Chinese cus-
toms increased the inspection of exports to and imports from Japan.137 For
another, some Japanese companies complained about being precluded from
bidding or contracting processes with Chinese counterparts, with the Chinese
side citing “administrative guidance.”138 One Japanese scholar who inter-
viewed Chinese enterprises and local officials in northern China confirmed
that these inspections and exclusion decisions were not made by localities,

128
Jane Perlez, “China Accuses Japan of Stealing After Purchase of Group of Disputed Islands,”
September 11, 2012, New York Times, www.nytimes.com/2012/09/12/world/asia/china-­
accuses-japan-of-stealing-disputed-islands.html; The Asahi Shimbun, September 5, 2012, http://
ajw.asahi.com/article/behind_news/politics/AJ201209050013.
129
MFA press conference, September 5, 2012, www.fmprc.gov.cn/web/fyrbt_673021/
jzhsl_673025/t966538.shtml.
130
MFA press conference, September 11, 2012, www.fmprc.gov.cn/web/fyrbt_673021/
jzhsl_673025/t968441.shtml.
131
MFA press conference, September 12, 2012, www.fmprc.gov.cn/web/fyrbt_673021/
jzhsl_673025/t968837.shtml.
132
Shi (2016, p. 212).
133
Interview, Beijing, China, July 15, 2014.
134
Ibid.
135
Ibid.
136
Interview KZ-#10, Beijing, China, October 13, 2015; interview KZ-#41, Beijing, China, Janu-
ary 2, 2016.
137
MFA press conference, September 24, 2012, www.fmprc.gov.cn/web/fyrbt_673021/
jzhsl_673025/t972832.shtml.
138
Interview, Beijing, China, July 15, 2014.
4.4 Japan’s Nationalization of the Senkaku Islands in 2012 121

which would have liked to strengthen economic ties with Japan. This indi-
cates that the instructions came from the central government.139
MFA spokesperson Hong Lei demanded that Japan terminate the action of
nationalization and return to the consensus of tabling disputes on September
11, 2012. According to interviews with government policy analysts, former
diplomats based in Japan, former SOA officials, and scholars, China’s goal was
to force Japan to at least accept that there was a territorial dispute over the
Senkaku Islands.140 The following paragraphs indicate how the cost-balancing
theory explains why China used coercion in the 2012 nationalization incident.
The need to establish a reputation for resolve was high. Despite Japan’s
belief that it could manage the Senkaku issue via nationalization, China
believed that Japan was taking actions to further strengthen its control of the
Senkakus. Japan named the smaller islands in the Senkakus on March 5, 2012,
sued the Chinese captain in the boat clash incident on March 15, 2012, and
listed one of the islands in the Senkakus as “national property” in late March
2012.141 In particular, Japan made explicit its intention to nationalize the
Senkaku Islands on July 7, 2012, the timing of which was particularly sensi-
tive to China, as it marked the 75th anniversary of the beginning of the Sino-
Japanese War. Japan’s intention was reported extensively by foreign media,
including the New York Times, the Washington Post, and the Strait Times, as
well as domestic Japanese media.142 After repeated warnings from the Chinese
Foreign Ministry about Japan’s decision to nationalize the Senkakus, Japan
reached an agreement to nationalize them on September 5, 2012, which the
Chinese Foreign Ministry spokesperson harshly criticized.143 Interestingly,
press releases from the MFA spokesperson prior to September 5 mainly voiced
strong protests, but the spokesperson added one sentence after that date: “The
Chinese government is resolute and has strong will in defending the Diaoyu

139
Interview KZ-#107, Washington D.C., USA, September 28, 2016.
140
Interview KZ-#10, Beijing, China, October 13, 2015; interview KZ-#71, Shanghai, China,
May 6, 2016; interview KZ-#66, Shanghai, China, May 4, 2016; interview KZ-#93, Beijing,
China, June 16, 2016; and interview KZ-#99, Beijing, China, July 21, 2016.
141
MFA press conference, March 5, 2012, www.fmprc.gov.cn/web/fyrbt_673021/jzhsl_673025/
t911108.shtml; MFA press conference, March 15, 2012, www.fmprc.gov.cn/web/
fyrbt_673021/jzhsl_673025/t914379.shtml; MFA press conference, March 27, 2012, www​
.fmprc.gov.cn/web/fyrbt_673021/jzhsl_673025/t917806.shtml.
142
Martin Fackler, “Under Diplomatic Strain, Japan Recalls Envoy in Dispute With China Over
Islands,” New York Times, July 15, 2012, www.nytimes.com/2012/07/16/world/asia/japan-­
recalls-ambassador-to-china.html; Chico Harlan, “Japan’s Ambassador to China Returns for
Talks Amid New Row Over Islands,” Washington Post, July 15, 2012, www.washingtonpost​
.com/world/japans-ambassador-to-china-returns-for-talks-amid-new-island-row/2012/07/15/
gJQAQ9K6lW_story.html?utm_term=.fda9342bb2b7; Kwan Weng Kin, “Japan Recalls
Envoy to China,” The Straits Times, July 16, 2012; “Govt: Senkaku plan not diplomatic mat-
ter,” The Daily Yomiuri, July 10, 2012; and “Noda Moving to Nationalize Senkakus,” The
Nikkei Weekly, July 16, 2012 Monday.
143
MFA press conference, September 5, 2012, www.fmprc.gov.cn/web/fyrbt_673021/
jzhsl_673025/t966538.shtml.
122 Sino-Japanese Disputes in the East China Sea

[Senkaku] Islands.”144 This statement came right before China began to coerce
Japan. It seems that the logic behind this sentence is China’s need to consistently
demonstrate its resolve in defending China’s sovereignty over the Senkaku
Islands. More telling was that amid Chinese coercion, a semiofficial Chinese
source – Guo Jiping145 – wrote that China used regularized patrols to signal its
strong resolve in defending its sovereignty and emphasized that no one should
doubt China’s resolution in the People’s Daily on October 12, 2012.146
Interviews with former diplomats, government policy analysts, and scholars
also indicate the logic of establishing a reputation for resolve. Chinese govern-
ment policy analysts indicated that China and Japan had been dealing with the
issue of nationalization since April 2012, but Japan did not heed China’s warn-
ing.147 In contrast to the Koizumi era, Chinese government policy analysts
believed that the Democratic Party of Japan – the ruling party in 2012 – pub-
licized the issue of nationalization.148 One former senior government policy
analyst stated that if Japan were to accept that there was a dispute in 2012
and then tacitly tabled it, China would not have coerced in the first place.149
Because China feared being viewed as weak by Japan, it used coercive mea-
sures in the 2012 case to deter any future Japanese actions.150 As one former
Chinese diplomat based in Tokyo noted, China was afraid that Japan might
read China’s inaction as gains and therefore advance further.151 In short, the
need to establish a reputation for resolve was high in this incident.
Nevertheless, China was not simply reacting passively. As some scholars
and government policy analysts note, China began contemplating regularized
patrols around the contiguous zone of the Senkaku Islands around 2010 but
had not had time to “make proper preparations.”152 This suggests that Chinese
coercion in 2012 demonstrated opportunism. Japan’s decision to nationalize
the islands created an opportunity for China to “legitimately” carry out what
it had been planning since 2010.

144
Ibid.; MFA press conference, September 11, 2012, www.fmprc.gov.cn/web/fyrbt_673021/
jzhsl_673025/t968441.shtml; MFA press conference, September 12, 2012, www.fmprc.gov​
.cn/web/fyrbt_673021/jzhsl_673025/t968837.shtml; MFA press conference, September 13,
2012, www.fmprc.gov.cn/web/fyrbt_673021/jzhsl_673025/t969139.shtml.
145
Just like Zhongsheng, this is a pseudonym meaning “international peace.”
146
People’s Daily, October 12, 2012. http://paper.people.com.cn/rmrb/html/2012-10/12/
nw.D110000renmrb_20121012_5-03.htm?div=-1.
147
Interview KZ-#45, Beijing, China, February 2, 2016.
148
Interview KZ-#75, Shanghai, China, May 12, 2016.
149
Interview KZ-#93, Beijing, China, June 16, 2016.
150
Interview KZ-#45, Beijing, China, February 2, 2016; interview KZ-#51, Beijing, China, March
8, 2016.
151
Interview KZ-#66, Shanghai, China, May 4, 2016; interview KZ-#97, Beijing, China, July 18,
2016; and interview KZ-#98, Beijing, China, July 20, 2016.
152
Interview KZ-#93, Beijing, China, June 16, 2016; interview KZ-#99, Beijing, China, July 21,
2016.
4.4 Japan’s Nationalization of the Senkaku Islands in 2012 123

As with the 2010 case, despite being an important aspect of China’s foreign
economic relations, the proportion of China’s overall foreign trade volume
in Sino-Japanese bilateral economic relations had continuously decreased. As
reaffirmed by the 2011 CASS annual report on the Japanese economy, Sino-
Japanese trade had entered into a stage of “high-level stagnation,” lagging
behind China’s foreign trade with the United States and the EU.153 Japan was
only the fourth-largest trading partner of China in 2011, behind the EU, the
United States, and ASEAN.154 According to the CASS report, this also sug-
gested that Sino-Japanese trade had matured and stabilized.155
Furthermore, Japanese foreign direct investment to China also decreased
in 2010 after peaking in 2005, and the number of foreign direct investment
contracts witnessed a similar trend.156 According to the 2011 CASS report,
this decline had to do with changes in China’s industrial policies. China’s pre-
vious strategy was to welcome foreign capital of any kind, but China began
to implement a policy that terminated the tax exemption of foreign capital in
2008 because it no longer welcomed traditional and environmentally damag-
ing industries.157 Former Chinese diplomats, scholars, and government policy
analysts also noted that although China still needed Japan for high-tech inter-
mediary products, China’s need had decreased, as can be seen in China no lon-
ger needing Japan’s ODA, and Sino-Japanese economic relations had become
more balanced.158 In short, the economic cost was low in the 2012 case.
The geopolitical backlash cost remained high. For one, as the 2011 CASS
report on Japan and the 2011 CICIR annual report noted, Japan continued
to strengthen its alliance with the United States.159 Japan had also repeatedly
asked the United States to confirm that the US-Japan Security Treaty would
be applicable to the Senkakus.160 For another, CASS reports noticed that
the United States placed the US-Japan alliance as the bedrock of its security
arrangement in Asia.161 The 2011 CIIS annual report noted that after the Sino-
Japan boat clash incident of 2010, Secretary of State Hillary Clinton stated
that the Senkakus fell into the US-Japan Security Treaty, which she reaf-
firmed in October 2010 when meeting with Chinese Foreign Ministry Yang
Jiechi.162 The 2011 CICIR annual report added that the United States began

153
Wang and Zhang (2011, p. 24); Wang and Zhang (2012, p. 19).
154
Wang and Zhang (2012, p. 20).
155
Ibid., p. 20; Wang and Zhang (2011, p. 24).
156
Wang and Zhang (2011, p. 45).
157
Ibid.
158
Interview KZ-#40, Beijing, China, January 22, 2016; interview KZ-#66, Shanghai, China,
May 4, 2016; interview KZ-#67, Shanghai, China, May 4, 2016; and interview KZ-#98, Bei-
jing, China, July 20, 2016.
159
Wang and Zhang (2011, p. 239); CICIR (2012, pp. 324–325).
160
CICIR (2012, p. 331).
161
Zhang and Yang (2011, p. 2); see also CIIS (2011, p. 16).
162
CIIS (2012, p. 204).
124 Sino-Japanese Disputes in the East China Sea

strengthening its military presence by holding military exercises with Japan

and other countries in China’s surrounding waters in early 2011.163
In short, the need to establish resolve was high, the economic cost of coerc-
ing was low, and the geopolitical backlash cost of using military coercion was
high. Specifically, with Japan’s decision to nationalize the Senkakus attract-
ing international attention, China felt the need to use coercion to establish
its credible resolve in defending its sovereignty regarding the Senkakus. The
Sino-Japanese economic relationship had become more balanced, reducing the
economic cost for China to use coercion. China thus used nonmilitary coercion
in the 2012 incident.

4.5 Alternative Explanations

Now that we have examined the temporal trend of China’s coercion in the East
China Sea, as well as two detailed case studies, the following passages look at
competing explanations.

4.5.1 Individual Leaders

The leadership alternative expects certain leaders, such as hawkish leaders, to
be more prone to use coercion than dovish leaders. However, this alternative
explanation is not supported by empirical evidence. First, Chinese coercion
regarding maritime disputes in the East China Sea began during the Hu Jintao
and Wen Jiabao administration, allegedly the weakest of the three generations
of leaders in the post-Cold War period, with some China scholars coining
Hu Jintao’s reign as “inactive” (wuwei).164 Even if one argues that Xi Jinping
would already have assumed power by the time the September 2012 incident
took place, this would not explain the use of coercion by China during the
2010 boat clash incident. After all, if Xi Jinping, an assertive leader, uniquely
contributes to the use of coercion, then we should observe coercion of greater
frequency and magnitude when he assumed power, which is not empirically
correct. In fact, as seen both in the East and South China Sea cases, the Hu
Jintao administration used coercion in maritime territorial disputes and was
therefore not an administration of “inaction,” as some may suggest.
Second, interviews with scholars, government policy analysts, and former
foreign officials also discounted leadership as a definitive factor in explaining
coercion decisions. For example, as one scholar emphasized, despite China
being considered weaker in 2010 than during the Xi administration, China still
used coercion in 2010.165 Another senior government policy analyst noted that
even after Xi came into power, China’s coercion toward Japan did not change,

163
CICIR (2012, p. 113).
164
Li (2016, p. 10).
165
Interview KZ-#13, Beijing, China, November 16, 2015.
4.5 Alternative Explanations 125

emphasizing that the 2012 case was not a result of a supposedly more assertive
Xi.166 In short, individual leadership difference does not constitute a crucial
factor in explaining China’s coercion decisions.

4.5.2 Bureaucracies and Interest Groups

This alternative explanation concerns bureaucratic interests and domestic
interest groups, such as the CCG (previously the Chinese Maritime Surveillance
Force) and state-owned energy companies. Empirically, however, the decision
to use coercion came from the central government in both the 2010 boat clash
incident and the 2012 nationalization of the Senkakus. Interviews with schol-
ars, former officials, Japanese diplomats based in Beijing, and government pol-
icy analysts all indicate that when it came to issues involving Japan, coercion
decisions almost always came from the center.167 One example involves the
rare-earth embargo in the 2010 incident, which, according to US policy ana-
lysts, came from the production sharing contract.168 One government policy
analyst stated that when China used gray-zone coercion in response to Japan’s
official naming of the Senkaku Islands in the March 2012 case, it was the SOA
that laid out plans for the rights-defense patrol, but China began to send mar-
itime surveillance ships into the territorial waters of the Senkakus only after it
was approved by their superiors.169 That is, the decisions came from the cen-
ter, with the different ministries and agencies implementing them.170
According to a former official in the East China Sea bureau of the SOA,
two kinds of missions were tasked to maritime surveillance ships in the East
China Sea. First was regularized patrol, which would have preapproved plans
and models to follow (you yu’an).171 The second was addressing contingencies
and accidents in the East China Sea, which had to be reported at each level all
the way to the center, sometimes with the MFA convening “a joint meeting”
(lianxi huiyi) to determine whether or not maritime surveillance ships would
take action based on “instructions from the center” (zhongyang zhishi).172
This account is in line with the decision-making process seen in South China
Sea cases.
Finally, a related negative case in which China did not coerce also indicates
the centralization of decisions. In June 2008, China and Japan released a “Japan-
China Joint Press Statement” regarding the cooperation between Japan and
China in the East China Sea. According to senior government policy analysts
and scholars, the SOA and state-owned oil companies were strongly against
this agreement, which would lead to “cooperative development” (hezuo kaifa)

166
Interview KZ-#40, Beijing, China, January 22, 2016.
167
Interview, Beijing, China, July 3, 2014; interview, Beijing, China, July 15, 2014.
168
Interview KZ-#109, Washington D.C., USA, December 5, 2016.
169
Interview KZ-#41, Beijing, China, January 22, 2016.
170
Interview KZ-#45, Beijing, China, February 2, 2016.
171
Interview KZ-#71, Shanghai, China, May 6, 2016.
172
Ibid.
126 Sino-Japanese Disputes in the East China Sea

around the median line in the East China Sea, but top leaders decided to con-
tinue negotiations with Japan (goaceng zhudao) that eventually resulted in this
press statement.173 If state-owned Chinese energy companies influence China’s
coercion decisions, we would expect to see China being more confrontational
instead of cooperative in 2008. In short, the use of coercion in the East China
Sea cases is based on centralized decisions, not bureaucratic maneuvering.

4.5.3 Nationalism
If popular nationalism is crucial in explaining coercion decisions, then we
should expect to see stable and repeated coercion over time. Given that nation-
alism, an ideational source of behavior, does not tend to change over time,
we should see stable occurrences in terms of coercion frequency. However,
empirically, China has not resorted to coercion every time an incident takes
place. For example, China refrained from coercion in 1996 and 1997, even
though the two cases in those years are similar to the 2010 and 2012 cases,
when China used coercion. In all four of these cases, Chinese nationalists were
active in starting popular protests against Japan regarding the Senkaku Islands.
In other words, a subset of the Chinese populace has always been nationalistic,
but China did not choose coercion in all four cases. Moreover, China has not
utilized coercion against Japan post-2012, even though anti-Japan nationalist
sentiments are still present in China, indicating that popular nationalism does
not dictate China’s coercion decisions. As CASS specialist Feng Zhaokui noted,
China’s Japan policies should not be controlled by the emotions of the masses.
Rather, they should be based on a precise calculation of China’s national inter-
ests.174 Finally, even if Chinese leaders were under pressure from the nation-
alists to take actions to increase the leaders’ domestic legitimacy, wouldn’t
the use of military coercion, or a direct use of force, logically be a stronger
signaling tool to win domestic legitimacy points? For example, some might
argue that Russian President Putin invaded Ukraine partially to appease the
nationalistic domestic public, which is more in line with the diversionary war
logic. However, we empirically observe a diversionary peace logic in China’s
use of force, not a diversionary war logic.175 If anything, the Chinese govern-
ment used the anti-corruption campaign to increase domestic legitimacy.

4.5.4 Structural Realism and the Power Variable

If the argument of overall Chinese material power growth, and especially
offensive realism, is critical, then we should expect to see a linear progression

173
Interview KZ-#13, Beijing, China, November 16, 2015; interview KZ-#40, Beijing, China,
January 22, 2016.
174
Feng (2003).
175
Fravel (2010).
4.5 Alternative Explanations 127

of coercion from fewer to more cases of military coercion over time, as China’s
power grows. Empirically, we have yet to observe China using military coer-
cion toward Japan. Moreover, if the overall power growth variable is correct,
then we should see China continuously coercing Japan after 2012, given that
China’s power has continued to grow. However, China has not coerced Japan
since the 2012 incident, indicating that the overall power variable fails to cap-
ture the nuances of when and how China coerces.

4.5.5 The Utility of Military Coercion

The argument focusing on the utility of military coercion would predict that
China uses military coercion over issues of high importance, including mari-
time territorial disputes in the East China Sea. Empirically, however, China
has not prioritized militarized coercion. If anything, China has an aversion to
military coercion in the East China Sea, never once using it in East China Sea
disputes. The cost-balancing theory explains China’s preference for nonmilita-
rized coercion in East China Sea cases.
Interviews with government policy analysts, former officials, scholars, and
former foreign officials indicate that China was keenly concerned about the
potential risk of escalation and geopolitical backlash if it used militarized
coercion.176 For example, government policy analysts stressed that “moder-
ate forms” of coercion would not push Japan to the complete opposite side,
but militarized coercion would.177 One former Chinese diplomat based in
Tokyo stated that China refrained from military coercion for fear of gener-
ating military conflicts, believing that as long as China did not use military
means, the United States would not get militarily involved.178 Even former
officials from the East China Sea bureau of the SOA admitted that China’s
bottom line was to avoid military conflicts, and other former members of the
maritime surveillance agency who participated in regularized patrols in 2012
confirmed that both China and Japan intentionally exercised restraint.179
The tacit understanding between Chinese maritime surveillance ships and
the JCG was such that both sides aimed to avoid escalation. Japan tried to
prevent its right-wing nationalists from landing on the Senkakus, and China
kept its own fishing vessels away from them.180 As a former government
policy analyst summarized, China conducted “cost–benefit analyses” when it
considered using coercion on Japan that would not push Sino-Japan relations

176
Interview KZ-#104, Washington D.C., USA, September 6, 2016.
177
Interview KZ-#51, Beijing, China, March 8, 2016; interview KZ-#40, Beijing, China, January
22, 2016; interview KZ-#41, Beijing, China, January 22, 2016; interview KZ-#45, Beijing,
China, February 2, 2016.
178
Interview KZ-#66, Shanghai, China, May 4, 2016.
179
Interview KZ-#71, Shanghai, China, May 6, 2016.
180
Ibid.
128 Sino-Japanese Disputes in the East China Sea

to the extreme.181 In other words, China used coercion without “breaking”

relations with Japan (dou er bu po).182 As such, due to concerns about geo-
political costs, and especially the possibility of escalation into wars, China
did not use militarized coercion.

4.6 Conclusion
As the cost-balancing theory argues, the costs and benefits of coercion explain
when and how China coerces. In the pre-2005 period, the need to establish
resolve was generally low, whereas the economic cost was high. China, there-
fore, refrained from coercion. The need to establish resolve was briefly higher
in 1996 and 1997, but China did not utilize coercion in these cases because
of its equally high need for resolve and high economic costs. Because the East
China Sea is not China’s core interest, its issue importance is not sufficiently
high to justify the use of coercion. When the need to establish a reputation for
resolve is high and the economic cost is low, China used coercion, as seen in
the post-2005 trend and, in particular, the 2010 and 2012 cases. It refrained
using from military coercion for fear of potential geopolitical backlash. After
2015, the need to establish resolve became lower due to lower international
media exposure and a more cooperative stance from Japan. China has since
refrained from coercion, thereby leading to a cyclical pattern of coercion simi-
lar to the one found in the South China Sea.
In more recent years, as indicated in the 2020/2021 CICIR and CIIS
reports, the Chinese perspective is that Sino-Japanese relations have stabi-
lized, improved, and “returned to the right track.”183 Both sides are actively
engaged in crisis management regarding the Senkakus. However, if an inci-
dent of extensive media coverage takes place, it is quite possible that China
would resort to more drastic measures, such as the gray-zone standoffs in
2010 and 2012.
As with South China Sea cases, the need to establish a reputation for
resolve – demonstrating the capability and willingness to defend one’s sov-
ereignty in these disputes – was considered more important than boosting
domestic regime legitimacy. China cared about building the reputation that it
is resolved and willing to take action to defend its national security interests,
which, according to its logic, makes others believe that China will act in a
similarly resolved way in the future and thus increases China’s reputation of
resolve in the eyes of other states. As for the costs of coercion, economic cost,
like the asymmetrical Chinese dependence on Japan, was a crucial factor that
explained China’s decisions to not pursue coercion in the 1990s.

181
Interview KZ-#93, Beijing, China, June 16, 2016; interview KZ-#98, Beijing, China, July 20,
2016.
182
Interview KZ-#51, Beijing, China, March 8, 2016.
183
CICIR (2020, pp. 116–117); CIIS (2021, p. 57).
4.6 Conclusion 129

Moreover, the process of tracing the costs and benefits of coercion in the
East China Sea from 1990 to the present makes it clear that the power variable
does not explain all instances of coercion. In other words, China’s growing
material capability does not explain the timing of Chinese coercion or China’s
preference for nonmilitarized coercion in the East China Sea. As one can see
from the South China Sea chapter, China was capable of gray-zone coercion in
the 1990s, but it did not use it in the East China Sea until 2005. Such specific
mechanisms as variations in the costs and benefits of coercion – the need to
establish resolve variable, the economic cost variable, and the geopolitical cost
variable – better explain the timing and tools of coercion.
Just as in the South China Sea cases, the US factor was crucial in deterring
China from escalating to militarized coercion against Japan. Although Allen
Carson argues that Chinese coercion was less harsh toward Japan than other
Southeast Asian countries, this chapter demonstrates that Chinese coercion
against Japan was just as harsh.184 The constraining factor was the United
States.
Finally, China’s lack of action in 1996 and 1997 demonstrates the intercon-
nectedness of issue areas and the relevance of the issue importance variable. In
an ideal world, China might have used coercion in 1996 and 1997 to establish
resolve, but the Taiwan issue, a core interest for China, was prioritized over
disputes concerning Japan. China, therefore, needs to be economical about
when and against whom to use coercion, only using it for issues of the highest
importance, such as Taiwan, if both the need to establish resolve and the eco-
nomic cost are high. The next chapter, in which we turn to Chinese coercion
regarding Taiwan, precisely examines such cases.

184
Allen R. Carlson, “Why Chinese Nationalism Could Impact the East and South China Seas
Very Differently,” National Interest, September 24, 2015, http://nationalinterest.org/feature/
why-chinese-nationalism-could-impact-the-east-south-china-13922?page=2.
5

Coercion in Cross-Strait Relations

China, which has been sensitive to both foreign arms sales to Taiwan and
Taiwan’s move toward independence, considers Taiwan its territory, one of its
core interests, and the issue of the highest importance. According to one Chinese
scholar who was involved in China’s Taiwan policy in the 1990s, the notion of
“core interest” was raised during track II dialogues, when China began adopt-
ing this wording to better communicate with the United States.1 By “core inter-
est,” China meant that Taiwan assumed the highest priority in China’s foreign
policy and was something on which China would not compromise. The territo-
rial disputes in the South and East China Seas, discussed in previous chapters,
were negotiable, but China “would never compromise on the Taiwan issue”
(juedui buneng rang).2 The first official reference to Taiwan as China’s “core
interest” appeared in the report of a meeting between Foreign Minister Tang
Jiaxuan and Secretary of State Colin Powell on January 19, 2003.3 In a previ-
ously private speech made by President Hu Jintao during the Central Foreign
Affairs Conference (zhongyang waishi huiyi) in August 2006, Hu reaffirmed
Taiwan as China’s core interest.4 Taiwan is a core interest along with Tibet, and
maritime territorial disputes pale in importance when compared with Taiwan
and Tibet.5 If there are conflicts, they will most likely involve Taiwan.6 In short,
Taiwan is a national security issue of the highest importance to China.
The United States has been a relevant player in Cross-Strait relations. While
it did not explicitly state the sovereign status of Taiwan in the US-PRC Joint

1
Interview KZ-#96, Beijing, China, July 6, 2016.
2
Ibid.
3
People’s Daily, January 21, 2003.
4
Hu (2016a, p. 510). Hu’s speech during this conference was not previously made public.
5
Interview KZ-#100, Beijing, China, July 28, 2016; cross-checked by Chu (2001, p. 360).
6
Ibid.

130
Coercion in Cross-Strait Relations 131

Communiqués of 1972, 1979, and 1982, it did “acknowledge” the “one

China” position of both sides of the Taiwan Strait.7 Assistant Secretary of
State Stanley Roth’s testimony in front of Congress cited a declassified 1972
document in which Nixon told Zhou Enlai that “[w]e have not and will not
support any Taiwan independence movement.’’8 Meanwhile, the United States
ended its official relationship with Taiwan, turning it into an unofficial one
and enacting the Taiwan Relations Act, which stipulated expectations that the
future of Taiwan “will be determined” by peaceful means.9 It also provides a
congressional role for determining US security assistance to Taiwan.
Arms sales to Taiwan is a salient issue between China and the United States.
Deng Xiaoping told former US President Ford that Taiwan was the only issue
between the United States and China on March 23, 1981, and China subse-
quently informed US Secretary of State Haig that the “Taiwan issue,” including
arms sales, was “one of China’s most critical policy issues” on June 16, 1981.10
Left unresolved when China and the United States normalized their relation-
ship in 1979, the issue led to the “August 17 Communiqué” of 1982, in which
the US government stated that “arms sales to Taiwan will not exceed, either in
qualitative or in quantitative terms, the level of those supplied in recent years”
and that “it intends gradually to reduce its sale of arms to Taiwan.”11 China’s
official defense white paper of 1998 stated that foreign arms sales to Taiwan
constituted a threat to China’s national security.12
Throughout the 1980s, the United States’ level of arms sales to Taiwan
remained acceptable to China, but arms sales to Taiwan increased beginning in
the 1990s. According to statistics from the Federation of American Scientists,
annual US weapons sales to Taiwan were around $500 million in the 1980s,
before increasing by 1,000 percent by 1992.13 As Figure 5.1 shows, the dollar
value of US weapons sales to Taiwan in 1992 was among the highest in the
last thirty years.14 It was also the first time that the United States ever sold

7
Shirley A. Kan, “China/Taiwan: Evolution of the ‘One China’ Policy – Key Statements from
Washington, Beijing, and Taipei,” Congressional Research Service, 2011, www.fas.org/man/
crs/RL30341.pdf.
8
“Memorandum of Conversation, Tuesday, February 22, 1972, 2:10 p.m.-6:00 p.m. (Declassi-
fied version), p. 5,” quoted in United States-Taiwan Relations: the 20th Anniversary of the Tai-
wan Relations Act, Hearing Before the Committee on Foreign Relations, United States Senate,
106th Cong., 1st sess., 1999, Washington: U.S. Government Printing Office, www.gpo.gov/
fdsys/pkg/CHRG-106shrg55823/html/CHRG-106shrg55823.htm.
9
See Kan, “China/Taiwan: Evolution of the ‘One China’ Policy,” p. 35.
10
Leng and Wang (2004, pp. 723, 749).
11
For the English version, see “Joint Communiqué of the United States of America and the People’s
Republic of China, August 17, 1982” at www.taiwandocuments.org/communique03.htm; for
the Chinese version, see “Zhonghua renmin gongheguo he meilijian hezhongguo lianhegongbao
bayiqi gongbao” at http://news.xinhuanet.com/ziliao/2002-01/28/content_257069.htm.
12
China’s National Defense, July 1998, www.gov.cn/zwgk/2005-05/26/content_1107.htm.
13
https://fas.org/asmp/profiles/taiwan.htm.
14
For data, see the online appendix.
132

Figure 5.1 US arms sales to Taiwan (1990–2020)

Coercion in Cross-Strait Relations 133

F-16 fighters to Taiwan. From China’s perspective, the actions in 1992 were a
significant break from the past.
In 1991, China purchased a batch of twenty-six Su-27 fourth-generation
fighters from Russia, which constituted the People’s Liberation Army (PLA)
Air Force’s first fourth-generation fighters.15 From China’s perspective, the
F-16s the United States sold to Taiwan in 1992 could seriously tilt the military
balance of power between China and Taiwan to China’s disadvantage in two
ways. First, F-16s were fourth-generation fighters, just like the Su-27s. Second,
the quantity of these fourth-generation fighters being sold to Taiwan dwarfed
the number newly purchased by China at the time. The material impact of these
weapons sales was therefore much more significant than President Lee Teng-
hui’s visit to Cornell in 1995, which marked the first time that a Taiwanese
president was allowed to enter the United States and deliver a speech.
One might predict that China took drastic coercive actions because of US
arms sales to Taiwan in 1992. However, China did not use coercion.16 Instead,
it reacted only with rhetorical diplomatic protests. Upon hearing President
Bush announce sales on September 2, 1992, Chinese Vice Foreign Minister Liu
Huaqiu lodged “the strongest protests.”17 China’s reaction was purely dip-
lomatic. To be sure, the Chinese Ministry of Agriculture (MOA) “strongly
advocated” in People’s Daily that “if the United States insisted on selling F-16s
to Taiwan, we should immediately stop importing wheat from the United
States.”18 China did not carry out this threat, though, or even communicate it
to the United States, instead continuing to import wheat and other merchan-
dise from the United States.
By contrast, China used military coercion in response to Taiwanese President
Lee Teng-hui’s visit to the United States and Taiwan’s subsequent presidential
election during the 1995–1996 Taiwan Strait Crisis. These two events were
political. They were not about weapons sales to Taiwan and did not post any
military threats to China. Yet they are significant because China utilized mili-
tarized coercion, including missile testing, begging the question of why China
escalated to military coercion in 1995 but chose not to in 1992.
The United States has continuously sold weapons to Taiwan in the post-
Cold War era, but China does not use or threaten coercion every time the
United States does this. It only started coercing the United States over weap-
ons sales to Taiwan in 2008,19 and Chinese coercion was moderate in the

15
Shirley Kan and Ronald O’Rourke, “China’s Foreign Conventional Arms Acquisitions: Back-
ground and Analysis,” Congressional Research Service Report for Congress, November 6,
2001, https://fas.org/sgp/crs/row/RL30700.pdf.
16
For details and the sources, see the online appendix.
17
People’s Daily, September 4, 1992, section 1.
18
People’s Daily, September 11, 1992, section 1. Emphasis added. This statement was on the
front page, indicating its importance. However, it seems that the audience was domestic, and
China did not communicate this threat to the United States.
19
See the online appendix.
134 Coercion in Cross-Strait Relations

post-2008 period, when it paused military-to-military exchanges and only

threatened economic sanctions without implementing them. In short, between
1990 and 2020, China only used military coercion against the United States
during the Taiwan Strait Crisis in 1995–1996 in the pre-2008 period, and it
was not a reaction to a substantial weapons sale. Therefore, there is curious
variation in when and how China uses coercion.

5.1 General Trends, Specific Cases, and Theoretical

Expectations of the Cost-Balancing Theory
As previously mentioned, the cost-balancing theory predicts that China will
coerce the United States over issues regarding Taiwan when the need to estab-
lish a reputation for resolve is high and the economic cost is low, while refrain-
ing from coercion when the economic cost is high and the need to establish
resolve is low. Because issues concerning Taiwan are considered a “core inter-
est,” the theory would also predict that China will use coercion when the need
to establish resolve and the economic cost are both high. In the South and East
China Sea cases, China is much more likely to choose nonmilitary coercive
tools when the geopolitical backlash cost is high. However, because China
perceives Taiwan as an issue of the highest importance, the cost-balancing
theory predicts that China may still use military coercion when the geopolitical
backlash cost is high.
China’s need to establish resolve is measured by objective measures, such
as the quantity and quality of US weapons sales to Taiwan, the level of
media exposure, and written and interview speech evidence. Economic cost
is measured by US trade and financial relations with China. For example, is
the United States a major export market for China or an important source
of import for key technologies or intermediary products in China’s supply
chain? Is the United States a critical FDI source for China? Does the United
States control the global financial network? Geopolitical backlash cost is mea-
sured by the level of US commitment to Taiwan. For instance, is the United
States strengthening its relations with Taiwan? Is the United States signaling a
greater commitment to defend Taiwan in the event of China’s invasion? The
cost-balancing theory predicts that China will only refrain from coercing the
United States over issues related to Taiwan when the economic cost is high and
the need to establish resolve is low. For example, the cost-balancing theory
predicts that China would have coerced the United States in both the 1992 and
1995–1996 cases.
As with previous chapters, alternative explanations yield the following pre-
dictions. First, if evidence suggests that the Chinese president makes coercion
decisions that contradict the judgment of all other leaders, then there is strong
support for the individual leadership argument. Second, if domestic lobbies and
interest groups dictate coercion decisions, we should expect to see a bottom-up
instead of a top-down decision-making process of coercion. In particular, we
5.2 US Arms Sales to Taiwan in 1992 135

should see agencies related to Taiwan or US affairs or Chinese businesses that

have close economic ties to Taiwan having an impact on coercion decisions.
Third, if popular nationalism is crucial, then we should expect China to use
coercion consistently and continuously every time there is a major weapons
transfer to Taiwan. Fourth and similarly, if the argument of overall Chinese
material power growth is central, then we should also see a linear progression of
coercion from fewer to more cases of military coercion over time. Finally, if the
argument favoring the utility of military coercion is correct, we should expect to
see an overall linear increase or even preclusive use of military coercion.
The remainder of the chapter examines two detailed case studies from the
1990s: the 1992 US F-16 sales to Taiwan and the 1995–1996 Taiwan Strait
Crisis. I chose these two because they are the two cases in the pre-2008 period
when China was most likely to use coercion on the United States over Taiwan,
even though China only chose coercion in one case. The 1992 case is thus a
curious outlier to the cost-balancing theory, which predicts that China should
have coerced the United States. Conversely, the 1995–1996 Taiwan Strait Crisis
was the most drastic coercion China had undertaken since 1990, with China
using military coercion despite being weaker than and much more dependent on
the United States than it is now. The 1995–1996 case, therefore, contradicts the
conventional explanation of power, with China using military coercion when
it was weaker but resorting to nonmilitarized coercion when it became more
powerful. The ensuing section examines the overall pattern of China’s coercion
against the United States over weapons sales in the post-2008 period. I do not
discuss the pre-2008 period, aside from the 1992 case, because, as shown in
Figure 5.1, the rest of the pre-2008 sales aside from the 1992 case were not
significant in quantity or quality. Hence, China’s need to establish resolve was
low. In line with the cost-balancing theory, it is logical for China not to attempt
coercion in reaction to these pre-2008 sales except for 1992, when the need to
establish resolve was high. The concluding section will explore China’s coercion
against other countries over issues surrounding Taiwan.

5.2 US Arms Sales to Taiwan in 1992

On September 14, 1992, the United States decided to sell 150 F-16 A/B fighters
to Taiwan after never having sold F-16s to Taiwan before.20 As one govern-
ment policy analyst noted, the F-16s significantly tilted the military balance of
power to Taiwan’s advantage.21 China was thus fair in calling the sale unprec-
edented, but it did not coerce the United States.
Interestingly, France decided to sell sixty Mirage-2000 jet fighters to Taiwan
at roughly the same time, having sold $2.7 billion worth of frigates to Taiwan on
June 6, 1991. Following the frigate sale, China and France engaged in a heated

20
See Su (1998, pp. 639, 643).
21
Interview KZ-#63, Beijing, China, April 25, 2016.
136 Coercion in Cross-Strait Relations

diplomatic “struggle,” reaching a minimal understanding (zuidi xiandu de liang-

jie) on June 25 that the frigates would not be equipped with weapons.22 The arms
sale drove a wedge between the two countries, and France further escalated the
situation on January 31, 1992, when French Foreign Minister Roland Dumas
raised the issue of selling Mirage-2000 jet fighters to Taiwan during a meet-
ing with Chinese Foreign Minister Qian Qichen at the United Nations Security
Council meeting.23 Qian said that if France gave up on the deal, China could “do
something significant to improve bilateral trade relations” that would address the
trade imbalance between China and France.24 France refused Qian’s “carrot,”
officially confirming that it had approved the arms deal on December 22, 1992.25
These two arms sales were comparable. Both were significant breaches
of past agreements with China and were also of important military value to
Taiwan, potentially eroding the Cross-Strait military balance to China’s dis-
advantage. The US sale was even greater in magnitude than the French one,
suggesting that China should have coerced the United States. Sanctioning the
United States, the most powerful state in the world, would have sent a deter-
rent signal to both France (who approved the arms sale three months after the
United States did) and other states that might consider arms sales (Germany,
for example, was toying with the idea of selling submarines to Taiwan).
China reacted to both sales with diplomatic protests, but it singled out
France for coercion. On November 27, 1992, the spokesperson for the Chinese
Ministry of Foreign Trade and Economic Cooperation stressed that from
January to September 1992, Chinese imports from Europe had increased by
10.9 percent compared to the prior year, but France had lagged behind because
of the arms sales to Taiwan (i.e., the sales of the frigates in 1991).26 China
announced more serious sanctions on the front page of the January 22, 1993
People’s Daily, stating that because of the French decision to sell Mirage-2000s
to Taiwan, bilateral trade and economic relations had been affected, including
banning French wheat export and the French bid for a subway contract in
Guangzhou.27 In addition, Qian announced that China had also stopped nego-
tiating new trade projects with France.
Instead of coercing the United States for similar actions, China continued to
import wheat from the United States. Even more surprisingly, Foreign Minister
22
Cai Fangbo, “Zouchu digu, quanmian hezuo: 1989–1997nian de zhongfa guanxi [Walking Out of
the Valley and Cooperating Comprehensively: A Recap of Sino-French Relations in 1989–1997],”
in People’s Daily, January 16, 2004, section 7, www.people.com.cn/GB/guoji/1031/2299413​
.html. The accounts of Cai, who was the Chinese ambassador to France from 1990 to 1998, can
be further corroborated by former Chinese Foreign Minister Qian Qichen’s memoir, Qian (2004).
The sequence of the events below is based on Qian and Cai’s recounting.
23
Qian (2004).
24
Ibid., pp. 300–301.
25
Cai, “Zouchu digu, quanmian hezuo: 1989–1997nian de zhongfa guanxi.”
26
People’s Daily, November 28, 1992, section 1. Emphasis added. The MOFTEC later became
the Chinese Ministry of Commerce.
27
People’s Daily, January 22, 1993, section 1. Emphasis added.
5.2 US Arms Sales to Taiwan in 1992 137

Qian Qichen used the phrase “responsible great power” (fu zeren de daguo)
for the first time during remarks in Washington, D.C., stating that “China as
a responsible great power is working toward world peace and development”
and that “Sino-US exchange and cooperation is where the mutual interests of
both sides lie.”28 He also emphasized that China had become “one of the larg-
est buyers” of US wheat, airplanes, computers, industrial mechanical appli-
ances, and chemical fertilizers, and continued that “many famous US firms”
had gained “considerable profits and market shares” in China.29 Although
Qian did touch on arms sales, his emphasis was Sino-US cooperation. The
speech was surprisingly conciliatory, given that it took place just twenty days
after the arms deal. Su Chi, then a senior Taiwanese official, also noted China’s
muted response.30 One former US official even admitted that the United States
upgraded the F-16 A/Bs to the extent that they were essentially similar to F-16
C/Ds in terms of capability.31 Yet another former US official pointed out that
China did not lodge any protest on this issue, let alone engage in coercion.32

5.2.1 The Need to Establish Resolve

China’s need to establish a reputation for resolve was high in 1992. US arms
sales to Taiwan in the 1980s had been moderate, totaling about seven billion
US dollars between 1980 and 1988, as noted by the Chinese Academy of Social
Sciences (CASS) in 1989.33 Furthermore, CASS summarized that the United
States refused to sell FX fighters to Taiwan for fear of increasing tensions in
Cross-Strait relations during the 1980s.34 By 1992, however, the United States
had begun to drastically increase its arms sales to Taiwan, with sales in 1992
alone totaling about 7.9 billion US dollars, which was greater than all of the
US arms sales to Taiwan in the 1980s combined. In particular, the United
States began selling F-16 jet fighters to Taiwan, potentially significantly tilting
the military balance of power to China’s disadvantage.
In fact, 1992 was a watershed, with US arms sales to Taiwan generally
increasing to above one billion US dollars each year. Even Deng Xiaoping

28
People’s Daily, September 24, 1992, section 6.
29
Ibid.
30
Su (2014, p. 41).
31
Interview KZ-#120, Washington D.C., USA, February 23, 2017; senior U.S. military officials
and U.S. Air Force pilots at what was then USPACOM, 27–28 March 2017, Honolulu, Hawaii
who flew F-16 C/Ds acknowledged that Taiwan’s upgraded F-16 A/Bs were much closer to C/
Ds. Another former U.S. State Department official added that despite upgrades, the A/Bs remain
defensive aircraft that were different from the C/Ds because they are heavier aircraft with stron-
ger frames. Interview KZ-#121, Washington D.C., USA, March 1, 2017. Nevertheless, F-16
C/D pilots at USPACOM indicated that their frames are not very different. It is more about the
software that goes with the F-16s that makes the difference in defense and offense.
32
Interview KZ-#116, Washington D.C., USA, February 9, 2017.
33
CASS Institute of American Studies (1989, p. 91).
34
Ibid.
138 Coercion in Cross-Strait Relations

noted that China should not show weakness regarding President Bush senior’s
F-16 sales to Taiwan in his 1992 statement, which is a crucial piece of speech
evidence highlighting the need to establish resolve.35 CASS analysts noted in
1998 that the Clinton administration continued to implement the Bush admin-
istration’s decision to sell F-16s to Taiwan throughout the 1990s and further
expanded the sales of other kinds of weapons to Taiwan.36 Figure 5.2 shows
the number of major news source reports on Taiwan and US arms sales from
1990 to 2022. It objectively demonstrates that the media exposure for the
1992 weapons sales was high, with the number of reports making up one of
the two peaks in the 1990s.37

5.2.2 Economic Cost

Despite the high need to establish resolve in both the US and French cases,
China only coerced France, which can be explained by a crucial element in
the cost-balancing theory: the different economic costs of coercion. In the
1990s, the Sino-US trade structure created Chinese dependence on the United
States, limiting China’s choices. China thus refrained from coercion in the
1992 US case because of the high economic cost. China’s official 1992, 1994,
and 1996 government work reports repeatedly emphasized that China wanted
to welcome more foreign investments, improve the environment for foreign
investment, and introduce advanced foreign technologies and equipment while
actively expanding exports.38 China needed the United States for investments,
technologies, and exports, and the United States ranked as the largest foreign
investor in China by the end of 1993.39 As CASS analysts indicated in 1992,
China benefited not only from exports to the United States – crucial for job
creation in the Chinese labor force – but also US products that contributed to
China’s industrialization.40
China depended on the United States as an export market, but the United
States did not depend on China for its exports. In early 1992, China’s para-
mount leader, Deng Xiaoping, stressed the need to prioritize economic develop-
ment and continue the “reform and opening up policy.”41 Deng’s speech had a

35
Gong (1996, p. 58).
36
Jia (1998).
37
Data comes from Factiva’s “major news sources” search. The wording of the search is “United
States AND announce AND weapons sale AND Taiwan.”
38
China’s Government Work Report 1992 from the State Council, www.gov.cn/test/2006-
02/16/content_200922.htm; China’s Government Work Report 1994, www.gov.cn/
test/2006-02/16/content_201101.htm; and China’s Government Work Report 1996, www​
.gov.cn/test/2006-02/16/content_201115.htm.
39
Diplomatic history editorial office of the MFA (1995, p. 426).
40
Wei (1994).
41
Full speech of Deng Xiaoping’s southern tour in 1992, http://gd.people.com.cn/n/2014/0811/
c123932-21952148.html.
 Figure 5.2 Reports from major news sources on Taiwan and US weapons sales
139
140 Coercion in Cross-Strait Relations

critical impact on ensuring that China went down the path of reform and open-
ing up.42 As such, China’s official 1992 government work reports emphasized
China’s interests in foreign investments, technologies, and equipment, as well as
expanding exports.43 China needed the United States for these things.44 Against
this backdrop, one official Chinese Communist Party historian characterized
Deng Xiaoping’s US policy as conforming to the central aim of economic devel-
opment and treating Sino-US trade as a relationship stabilizer, as manifested in
the sixteen-character order Deng Xiaoping raised in the fall of 1991: “increase
trust, reduce trouble, cultivate cooperation, and avoid confrontation (zengjia
xinren, jianshao mafan, fazhan hezuo, bugao duikang).”45
China’s asymmetrical dependence on the United States became more acute
owing to the US annual review of China’s most-favored-nation (MFN) sta-
tus without attaching human rights conditions. China was preoccupied with
gaining US approval for market entry negotiations, attaining the MFN sta-
tus, and admission into the World Trade Organization (WTO) throughout the
1990s.46 In an MFN agreement, participating states “guarantee to each other
tariff treatment as low as that accorded to any third country.”47 China gained
MFN status with the United States shortly after normalization in 1979, but
the United States required China’s MFN status go through an annual review.48
This issue was irrelevant in the 1980s, when extending MFN status to China
was almost “automatic.” China’s MFN status successfully passed US annual
reviews in the 1980s until the Tiananmen incident in 1989, after which both
the US House and Senate opposed the extension of China’s MFN status with-
out attaching new human rights conditions.49 Bush managed to override the

42
“Deng nanxun jianghua 20zhounian guanfang didiao [Chinese Authorities Kept a Low Profile at the
20th Anniversary of Deng Xiaoping’s Speech Following His ‘Southern tour’],” BBC, January 18,
2012, www.bbc.com/zhongwen/trad/chinese_news/2012/01/120118_deng_speech_anniversary.
43
China’s Government Work Report 1992 from the State Council, www.gov.cn/test/2006-02/16/
content_200922.htm. The trend holds in the 1980s, see CASS Institute of American Studies
(1989, p. 217).
44
Agreed to during conversations with Nicholas Hope, former World Bank Country Director for
China and Mongolia, March 14, 2019. Economists’ studies also indicate that China’s calcula-
tion was correct, and that China benefited economically from greater trade volumes and foreign
direct investment. See Whalley et al. (2007); Naughton and Lardy (1996); Lardy (1992); Lardy
(1995); Lardy (1996); and Garnaut and Song (2006).
45
“Bugao mafan” has been translated as “avoid trouble.” However, the more precise translation is
“not to initiate trouble” or “not to make trouble.” This adds to China’s status-quo orientation
and indicates its cost-consciousness. The quote comes from Gong (2004, pp. 7–13, 633). Gong
is the deputy director at the International Strategy Institute of the CCP’s Central Party School.
46
CASS analysis by Zhou (1995).
47
Wang (1993, p. 442).
48
Ibid.
49
Ibid.; Kerry Dumbaugh, “Voting on NTR for China Again in 2001, and Past Congressional
Decisions,” Congressional Research Service Report for Congress RS20691, July 17, 2001, www
.everycrsreport.com/files/20010717_RS20691_9d7dd0b47ef14e2812416db8a52a844821b
20362.pdf.
5.2 US Arms Sales to Taiwan in 1992 141

opposition and extended MFN status unconditionally to China, but it became

an annual issue in the early 1990s, and especially 1991 and 1992.50
The timing of the US arms sales in 1992 was crucial. On June 3, 1992, the
US Congress introduced bill H.R.5318, prohibiting the president from granting
China the MFN unconditionally unless it made documented efforts to address
human rights issues.51 The bill passed the US Senate on September 14, shortly
after the United States announced weapons sales to Taiwan.52 According to
Chinese government analysts, China anxiously awaited whether the US presi-
dent would veto the conditional extension of MFN status, forcing Congress to
vote on overturning the veto.53 President Bush vetoed the bill on September 28,
right around when then-Foreign Minister Qian Qichen gave his conciliatory
talk in Washington, D.C.54
Moreover, Chinese government policy analysts noted that presidential can-
didate Bill Clinton stated that he planned to support the conditional renewal
of China’s MFN status during his campaign, and he was aware that the issue
“will recur in June 1993 when MFN comes up for consideration again.”55
The negotiations regarding MFN worried analysts from China’s Central Party
School.56 For example, Wu Guifu worried that if the United States denied
granting MFN status to China, the prices for Chinese exports to the United
States would rise by forty percent, drastically reducing Chinese exports worth
of billions of dollars while adversely affecting foreign investments and techno-
logical transfers to China.57 Non-Chinese economists substantiated China’s
worry, suggesting that if MFN status were withdrawn, Chinese exports to the
United States would be taxed five to ten times more.58 For example, one World
Bank study estimated that revoking MFN status would lead Chinese exports to
the United States to decline from $15.2 to $7 billion, approximately forty-two
percent to ninety-six percent of total Chinese exports to the United States.59
Other studies estimated the loss to be about seventy percent in exports to the
United States.60 In short, the economic consequences of revoking MFN sta-
tus for China would be disastrous, which was emphasized by a former senior
World Bank official in charge of the China program in the 1990s.61

50
Dumbaugh, “Voting on NTR for China Again in 2001, and Past Congressional Decisions.”
51
“H.R.5318: United States-China Act of 1992,” U.S. Congress, www.congress.gov/
bill/102nd-congress/house-bill/5318/summary/00.
52
Ibid.
53
Gong (1996, p. 58); Chen (1993).
54
Dumbaugh, “Voting on NTR for China Again in 2001, and Past Congressional Decisions.”
55
Chen (1993, p. 251).
56
Wu (1992).
57
Ibid., p. 156.
58
Ho (1995).
59
Cited in Arce and Taylor (1997, p. 741).
60
Sung (1991, pp. 15.1–15.21).
61
Conversations with Nicholas Hope, former World Bank Country Director for China and Mon-
golia, March 14, 2019.
142 Coercion in Cross-Strait Relations

Furthermore, China and the United States engaged in new rounds of nego-
tiations on market entrance beginning in June 1992. The Bush administration
demanded that China bring down barriers to US imports, with the US Trade
Representative specifically charging China with “having an extensive web of
restrictions to keep American products out” on August 21, 1992, and threat-
ening that it would impose punitive tariffs of up to 100 percent on $3.9 billion
worth of Chinese goods if no agreement was reached by October 10.62 China
could not retaliate in this case because China needed US exports to China,
including high-tech goods and industrial equipment, for which China would
have difficulty finding substitutes.
The ninth round of the Sino-US market entry negotiations was scheduled to
take place in Washington, D.C. in late September 1992.63 This timing made
China’s response to arms sales especially important. When contemplating a
proper response to US arms sales in 1992, Deng Xiaoping endorsed the MFA
report, which suggested that “China needed to give priority to economic inter-
ests” and that if China retaliated with trade sanctions, “a cycle of mutual retal-
iation could unleash a trade war in which China would lose most.” The report
concluded that “China should do everything it could to avoid the deterioration
of Sino-US economic relations.”64 Although not stated explicitly, MFN status
and the United States Trade Representative threats would probably be the most
severe retaliation. Chinese moderation had positive results, including an uncon-
ditional extension of China’s MFN status for another year and market entry
negotiations in October 1992 that relaxed restrictions on high-technology US
exports to China.65 Deng’s endorsement indicated that the cost of economic
vulnerability was China’s primary consideration when contemplating the costs
of coercion.
In short, the United States held the key to Chinese economic growth.66
China “did not have many cards to play.”67 Another senior government pol-
icy analyst bluntly admitted that China’s economic dependence on the United
States was “overwhelming.”68 Highly dependent on US investments, markets,

62
Wang (1993, p. 460).
63
Wu (1992).
64
Tian Chen, “Foreign Ministry’s Secret Report on Sino-U.S. Relations,” Zheng ming, November
1, 1992, qtd. in Garver (2011), emphasis added. Another source that corroborates this report is
John Garver’s personal communication with Hong Kong sources; one former U.S. State Depart-
ment official also agreed that economy was the number one concern for Deng at that time and
that Deng was aware that China was not able to coerce the United States because it needed U.S.
markets, technology, and business investment: interview KZ-#121, Washington D.C., USA,
March 1, 2017.
65
Diplomatic history editorial office of the MFA (1993).
66
Interview KZ-#21, Beijing, China, December 10, 2015; interview KZ-#59, Wuhan, China,
April 18, 2016; and interview KZ-#76, Shanghai, China, May 12, 2016.
67
Interview, Beijing, January 14, 2014.
68
Interview KZ-#43, Beijing, China, January 28, 2016; echoed by another senior former govern-
ment policy analyst, interview KZ-#95, Beijing, China, July 4, 2016.
5.2 US Arms Sales to Taiwan in 1992 143

and technologies, China lacked economic capability, which made it too eco-
nomically costly to coerce the United States.69
As for the French case, China was not as economically dependent on France
as it was on the United States. Sino-French trade lent itself easily to Chinese
sanctions. French businessman Jean-Pierre Desgeorges, then-president of the
France-China Committee, argued that French exports to China depended too
much on large contracts from the energy, transportation, and telecommunica-
tion realms, and it would be better for medium- and small-sized French firms
to enter the Chinese market.70 Indeed, both wheat exports and the subway bid
fell under the category of large contracts, or “les grand contracts.” France’s
overdependence on single large-scale contracts led to a strong politicization of
Sino-French trade relations.71 However, China did not depend on France for
exports: Chinese exports to France stabilized at around 1.5 percent of China’s
total exports after the early 1980s.72 In addition, China had other import
sources, all of which were more than willing to do business with China. For
instance, China gave the Guangzhou subway bid to Germany, a long-time com-
petitor of France on Chinese subway contracts.73 In his memoir, Ambassador
Cai Fangbo stated clearly that China turned to Germany to sanction France.74
Thus, China was able to coerce France because France depended on large-scale
contracts, but China had exit options.
To summarize, China was highly economically dependent on the United States,
and was especially sensitive to the perceived potential costs should MFN status
and market entry negotiations fail in 1992. Both senior scholars and a former
Chinese military attaché involved in Cross-Strait affairs in the 1990s acknowl-
edged that there was nothing China could do about US arms sales in 1992, even
though it significantly tilted the military balance of power to Taiwan’s advan-
tage.75 This explains China’s muted reaction following the US announcement
of plans to sell F-16s to Taiwan in September 1992. China not only failed to
coerce the United States but it also provided the United States with “economic
carrots,” such as making more Boeing and wheat purchases. This deviant case
demonstrates the importance of economic cost in China’s calculus regarding the
Taiwan issue, as well as the simultaneous constraints and opportunities that a

69
Interview KZ-#73, Shanghai, China, May 8, 2016; interview KZ-#94, Beijing, China, June
27, 2016; interview KZ-#14, Beijing, China, November 25, 2015; interview KZ-#37, Beijing,
China, January 19, 2016; interview KZ-#39, Beijing, China, January 22, 2016; and interview
KZ-#80, Shanghai, China, May 13, 2016.
70
Desgeorges (1994, p. 31).
71
Taube (2002).
72
Ibid.
73
This competition had already manifested itself in 1988, when France competed with Germany
and Britain for the bid to construct the largest subway in Shanghai. See Zhu (2013, p. 130).
Zhu was a former Chinese Premier in the 1990s.
74
Cai (2007, p. 146).
75
Interview KZ-#96, Beijing, China, July 6, 2016; interview KZ-#99, Beijing, China, July 21, 2016.
144 Coercion in Cross-Strait Relations

globalized economy provides for Chinese coercion. China did use military coer-
cion in the 1995–1996 Taiwan Strait Crisis below, which highlights the signifi-
cance of the issue importance variable in the cost-balancing theory.

5.3 The 1995–1996 Taiwan Strait Crisis

The United States granted Taiwanese President Lee Teng-hui a visa to visit his
Alma Mater, Cornell, in May 1995. Chinese Foreign Minister Qian Qichen
summoned the US ambassador and lodged strong protests in response.76
China then immediately terminated senior-level visits (at the deputy ministe-
rial level and above) and bilateral negotiations between China and the United
States.77 Lee Teng-hui visited the United States from June 7 to 11, 1995, and
he gave a speech at Cornell University calling for breaking Taiwan’s diplo-
matic isolation and strengthening US-Taiwan relations.78 China summoned
then-Chinese Ambassador to the United States Li Daoyu back to China on
June 16, 1995, stating that this action was caused by Lee Teng-hui’s visit.79
China also ratcheted up its response by conducting missile tests near the
Taiwan Strait in the summer of 1995. Preceding Taiwan’s March 1996 pres-
idential election, China stepped up its military exercises. On March 5, 1996,
China’s official Xinhua news agency announced that the PLA would conduct
ground-to-ground missile launching in the Taiwan Strait off the Taiwanese
port cities of Chilung and Kaohsiung.80 The live ammunition exercise closure
zone was approximately sixty miles southwest of Kaohsiung, and the missiles
were just thirty-two miles away.81
China’s coercion in this episode was one of its harshest cases in the post-Cold
War period. First, China used both diplomatic sanctions and military coer-
cion. As stated above, China canceled senior-level exchanges with the United
States and recalled its ambassador, followed by Chinese missile tests that were
a blockade of Taiwan. Second, as confirmed by such senior Chinese officials
as Qian Qichen and Jiang Enzhu and official documents and announcements,
these Chinese actions were state decisions.
The goals and targets of Chinese coercion were clear. China viewed the
US action of granting Lee a visa as a serious and dangerous setback of its

76
Qian (2004, p. 308).
77
Ibid.
78
Ibid., p. 309. For the English version of President Lee’s speech, see www.straittalk88.com/
uploads/5/5/8/6/55860615/appendix_80_--_president_lee_tenghui_cornell_commencement_
address.pdf.
79
Qian (2004, p. 308).
80
“Zhongguo Renmin Jiefangjun Zai Donghai he Nanhai Jinxing Haikong Shidan Yanxi [Xin-
hua News: The PLA will Conduct Naval and Air Military Exercise in East and South China
Sea],” March 9, 1996, www.people.com.cn/GB/historic/0320/903.html.
81
Edward A. Gargan, “Chinese, in a Move to Alarm Taiwan, Fire Test Missiles,” New York
Times, March 8, 1996, p. 3.
5.3 The 1995–1996 Taiwan Strait Crisis 145

China policy and a staunch breach of the Sino-US joint communiqués.82 A

Chinese MFA spokesperson demanded that the United States “take actions
to return to the correct path as directed by the three communiqués” on June
29, 1995.83 Specifically, as CASS researcher Li Jiaquan stated in the June
1, 1995 Guangming Daily, a few days before Lee’s visit, China wanted the
United States to revoke Lee’s visa.84 Chinese scholars and government policy
analysts also confirmed that China judged that the United States was chang-
ing its Taiwan policy and aimed to use coercion to let the United States and
other countries know that they must not grant visas to Taiwanese leaders.85
Also, Chinese Premier Li Peng explicitly demanded that Taiwanese leaders
stop pro-independence activities at the time of China’s third missile test in
March 1996.86 One senior Chinese scholar explained that until the 1995–1996
episode, China viewed the Taiwan issue as a struggle over “authority” (zhi-
quan zhizheng, i.e., which administration should govern China), but after the
1995–1996 episode, the struggle was over “sovereignty” (zhuquan zhizheng,
i.e., whether Taiwan should have independent sovereign status). This negative
change in the nature of the issue was not expected by China.87 As one former
US official put it, China’s goal in the 1995–1996 episode was not to retake
Taiwan but to send a signal to check perceived pro-independence activities.88
Although China’s coercion did not scare Taiwanese voters into voting
against Lee Teng-hui, it was partially successful, making other countries cau-
tious in granting Lee visas. Lee was unable to attend his daughter’s graduation
ceremony in Britain because the British government did not want trouble with
China.89 Moreover, as Qian Qichen noted, President Clinton visited China in
1998 and publicly stated the “three-nos” (sanbu) of US Taiwan policy: The

82
May 23, 1995, People’s Daily; May 26, 1995, People’s Daily, qtd. in Taiwan Affairs Office
(1996, pp. 100, 210). The Taiwan Affairs Office (TAO, guotaiban) is a government agency
under China’s State Council specifically tasked with Cross-Strait affairs. Cross-checked with a
former U.S. military attaché, interview KZ-#118, Arlington VA, USA, February 15, 2017; also
corroborated by former U.S. officials, interview KZ-#120, Washington D.C., USA, February
23, 2017 and interview KZ-#121, Washington D.C., USA, March 1, 2017; corroborated by a
private statement made by a Chinese Charge d’Affaires in Washington, D.C. in late June 1995,
who told Winston Lord that the Lee visit “had shaken the very foundation of the one China
policy.” See Romberg (2003, p. 168).
83
Sun (2009, p. 260).
84
Li Jiaquan, June 1, 1995, Guangming Daily, qtd. in Li (2010, p. 576).
85
Interview KZ-#73, Shanghai, China, May 8, 2016; interview KZ-#78, Shanghai, China, May
13, 2016; interview KZ-#80, Shanghai, China, May 13, 2016; interview KZ-#92, Beijing,
China, June 8, 2016; interview KZ-#94, Beijing, China, June 27, 2016; and interview KZ-#95,
Beijing, China, July 4, 2016.
86
Taiwan Affairs Office (1997, p. 27). Cross-checked by interviews, interview KZ-#74, Shanghai,
China, May 10, 2016; interview KZ-#78, Shanghai, China, May 13, 2016; interview KZ-#80,
Shanghai, China, May 13, 2016; and interview KZ-#92, Beijing, China, June 8, 2016.
87
Interview KZ-#94, Beijing, China, June 27, 2016.
88
Interview KZ-#120, Washington, D.C., USA, February 23, 2017.
89
Jiang (2016, p. 190).
146 Coercion in Cross-Strait Relations

United States “does not support independence for Taiwan, or ‘two Chinas,’ or
‘one Taiwan, one China,’ and does not believe that Taiwan should be a mem-
ber in any organization for which statehood is a requirement.”90 This was the
first time a US president made such statements.

5.3.1 Explaining the Case

The 1995–1996 Taiwan Strait Crisis highlights the issue importance variable.
In this case, the need to establish resolve and economic cost were both high,
but China still used coercion – especially military coercion, despite the high
geopolitical cost – because the issue importance was at its highest.
The pressure for China to establish its reputation for resolve in defend-
ing its national interests regarding Taiwan was high in this episode. Taiwan’s
prior behavior increased the pressure on China to strengthen this reputation
during the 1995–1996 episode. For example, Lee Teng-hui’s March 1989 visit
to Singapore opened the door for visits from senior Taiwanese leaders to other
countries, which became quite frequent between 1990 and 1996.91 In 1994
alone, President Lee Teng-hui visited Nicaragua, Costa Rica, South Africa,
the Philippines, Thailand, and Indonesia.92 China was particularly concerned
about his 1995 visit to the United States, not least because of the publicized
nature of Lee Teng-hui’s speech.93 In addition, as shown in Figure 5.2, the
media exposure of the issue involving Taiwan was objectively high in the
1995–1996 period.
Senior Chinese officials at the time demonstrated concerns about a rep-
utation for resolve. As Foreign Minister Qian Qichen pointed out, the
US decision to allow Lee Teng-hui to visit the United States broke the
seventeen-year convention of a US ban on visits by senior Taiwanese leaders,
while also encouraging Taiwan’s “two-China” policy and anti-China forces
internationally.94 According to Qian, China used assertive (qiang youlide)
countermeasures to stop the US “fantasy” that China would “swallow the
bitter fruit” of Lee’s visit without doing much.95 Similarly, Fu Quanyou,
then PLA-Chief of Staff and a member of the Central Military Commission
(CMC), also believed that “if China swallowed the bitter fruit” (kuguo)
of Lee Teng-hui’s visit, it would break the bottom line of the “one-China”

90
Qian (2004, p. 315).
91
Huang and Lin (2007, pp. 84–85).
92
Su (2014, p. 45).
93
See, for example, David W. Chen, “Taiwan’s President Tiptoes Around Politics at Cornell,”
The New York Times, June 10, 1995; David Lague, “Historic US Opening to Taiwan,” Sydney
Morning Herald, May 23, 1995; James Pringle, “Peking Pulls Punches Over Lee’s US Visit,”
The Times, June 9, 1995; Keith B. Richburg, “Modern Taiwan Looks Inward for New National
Identity,” The Washington Post, June 11, 1995.
94
Qian (2004, p. 307).
95
Ibid, p. 308.
5.3 The 1995–1996 Taiwan Strait Crisis 147

[principle] toward Taiwan and invite “endless trouble in the future”

(houhuan wuqiong). Therefore, China absolutely “must not swallow this
bitter fruit.”96 In Chinese, swallowing the bitter fruit is a metaphor for
acquiescing without trying to change an unfair situation, which is a sign of
weakness and permissiveness. Both senior civilians and senior officials noted
the importance of not swallowing the bitter fruit, which indicated that they
were well aware of the logic of showing strength to change the perception
and behavior of other states.
The timing of China’s diplomatic and military coercion also indicated its
logic of establishing a reputation for resolve. China did not recall its ambas-
sador to the United States until June 16, right after news came out that senior
Taiwanese leader Lien Chan might visit Austria, Hungary, and the Czech
Republic. As former Taiwanese official Su Chi put it, China wanted to stop
Taiwan from spreading such visits to Europe.97 Fu Quanyou’s rationale
during the December 1995 military exercise and the March 1996 blockade
of the Taiwan Strait further indicated the centrality of the need to establish
a reputation for resolve. Despite the United States dispatching its Nimitz
aircraft carrier battle group to the Taiwan Strait in December 1995, Fu
stated that China should not stop carrying out further missile tests because
“if China stopped, it would give the false impression that China was scared
by the United States, which would then make anti-China forces even more
reckless.”98 When the United States dispatched two aircraft carrier battle
groups to waters near Taiwan in March 1996, Fu similarly reasoned that
China must not stop the missile tests because if China stopped firing missiles
in the face of US aircraft carriers, it would lead to misperceptions among
the pro-independence people that as long as the United States stood behind
Taiwan, “Taiwan could do anything it wants” (weisuo yuwei).99 China,
therefore, continued firing missiles.100
Writings of and interviews with former Chinese officials, government policy
analysts, and scholars also indicate China’s logic of establishing resolve. On June
1, 1995, prior to China’s coercion, Chinese government policy analysts wrote
that the US allowing Lee to visit the United States set a bad precedent and that
the United States “misjudged the situation” (cuogu le xingshi), thinking that
China would not react with concrete measures due to its reliance on the United
States and preoccupation with economic development.101 This indicated China’s
concerns about establishing resolve by correcting other countries’ mispercep-
tions about China’s resolve in defending its interests regarding Taiwan and

96
Wang (2015, p. 155). This is the official biography of Fu.
97
Su (2014, p. 56).
98
Wang (2015, p. 156).
99
Ibid., pp. 164–168.
100
Ibid.
101
Li (2010, pp. 574–575).
148 Coercion in Cross-Strait Relations

stopping others from following the US lead.102 One former Chinese diplomat
listed Chinese coercion in the 1995–1996 episode as actions “establishing a rep-
utation for resolve” (shuli weixin) and, in particular, sending a signal to estab-
lish the bottom line of prohibiting pro-independence activities.103 Then-Chinese
Ambassador to the United States Li Daoyu told one senior Chinese scholar that
China’s assertive measures in the 1995–1996 episode made sense because China
wanted to demonstrate to the United States that it was not weak, which would
then stop the United States from allowing Lee to visit in the future.104
As shown earlier, the economic cost of coercion was also high. China knew
that using coercion would invoke a high economic cost, especially since one of
China’s intended targets was the United States. The reason China used coercion,
in this case, was the high issue importance involved. Issues related to Taiwan
had been core interests of China, and they assumed the highest importance and
priority in China’s national security. Because of this, Taiwan’s actions in 1995
and 1996 violated China’s bottom line that Taiwan must not seek de jure inde-
pendence.105 As one senior scholar close to the government indicated, despite
both being Taiwan-related issue, China viewed Lee Teng-hui’s pro-independence
activities of visiting the United States and giving the speech at Cornell as much
more serious issues than arms sales.106 China believed that 1995 was a turning
point in Cross-Strait relations, with both Lee’s Cornell speech and subsequent
elections having salient pro-independence tendencies.107 That is, Cross-Strait
relations before 1995 involved the struggle over authority, but after 1995, the
struggle was over sovereignty.108 China thus had to use coercion due to the high-
est level of issue importance, despite the costs equaling the benefits of coercion.109
Similarly, the high issue importance in the 1995–1996 episode also explained
why China used military coercion, which was the most drastic coercion it had
used in the post-Cold War period, despite the high geopolitical cost. As CASS
analysts noted in 1992 and 1995, China lost its leverage vis-à-vis the United
States after the collapse of the Soviet Union and the end of the Cold War.110
Government policy analysts from the Shanghai Academy of Social Sciences
stressed in 1993 that the United States had made it clear that it would not sell
advanced fighters to Taiwan during the Cold War, but the United States no longer

102
Taiwanese scholars observed the same logic, see Cai (2000); also interview KZ-#73, Shanghai,
China, May 8, 2016. China had noted a trend of development in Taiwan’s pro-independence
activities by the end of 1989, see CASS Institute of American Studies (1989, p. 101).
103
Interview KZ-#21, Beijing, China, December 10, 2015; interview KZ-#42, Beijing, China,
January 25, 2016.
104
Interview KZ-#81, Shanghai, China, May 15, 2016.
105
Interview KZ-#90, Guangzhou, China, May 25, 2016.
106
Interview KZ-#94, Beijing, China, June 27, 2016.
107
Ibid.; also interview KZ-#21, Beijing, China, December 10, 2015.
108
Ibid.
109
Ibid.
110
See CASS analyses in 1992, 1995, and 2000, by Wang (1992); Zhou (1995); and Zhang (2000).
5.3 The 1995–1996 Taiwan Strait Crisis 149

faced threats from the Soviet Union with the end of the Cold War.111 Therefore,
it did not need China to balance the Soviet Union and was less constrained. One
Central Party School analyst also concurred with this assessment.112
This structural shift increased the geopolitical backlash cost of China mil-
itarily coercing the United States, and Chinese leaders were aware of this. As
early as November 1991, President Jiang Zemin told former US Secretary of
State Alexander Haig that given the significant and profound changes in the
international situation, China and the United States should “strengthen coop-
eration.”113 Premier Li Peng told President Bush senior that China prioritized
Sino-US relations and hoped that bilateral meetings would improve Sino-US
relations in January 1992.114 President Jiang Zemin reaffirmed that China and
the United States shared common interests in many critical issues in March
1994, adding that both sides should “strengthen trust, reduce trouble, develop
cooperation, and avoid confrontation.”115
Nevertheless, one senior scholar involved in China’s Taiwan policy in the
1990s indicated that China had to “show strength” (shiqiang), especially using
military coercion, because the United States and Taiwan would gain from
China’s acquiescence and “advance even further” (decun jinchi) if not.116
Because Taiwan was China’s core interest and the issue of highest importance,
China would not compromise on it, even at the risk of “bloody sacrfice” (liuxue
xisheng).117 As one former diplomat noted, because the 1995–1996 episode
violated China’s bottom line of not allowing Taiwan to seek independence,
China used military coercion to establish a reputation for resolve in defending
its national security interests.118 That is, China needed to use military coercion
to demonstrate to the United States and Taiwan that it was resolved.119 Not
using military coercion to stop the behavior of Taiwan and the United States
would cause too much damage to China.120 China coerced the United States
because of issue importance.121 As such, despite the high benefits and costs of
coercion, China used military coercion because of the high issue importance.
As for why China did not use military coercion against Taiwan’s pres-
idential elections in the 2000s, there was reduced pressure on China to
demonstrate its reputation for resolve in Cross-Strait situations. China
believed that the United States had begun to help China tackle Taiwan’s

111
Wang (1993, p. 24, p. 29).
112
Gong (1996, p. 56).
113
Diplomatic history editorial office of the MFA (1993, p. 327).
114
Diplomatic history editorial office of the MFA (1994, p. 367).
115
Diplomatic history editorial office of the MFA (1996, p. 460).
116
Interview KZ-#96, Beijing, China, July 6, 2016.
117
Ibid.
118
Interview KZ-#21, Beijing, China, December 10, 2015.
119
Interview KZ-#94, Beijing, China, June 27, 2016.
120
Interview KZ-#99, Beijing, China, July 21, 2016.
121
Interview KZ-#92, Beijing, China, June 8, 2016.
150 Coercion in Cross-Strait Relations

pro-independence activities.122 In particular, China believed that its 1996

coercion demonstrated its resolve, making it difficult for the United States to
change its Taiwan policy easily.123 In a sense, China had begun to learn how
to utilize the United States to manage Cross-Strait relations.124
In short, the need to establish resolve, the economic cost, and the geopolit-
ical backlash cost of using military coercion were all high in 1995 and 1996.
However, due to the high issue importance of Taiwan, China utilized mili-
tary coercion over the 1995–1996 Taiwan Strait Crisis, as predicted by the
cost-balancing theory. However, China refrained from using coercion against
the United States over arms sales to Taiwan in 1992, which is not predicted
by the cost-balancing theory. This suggests the power of MFN status and the
fact that China prioritized economic growth over everything else in the early
1990s, which is also seen in the next chapter.

5.4 Coercion in the Post-2008 Period

China did not coerce the United States over weapons sales to Taiwan in 1992,
but one might wonder if China has ever coerced the United States on this issue.
As shown in Figure 5.2, the need to establish resolve over US weapons sales to
Taiwan, as measured by media exposure, was not high in the pre-2008 period,
except for the 1992 case. Therefore, China did not attempt coercion against
the United States over weapons sales until 2008. Chinese coercion post-2008
was also moderate, with China pausing military-to-military exchanges for
short durations during the 2008, 2010, and 2011 arms sales and threatening
economic sanctions regarding the 2010, 2015, 2019, and 2020 arms sales.
Although China threatened to impose economic sanctions on US enterprises
selling weapons to Taiwan, it did not implement them. For instance, China
did not sanction Boeing at all. For companies with which China did not have
any direct business relationships, such as Lockheed Martin, the only action
China could take was to “restrict the heads of such companies from visiting
China.”125

5.4.1 The Need to Establish Resolve

Although US arms sales in the post-2008 period have been relatively moderate
compared to the 1992 case, media exposure was high in 2010, as shown in
Figure 5.2. US arms sales in 2008, 2010, and 2011 had a large monetary value

122
Ibid.; also interview KZ-#73, Shanghai, China, May 8, 2016; interview KZ-#92, Beijing,
China, June 8, 2016; and interview KZ-#116, Washington D.C., USA, February 9, 2017.
123
Interview KZ-#78, Shanghai, China, May 13, 2016; interview KZ-#99, Beijing, China, July
21, 2016.
124
Interview KZ-#92, Beijing, China, June 8, 2016.
125
Interview KZ-#36, Beijing, China, January 19, 2016.
5.4 Coercion in the Post-2008 Period 151

(averaging six billion US dollars per year), but one government policy analyst
pointed out that US arms sales during this period did not surpass the 1992
episode of selling 150 F-16s to Taiwan.126 Moreover, as senior scholars close
to the government noted, China’s military power significantly surpassed that
of Taiwan, making arms sales essentially meaningless in the military sense and
more of a political issue.127 One added that the United States could “use arms
sales to restrain Taiwan.”128
Furthermore, before announcing weapons sales to Taiwan in 2011, the
White House notified Beijing.129 As many government policy analysts noted,
communications between China and the United States over arms sales to
Taiwan increased.130 One senior Chinese scholar involved in track II dialogues
between China and the United States regarding Taiwan noted that the signifi-
cance of arms sales to Taiwan had decreased. In these track II dialogues, there
were usually “communications or even negotiations” about what may or may
not be sold to Taiwan.131 This scholar further indicated that similar discus-
sions and communications even occurred in the formal diplomatic channel
between the United States and China.132 According to one former US official,
China began trying to influence former US officials around 2008, and espe-
cially those from the defense establishment (including former four-star generals
who now do business with China), via the Sanya dialogue.133 The “Sanya dia-
logue” began in February 2008, with Xiong Guangkai (former Deputy Chief
of General Staff in charge of intelligence) leading the PLA side and Bill Owens
(retired admiral and former Vice Chairman of the Joint Chiefs of Staff) leading
the US side.134 The PLA side asked US participants to help address China’s
objections to US policies and laws, including the TRA.135 Information about
China’s red lines regarding arms sales in these track II dialogues would be
eventually communicated to incumbent US officials.136 Despite the unofficial

126
Zhu (2014).
127
Interview KZ-#94, Beijing, China, June 27, 2016; interview KZ-#96, Beijing, China, July 6,
2016; and interview KZ-#96, Beijing, China, July 6, 2016.
128
Interview KZ-#94, Beijing, China, June 27, 2016.
129
Ibid. Nevertheless, one cannot positively affirm this from Bader’s memoir. According to Bader,
he had a one-on-one breakfast with Chinese Ambassador Zhou Wenzhong the day after the
Congressional notification of the sale on January 29, 2010. Zhou noted what weapons the
United States did not authorize and said that he believed this would mitigate Beijing’s reaction.
See Bader (2012, p. 74).
130
Interview KZ-#39, Beijing, China, January 22, 2016; interview KZ-#76, Shanghai, China,
May 12, 2016; and interview KZ-#102, Washington, D.C., USA, August 21, 2016.
131
Interview KZ-#96, Beijing, China, July 6, 2016; cross-checked by one former military attaché,
who noted that track II dialogues regarding the specifics of arms sales started since the Bush
junior era, interview KZ-#99, Beijing, China, July 21, 2016.
132
Interview KZ-#96, Beijing, China, July 6, 2016.
133
Interview KZ-#118, Arlington, VA, USA, February 15, 2017.
134
See Kan, “U.S.-China Military Contacts: Issues for Congress.”
135
Ibid.
136
Ibid.
152 Coercion in Cross-Strait Relations

nature of these talks, PACOM Commander Admiral Tim Keating, Chairman

of the Joint Chiefs of Staff Admiral Mike Mullen, Vice Chairman of the Joint
Chief of Staff General James Cartwright, Deputy Secretary of Defense William
Lynn, Secretary of State Hillary Clinton, and Assistant Secretary of State Kurt
Campbell met with the Sanya group.137
Finally, as in the early 2000s, the United States continued to state explicitly
that it opposed provocative actions from Taiwan. As CASS noted, the United
States and China strengthened negotiations and reached a consensus on main-
taining the stability of Cross-Strait relations, with the United States becoming
“more cautious” in its Taiwan policy.138 Such US behavior and restraint reduced
the salience and publicity of arms sales, as well as the pressure on China to estab-
lish a reputation for resolve. For China, there are two red lines that should not
be crossed. Certain weapons are not to be sold, including submarines and C4ISR
systems, and countries other than the United States “must not sell weapons to
Taiwan.”139 In the post-2008 period, the value of US arms sales to Taiwan did
not surpass the 1992 level and there have been communications between China
and the United States prior to arms sales, making the need to establish resolve
lower than in 1992, although the media exposure was higher in the early 2010s
than in the late 2010s. In other words, the need to establish resolve was higher
in the early 2010s than it has been in more recent years.

5.4.2 Economic Cost

Economically, although the United States remained China’s second-largest
export market as of 2007,140 China’s asymmetrical dependence on the United
States had reduced. As noted in China’s official 2010 annual China’s Foreign
Affairs, the global financial crisis changed the balance of power between emerg-
ing great powers and traditional industrialized states. Advanced industrialized
states were deeply affected, whereas emerging great powers maintained the
momentum of economic growth, despite also being affected by the crisis.141
Furthermore, it noted emerging great powers’ increasing share of the global
GDP, whereas the proportion of traditional great powers had decreased.142
Unsurprisingly, China was among the most critical emerging great powers
from the perspective of the MFA.
Moreover, the United States had always been China’s largest export market
until 2006, when it became China’s second-largest market.143 The United States

137
Ibid.
138
CASS (2008).
139
Interview KZ-#80, Shanghai, China, May 13, 2016.
140
Diplomatic history editorial office of the MFA (2008, p. 222).
141
Diplomatic history editorial office of the MFA (2010, p. 2).
142
Ibid.
143
Diplomatic history editorial office of the MFA (2010, p. 216); China’s Ministry of Commerce
report, April 27, 2010, http://zhs.mofcom.gov.cn/aarticle/Nocategory/201004/20100406888
5.4 Coercion in the Post-2008 Period 153

was China’s largest export market again in 2012, taking up about twenty per-
cent of China’s exports.144 However, the market share of other economies had
increased, with the EU’s market share of China’s exports growing from about
ten percent in the 1990s to about twenty percent in the late 2000s. China had
also strengthened exports to new markets, such as Africa, Latin America, and
Oceania.145 Although the United States was still China’s single most important
market, China had been diversifying its export markets.
Furthermore, China also changed its long-term growth strategy in 2008,
shifting from what was previously an export-oriented economy to one
that relied on the “coordinated development of consumption, investment,
and export.”146 The 2011 government work report reaffirmed that “push-
ing the economy onto a path of domestic-oriented and innovation-driven
growth would be the main direction for China’s shift in means of economic
growth.”147 This shift partially reduced China’s dependence on exports to
such important markets as the United States as the fundamental driver of
its economic growth. This is not to say that foreign trade and export are no
longer important to China. Rather, as indicated by the 2012 government
work report, the shift signaled that China’s opening-up policy had “entered
a new stage, one in which the status of exports changed – China emphasized
expanding domestic consumption while maintaining the stable development
of foreign trade.”148
Indeed, the contribution of domestic consumption to economic growth
began to increase.149 As China’s official 2011 white paper on foreign trade
indicated, China had completed all the promises it made when entering the
WTO by 2010, and China’s imports have maintained an annual increase of
twenty percent since 2001.150 In line with this trend and the emphasis on
domestic consumption, the 2019 Chinese government work report prior-
itized domestic consumption over an expansion in exports, as indicated by
the order in which the report discusses domestic consumption and exports.151
Acknowledging the continuous growth of China’s domestic needs, the white
paper noted that China’s fast-expanding imports had created enormous export
markets for such trading partners as Japan, ASEAN, the EU, and the United

239​.html; and State Council report, January 10, 2013, http://finance.china.com.cn/news/­

special/jjsj12/20130110/1230560.shtml.
144
Li (2012).
145
Ibid.
146
China’s Government Work Report 2008, www.gov.cn/test/2009-03/16/content_1260198.htm.
147
China’s Government Work Report 2011, www.gov.cn/2011lh/content_1825233.htm.
148
China’s Government Work Report 2012, www.gov.cn/test/2012-03/15/content_2067314.htm.
149
China’s Government Work Report 2010, www.gov.cn/2010lh/content_1555767.htm.
150
Chinese State Council’s White Paper on China’s Foreign Trade 2011, www.gov.cn/zwgk/2011-
12/07/content_2013475.htm.
151
China’s government work report 2019, www.xinhuanet.com/politics/2019lh/2019-03/05/c_
1124194454.htm.
154 Coercion in Cross-Strait Relations

States.152 In short, with China no longer hastening to expand its foreign mar-
kets, it was instead able to increase its imports due to a gradual shift to a
domestic-oriented economy.
Semiofficial sources from such government think tanks as CASS, CICIR,
and CIIS also noted China’s growing economic power and the reduced asym-
metrical dependence on the United States. For example, CASS analysts stated
in 2009 that China and the United States had become mutually dependent on
one another, and neither side would be able to prosper without the other.153
As in the Japanese cases, the Sino-US economic relationship became more
balanced than it had been in the 1990s period. Former diplomats, govern-
ment policy analysts, PLA analysts, and scholars concurred.154 As early as the
2008–2009 period, internal discussions within government think tanks began
revolving around the ranking of great powers and manifested greater confi-
dence in China.155
In short, similar to Sino-Japan relations, the economic cost of using or threat-
ening coercion against the United States in the post-2008 period was lower than
it had been in the 1990s and early 2000s. To be clear, China needs the United
States, and China’s technology still lags behind that of the United States in cer-
tain sectors. For example, one recent report from Peking University acknowl-
edges that the United States remains the leader of the world in the technology
sector.156 China still needs the United States and Japan for certain intermedi-
ary products, including in the telecommunication industry.157 Nevertheless, the
report notes that unlike in the early 2000s, China does exceed the United States
in certain sectors, such as artificial intelligence and space.158 In short, as with
Sino-Japan economic relations, although the United States has advantages over
China in some technology sectors, China has begun to catch up, resulting in
more balanced Sino-US economic relations than in previous years.
The geopolitical backlash cost to coerce the United States over Taiwan
remained high after the 1990s. As analyzed in detail in previous chapters,

152
Ibid.
153
Tao Wenzheng and Yuan Zhao, “Dangqian de zhongmei guanxi [Sino-U.S. Relations at Pres-
ent],” CASS report, May 12, 2009, http://ias.cass.cn/sy/zmgx/201509/t20150901_2696263​
.shtml.
154
Interview KZ-#23, Beijing, China, December 19,2015; interview KZ-#21, Beijing, China,
December 10, 2015.
155
Interview KZ-#21, Beijing, China, December 10, 2015; cross-checked with another interviewee
at the same government think tank, interview KZ-#39, Beijing, China, January 22, 2016; inter-
view KZ-#80, Shanghai, China, May 13, 2016; interview KZ-#81, Shanghai, China, May 15,
2016; and interview KZ-#94, Beijing, China, June 27, 2016.
156
Peking University’s School of International Strategy Studies, “Jishulingyu de zhongmeizhanlue
jingzheng: fenxi yu zhanwang [Sino-U.S. competition in the technology sector: analysis and
prospects],” January 30, 2022, http://cn3.uscnpm.org/model_item.html?action=view&table=
article&id=27016.
157
Ibid.
158
Ibid.
5.4 Coercion in the Post-2008 Period 155

both official documents and semiofficial sources indicated continuous geopo-

litical pressure from the United States in the post-2008 period.159 Moreover,
China had sought US cooperation in checking Taiwan’s pro-independence
activities in the pre-2008 period. Nevertheless, Chinese government policy
analysts viewed the Obama administration as more moderate and cautious
than the Bush administration, as cross-checked with former US officials.160
One former US official indicated that the US Department of Defense was
eager to maintain military-to-military exchanges with China in 2010, and
China thus utilized pausing these exchanges as a coercive tool for arms sales
issues.161

5.4.3 Issue Importance

In short, both the need to establish resolve and economic cost were lower
in the post-2008 period, while the geopolitical backlash cost remained high.
China attempted coercion, but it used very moderate coercive tools, such as
pausing military-to-military exchanges and threatening economic sanctions.
The reason China coerced the United States over Taiwan had to do with issue
importance.162 As analyzed in detail in the introduction, China has always
viewed Taiwan as its core interest and the issue of the highest importance.163
According to Yang Jiemian, head of the Shanghai Institute of International
Studies, a government think tank, the Taiwan issue is “the most important
and most sensitive core issue in Sino-US relations.”164 Yang Jiemian was the
brother of Yang Jiechi, China’s former Foreign Minister and State Councilor.
As one senior scholar put it, China cannot fight wars against the United States,
but the Chinese government had to “pretend that it was prepared to fight the
United States.”165 Chinese President Xi Jinping made it clear when meeting US
President Joe Biden in November 2022 that the “Taiwan issue” is the “core of
China’s core interests” (zhongguo hexin liyi de hexin), and it is a red line that
the United States should not cross.166
Chinese coercion against the United States was quite moderate in these post-
2008 instances because China’s need to establish a reputation for resolve had

159
For example, see Huang and Ni (2012, p. 199); interview KZ-#42, Beijing, China, January
25, 2016.
160
Huang and Zheng (2015, p. 124); interview KZ-#80, Shanghai, China, May 13, 2016; and
interview KZ-#118, Arlington, VA, USA, February 15, 2017.
161
Interview KZ-#118, Arlington, VA, USA, February 15, 2017.
162
Interview KZ-#92, Beijing, China, June 8, 2016.
163
Interview KZ-#113, Beijing, China, December 29, 2016.
164
Yang (2000, p. 289); echoed by Chu (2001, p. 283).
165
Interview KZ-#73, Shanghai, China, May 8, 2016.
166
MFA, “Wangyi jiu zhongmei yuanshou huiwu xiangmeiti jieshao qingkuang bing dawen [Wang
Yi Answers Questions from Media Regarding the Meeting Between U.S. and Chinese Lead-
ers],” November 15, 2022, www.mfa.gov.cn/wjbzhd/202211/t20221115_10975081.shtml.
156 Coercion in Cross-Strait Relations

decreased, with arms sales becoming more of a political issue.167 Furthermore,

China continued to acknowledge that the United States was stronger, there-
fore, only acting in ways that would not cause trouble with the United States,
such as being harsher toward other countries but more moderate toward the
United States.168 This is why China only used very selective sanctions and coer-
cion against the United States in the post-2008 period.169 China used coercion
in the post-2008 period, and especially in more recent years, as a political
symbol that reflected issue importance.

5.5 Alternative Explanations

Now that we have examined cases studies and trends in China’s coercion
against the United States over issues surrounding Taiwan, the following pas-
sages provide alternative explanations.

5.5.1 Individual Leaders

As with the previous empirical chapters, the leadership alternative expects
certain leaders, such as hawkish leaders, to be more prone to use coercion
than dovish leaders. However, this alternative explanation is not supported
by empirical evidence. If the leadership alternative holds, the most asser-
tive leader – Xi Jinping – should use more coercion, and especially military
coercion. However, the military coercion that China used in the 1995–1996
Taiwan Strait Crisis occurred during the Jiang Zemin era. Furthermore, Hu
Jintao paused Sino-US military-to-military exchanges more frequently than
Xi Jinping did. In fact, China rarely used coercion in regard to arms sales to
Taiwan in the Xi Jinping era, especially when China began to realize the value
of maintaining military-to-military exchanges with the United States in terms
of Chinese military modernization.170 Interviews with former Chinese officials,
government policy analysts, and scholars also indicate that decisions about
whether to use coercion for arms sales and the 1995–1996 episode had little to
do with the different styles and characteristics of individual leaders, and that
even such assertive leaders as Xi Jinping had restraints.171 In short, Chinese
coercion decisions have been the result of rational cost–benefit calculation, not
characteristics of individual leadership.

167
Interview KZ-#96, Beijing, China, July 6, 2016.
168
Ibid.
169
Interview KZ-#92, Beijing, China, June 8, 2016.
170
Interview KZ-#42, Beijing, China, January 25, 2016.
171
Interview KZ-#21, Beijing, China, December 10, 2015; interview KZ-#42, Beijing, China, Jan-
uary 25, 2016; interview KZ-#63, Beijing, China, April 25, 2016; interview KZ-#73, Shang-
hai, China, May 8, 2016; interview KZ-#80, Shanghai, China, May 13, 2016; and interview
KZ-#92, Beijing, China, June 8, 2016.
5.5 Alternative Explanations 157

5.5.2 Bureaucracies and Interest Groups

This alternative explanation argues that bureaucratic interests and domestic
interest groups affect coercion decisions. Generally speaking, China’s Taiwan
affairs involve the Central Secretariat, the party’s Central Taiwan Affairs
Leadership Small Group, the party’s Central Taiwan Affairs Office (zhongtai
ban), the State Council’s Taiwan Affairs Office, and the CMC.172 Issues related
to Taiwan normally call for meetings of the party’s Central Taiwan Affairs
Leadership Small Group, the members of which usually involve Politburo
Standing Committee members.173 When there are important policy issues
(teshu zhongyaode zhengcexing wenti), the Politburo Standing Committee, or
at least the Politburo, makes the final decisions.174 According to Yang Jiemian,
China’s foreign policy decision-making has always been concentrated at the
highest level of leadership, and this is especially the case when it comes to
China’s policy toward the United States in the post-Cold War era.175 Yang’s
statement is convincing because, as mentioned earlier, he is the twin brother of
China’s former Foreign Minister and therefore personally close to the central
government, having done interviews with many senior diplomats at the MFA,
including those in charge of US affairs.176
In short, despite the importance of such bureaucracies as the State Council’s
Taiwan Affairs Office, the final decision-making authorities when it comes to
crucial issues are the Central Taiwan Affairs Leadership Small Group and the
Politburo.177 Arms sales, Lee’s visit to the United States, and Taiwan’s presi-
dential elections are all considered to be crucial issues. Interviews with former
Chinese officials, government policy analysts, and scholars also indicate that
decisions about whether to use coercion for arms sales and in the 1995–1996
episode were always elevated to the center, including to the Taiwan Affairs
Leadership Small Group and the Politburo.178 Bureaucracies such as the MFA
and the Ministry of Commerce merely implement policies.179
As seen earlier, and especially pertinent to the 1992 case, Deng’s endorse-
ment of the MFA report made it clear that coercion decisions were centralized
at the highest level and that Deng had the final say. There is little evidence
that import-competing sectors – sectors that produce the same goods imported

172
Cai (2000, p. 54).
173
Ibid. The leadership small group is headed by one Politburo Standing Committee Member.
174
Ibid.
175
Yang (2000, p. 104).
176
Ibid., p. 19.
177
Ibid., p. 56.
178
Interview KZ-#21, Beijing, China, December 10, 2015; interview KZ-#39, Beijing, China, Jan-
uary 22, 2016; interview KZ-#63, Beijing, China, April 25, 2016; interview KZ-#76, Shang-
hai, China, May 12, 2016; interview KZ-#80, Shanghai, China, May 13, 2016; and interview
KZ-#102, Washington, D.C., USA, August 21, 2016.
179
Interview KZ-#63, Beijing, China, April 25, 2016; interview KZ-#74, Shanghai, China, May
10, 2016.
158 Coercion in Cross-Strait Relations

from foreign countries – in China entered the calculus when it came to whether
to use economic sanctions against France. As noted earlier, the Chinese MOA
might have wanted to ban wheat imports from the United States, but Deng
vetoed that suggestion. The PLA lobbied for harsher measures against the
United States instead,180 but there were no sanctions, indicating the weakness
of these elite lobbies. As stated, Deng stood firm in the face of military pressure
and endorsed the MFA report advocating for moderation toward the United
States, in line with his earlier sixteen-character order.181 Thus, domestic inter-
ests did not influence China’s coercion decisions. Similarly, in the 1995–1996
Taiwan Strait Crisis, then-PLA Chief of Staff Fu Quanyou stated that the deci-
sion to carry out and continue military exercises was made by the CMC and, in
particular, the final decision was Jiang Zemin’s.182 In the 1995–1996 episode,
for example, the Politburo was involved in decisions and convened enlarged
meetings.183
As in the 1992 case, Chinese domestic politics and protectionist voices (e.g.,
the agricultural sector) do not explain why China did not use coercion against
the United States for arms sales to Taiwan until 2008. Sino-US economic rela-
tions were too important for protectionism to have an influence, and top leaders
intervene when protectionist voices surface. In Wang Yong’s study of China’s
WTO accession process, China was able to speed up the process (mostly nego-
tiations with the United States) despite reluctance from bureaucracies rep-
resenting import-competing sectors because of top leaders. President Jiang
Zemin and Premier Zhu Rongji ultimately determined what concessions China
should offer.184 Although Wang’s study is not about coercion, it indicates that
decisions regarding Sino-US economic relations are centralized at the highest
level, with top leaders wanting to maintain sound relationships. As such, the
bureaucratic alternative does not hold in China’s coercion decision-making
regarding Taiwan.

5.5.3 Nationalism
As with previous chapters, if popular nationalism is crucial in explaining coer-
cion decisions, then we should expect to see stable and repeated coercion over
time. However, China has not resorted to coercion every time the United States
sold weapons to Taiwan. This differs from popular nationalism predictions,

180
Garver (2011, pp. 54–55).
181
Ibid., p. 57.
182
Wang (2015, pp. 164–168); cross-checked with Bonnie S. Glaser, “The PLA Role in China’s
Taiwan Policymaking,” in Saunders and Scobell (2015, p. 176).
183
Su (2014, p. 54); cross-checked by Cai (2000, p. 63). The Politburo convened an enlarged
meeting in early July 1995, before China went on to use military coercion. This was also con-
firmed by a former Chinese diplomat, interview KZ-#74, Shanghai, China, May 10, 2016.
184
Wang Yong, “China’s Issue Importance in WTO Accession: The Internal Decision-making
Process,” in Holbig and Ash (2002, pp. 26, 30).
5.6 Conclusion 159

especially because China’s popular nationalism was directed toward the United
States in the 1990s, as manifested by the anti-US protests following the Belgrade
Embassy bombing in 1999. Moreover, even when China did resort to measures
of coercion in the 2010s, they were often moderate and nonmilitary. If the pop-
ular nationalism alternative explained China’s coercion behavior, it would be
logical to expect more drastic measures of coercion, such as military coercion
or at least an actual implementation of economic sanctions instead of merely
threatening companies that do not have major stakes in China, suggesting that
coercion decisions regarding Taiwan are not driven by popular nationalism.

5.5.4 Structural Realism and the Power Variable

If the argument of overall Chinese material power growth, and especially offen-
sive realism, is critical, then we should expect to see a linear progression of
coercion from fewer to more cases of military coercion over time. Again, we do
not observe such a pattern. China utilized military coercion in the 1995–1996
Taiwan Strait Crisis when it was weaker. Therefore, China’s coercion against
the United States over Taiwan affairs does not exhibit a linear pattern. China
picks and chooses when to escalate to military coercion.

5.5.5 The Utility of Military Coercion

Finally, the argument favoring military coercion would expect China to prior-
itize the use of military coercion over nonmilitary tools, especially over such
crucial issues as Taiwan. In a way, the 1995–1996 Taiwan Strait Crisis did
suggest that China recognized the utility of military coercion. Speech evidence
indicated that China chose military coercion in the ­1995–1996 case because
Taiwan is a core interest. Nevertheless, as critical as Taiwan matters are, China
used military coercion only sparingly, demonstrating that despite the expected
utility of military coercion for core interest issues, China does not always pri-
oritize military coercion. It is safe to predict that China would only use mili-
tary coercion over Taiwan affairs that most critically affect its reputation for
resolve. A potential scenario could be an official visit to the United States by
the Taiwanese President.

5.6 Conclusion
To summarize, China used moderate coercion measures toward the United
States over arms sales to Taiwan until 2008. The cost-balancing theory does
not perfectly explain the 1992 case of US weapons sales to Taiwan, which
instead highlighted economic concerns. As for the 1995–1996 Taiwan Strait
Crisis, China escalated to militarized coercion, the magnitude of which was the
greatest among all cases of Chinese coercion concerning territorial disputes,
Taiwan, and Tibet in the post-Cold War era.
160 Coercion in Cross-Strait Relations

This chapter first demonstrated the significance of the issue importance

variable. Given that Taiwan is the most important core interest of China,
China had to use coercion, and sometimes even militarized coercion, toward
the United States. The 1995–1996 Taiwan Strait case stands in stark contrast
to the 1996–1997 cases from the previous chapter regarding Sino-Japan rela-
tions. China refrained from coercing Japan over disputes in 1996–1997 pre-
cisely because the issue importance concerning the East China Sea disputes was
not as high as the issue importance of Taiwan.
Nevertheless, the costs and benefits of coercion do matter, and there is room
for variation even when it comes to core interest issues. In a way, the high
issue importance of Taiwan heightened the need to establish resolve, which
influenced the magnitude of coercion.185 Part of the reason that China used
moderate and symbolic coercion in the post-2008 period over arms sales was
the lower pressure for resolve compared to the 1992 case. Former US officials
also indicated that publicity, an objective indicator of a reputation resolving
pressure, is an important factor in predicting whether China will react harshly
or moderately.186
Furthermore, the 1992 case is a deviant case based on the expectation
of the cost-balancing theory that highlights the centrality of economic cost
in US-China relations in the 1990s. China’s acute sense of economic cost
­vis-à-vis the United States made it refrain from coercing the United States
over arms sales to Taiwan, even when the cost-balancing theory predicts that
China would have coerced the United States. As Yang Jiemian suggested, the
economic issue has always been a salient concern in Chinese foreign policy
decision-making.187 The United States played a crucial role, particularly in
the early period of Chinese economic development, similar to Sino-Japan rela-
tions. Although China still benefits from certain US and Japanese technologies
as part of its supply chain, this dependence is much less pronounced than it
was in the 1990s and early 2000s. As with Sino-Japan economic relations,
Sino-US economic relations have become more balanced. Of course, this is
not to say that the economic cost of coercing the United States or Japan has
vanished. Nevertheless, the economic cost of China coercing either country
has become lower compared to previous periods. The cost-balancing theory is
a theoretical construct that is a simplified model representing reality, hence the
dichotomous measurement of economic cost in a comparative sense both over
time and cross-nationally.
China’s growing economy, reduced asymmetrical dependence on the United
States, and, most critically, decreasing emphasis on exports and policies pri-
oritizing domestic innovation make it uncertain how long the edge that the
United States has over China will hold. Chinese patterns of coercion regarding

185
Interview KZ-#80, Shanghai, China, May 13, 2016.
186
Interview KZ-#118, Arlington, VA, USA, February 15, 2017.
187
Yang (2000, p. 94).
5.6 Conclusion 161

Taiwan may demonstrate a worrying trend, showing that China can be quite
opportunistic and might not act with restraint once it is powerful enough.188
As the 1995–1996 Taiwan Strait Crisis showed, more drastic Taiwanese mea-
sures, especially a potential announcement of de jure independence, would
most likely invoke Chinese military coercion or even an actual invasion of
Taiwan. Thus, while weapons sales might not be a central issue given China’s
growing military power, this future trajectory may be dangerous, especially
when the Chinese government reacts to actions that might contribute to
changes in the current political status quo. For example, China’s recent eco-
nomic sanctions against Lithuania suggest that it is more than willing to use
coercion over its perceived “negative political precedents.” In November 2021,
Lithuania allowed Taiwan to establish the Taiwanese Representation Office
in Lithuania. In December 2021, China imposed harsh economic sanctions on
Lithuania, secretly telling many multinational companies not to do business
with Lithuania and essentially cutting off its global production and supply
chains.189 In addition, Lithuanian exports to China could not clear customs,
with the Chinese Customs citing COVID issues. China’s use of military coer-
cion in reaction to House Speaker Nancy Pelosi’s visit to Taiwan in the sum-
mer of 2022 is strikingly similar to the Taiwan Strait Crisis of 1995–1996
examined earlier in this chapter. However, the magnitude of China’s military
coercion was greater in the 2022 case.190 This suggests that because Taiwan
continues to be one of China’s core interests, it is highly likely China will resort
to military coercion again in the future. In particular, if Taiwan decides to
pursue judiciary independence, then it is highly likely that China will resort to
military coercion, or even the use of force. The next chapter proceeds to exam-
ine political issues instead of territorial disputes analyzed in previous chapters:
foreign leaders’ reception of the Dalai Lama.

188
Interview KZ-#73, Shanghai, China, May 8, 2016.
189
Andrius Sytas and John O’Donnell, “Exclusive: China Pressures Germany’s Continental to
Cut Out Lithuania – Sources,” Reuters, December 17, 2021, www.reuters.com/world/china/
exclusive-china-asks-germanys-continental-cut-out-lithuania-sources-2021-12-17/.
190
“Xinhuashe shouquan gonggao [Authorized Announcement],” Xinhua News, August 2, 2022,
www.news.cn/2022-08/02/c_1128885591.htm; www.news.cn/2022-08/02/c_1128885582.htm.
6

Tibet and the Dalai Lama Visits

Tibet is a plateau surrounded by three mountain ranges, with the Himalayas

in the South.1 A political entity did not emerge in the Tibet region until the
late sixth century, when a tribal chief named Namri-songsten attempted unifi-
cation.2 This task was later accomplished by his son, Songsten Gampo,3 who
married Princess Wen Cheng of the ruling Chinese Tang dynasty, establishing
the “first formal relations” between the Chinese empire and Tibet.4 Tibet was
an important and integral part of all subsequent Chinese empires, as well as
Republican China and the People’s Republic of China.5 For Tibetans, how-
ever, Tibet “has always been independent.”6
Lama is Tibetan for “priest,” and the Dalai Lama has been portrayed as an
individual “who had broken the cycle of birth-rebirth and could aspire to ulti-
mate peace in nirvana.”7 The Dalai Lama did not become a powerful political
force in Tibet until the mid-seventeenth century.8 His Holiness the 14th Dalai
Lama, Tenzin Gyatso, was born on July 6, 1935.9 In 1951, after the Chinese
Communist Party took over Tibet, the Chinese government and the Dalai
Lama signed the “Seventeen Point Agreement,” in which Tibet “for the first
time formally accepted Chinese sovereignty, albeit with regional a­ utonomy.”10

1
Grunfeld (1996, p. 7).
2
Ibid., p. 35.
3
Ibid.
4
Ibid.
5
Ibid., p. 42; Dawa (2001, p. 2); Goldstein and Rimpoche, (1989, p. xix).
6
Dawa (2001, p. 2).
7
Grunfeld (1996, p. 41).
8
Ibid., p. 42.
9
See the official website of the Dalai Lama at www.dalailama.com/the-dalai-lama/biography-and-
daily-life/brief-biography.
10
Goldstein and Rimpoche (1989, p. xix).

162
6.1 Cost-Balancing Theory: General Trends 163

One critical part of the agreement stated that “the Central People’s Government
shall conduct the centralized handling of all external affairs of the area of
Tibet,” suggesting that the Chinese government considered Tibet part of the
Chinese territory over which it exercised sovereign control.11
The Dalai Lama went into exile in 1959, following an unsuccessful Tibetan
uprising in Lhasa.12 Since then, Dharamsala, a town in northern India, has
become the political headquarters of the Dalai Lama. The Chinese govern-
ment viewed this uprising as a betrayal of the “Seventeen Point Agreement.”13
Deeming the Dalai Lama to be the leader of a secessionist movement, the
Chinese government particularly opposes foreign heads of state or government
receiving the Dalai Lama, believing it grants him legitimacy.

6.1 General Trends, Specific Cases, and Theoretical

Expectations of the Cost-Balancing Theory
As with Taiwan, China deems Tibet as one of its core interests and an issue
of the highest importance. Former Chinese diplomats and senior government
policy analysts have repeatedly stated that the Dalai Lama visits, or “the
Tibet issue,” concern China’s core interests.14 Foreign officials also indicate
that China views Tibet as its core interest. According to Bader, in the first
few months that Obama was president, the Chinese government informed
US officials of their “core interests,” which were Taiwan and Tibet.15 The
Chinese government considers receptions of the Dalai Lama to be interfering
in Chinese domestic affairs and threatening China’s sovereignty over Tibet.
The Chinese Ministry of Foreign Affairs (MFA) always protests receptions
of the Dalai Lama with “strong dissatisfaction” (qianglie buman) and “firm
opposition” (jianjue fandui). Interestingly, despite its rhetorical diplomatic
protests, China does not always coerce states that have received the Dalai
Lama. There is both temporal and cross-national variation concerning
Chinese coercion against foreign heads of state or government receiving the
Dalai Lama, as shown in Figure 6.1.16 The data capture each head of the
government or state’s reception of the Dalai Lama from 1990 to 2015. As
the Dalai Lama aged, and after China’s repeated use of coercion, the Dalai
Lama decreased his travel abroad, not being received by any head of state
or government post-2016.

11
Ibid., pp. 763–768; emphasis added.
12
See the official website of the Dalai Lama at www.dalailama.com/the-dalai-lama/biography-
and-daily-life/brief-biography.
13
Grunfeld (1996, p. 242).
14
Interview KZ-#22, Beijing, China, December 15, 2015; interview KZ-#43, Beijing, China,
­January 28, 2016; and interview KZ-#100, Beijing, China, July 28, 2016.
15
Bader (2012, p. 49).
16
For data and the coding, see the online appendix.
164

Figure 6.1 Chinese coercion regarding foreign heads of state/government receiving the Dalai Lama (1990–2015)
6.1 Cost-Balancing Theory: General Trends 165

The dark gray bars denote the number of countries whose heads of state or
government received the Dalai Lama in a given year. The Dalai Lama is also
often received by foreign parliaments or nongovernmental organizations, but
reception by a head of state or government is most likely to elicit a Chinese
response because it symbolizes the highest level of diplomatic reception. The
light gray bars denote the number of cases in which China used coercion fol-
lowing the reception of the Dalai Lama. China began to use coercion more in
2007, despite frequent receptions in the 1990s and early 2000s. Furthermore,
China did not coerce all states that received the Dalai Lama. For example, US
presidents met with the Dalai Lama almost yearly until 2016, but China never
coerced the United States about it. Prime ministers and presidents of Australia
and New Zealand also met with the Dalai Lama, and China also did not use
or threaten coercion. By contrast, China coerced European countries harshly,
including France, Germany, and Britain, when they received the Dalai Lama.
Why did China use coercion over the Dalai Lama in the first place? What
explains the temporal variation of Chinese coercion, and why does China pre-
fer to coerce European countries? The Dalai Lama is a relatively moderate
figure within Tibetan politics who supports negotiations and diplomatic solu-
tions with China, whereas younger leaders in the Tibetan regime in exile seek
Tibet’s independence. It is, therefore, puzzling that China used coercion on
Dalai Lama receptions and targeted some states but not others.
As with the previous chapter on Taiwan, the cost-balancing theory predicts
that China will coerce a country over the “Dalai Lama issue” when the need
to establish resolve is high and the economic cost is low, while refraining from
coercion when the economic cost is high and the need to establish resolve is low.
Since Tibet is a “core interest” to China like Taiwan, China should be expected
to utilize coercion when the need to establish resolve and the economic cost are
equally high. China is much more likely to choose nonmilitary coercion when
the geopolitical backlash cost is high, although China may resort to military
coercion because Tibet is a core interest. The need to establish resolve is mea-
sured by objective measures, such as the number of Dalai Lama receptions and
their level of media exposure, as well as written and interview speech evidence.
Economic cost is measured by the target country’s trade and financial relations
with China. For example, is the target a major export market for China or an
important source of imports for key technologies, intermediary products, or
primary natural sources in China’s supply chain? Is the target country a crit-
ical Foreign Direct Investment (FDI) for China for which China cannot find
alternatives? Does the target control the global financial network? Geopolitical
backlash cost is measured by the target state’s alliance relationship with the
United States, as well as the extent to which the target state’s neighbors might
ally with the target state against China.
The cost-balancing theory predicts that we should expect to see high economic
cost and low need to establish resolve when China refrained from coercion in the
1990s and early 2000s. When China began using coercion more frequently in
166 Tibet and the Dalai Lama Visits

the post-2007 period, we should see low economic cost and high need to estab-
lish resolve. Given that Tibet is a “core interest” issue, we should also observe
China using coercion even when the need to establish resolve and the economic
cost are both high. Finally, we might see a cyclical pattern in the frequency of
coercion over time, in line with the varying need to establish resolve.
Alternative explanations would yield predictions different than the
cost-balancing theory, similar to previous chapters. First, if evidence suggests that
the Chinese president makes coercion decisions that contradict the judgment of
all other leaders, then there is strong support for the individual leadership argu-
ment. Second, if domestic lobbies and interest groups dictate coercion decisions,
we should expect to see a bottom-up decision-making process of coercion, instead
of a top-down process. Third, if popular nationalism is crucial, then we wouldn’t
expect a cyclical pattern of coercion over time. Given that nationalism is an ide-
ational source of behavior that tends to be stable over time, we should see a stable
frequency of coercion occurrences. Fourth, if the argument of overall Chinese
material power growth is central, then we should also see a linear progression of
coercion, from fewer to more cases of military coercion over time. Finally, if the
argument favoring the utility of military coercion is correct, we should expect to
see an overall linear increase or even preclusive use of military coercion over time.
Before comparing the cost-balancing theory against the above alternative
explanations, the chapter first examines the overall trend of China’s coercion
regarding the reception of the Dalai Lama over time. Interestingly, this dis-
cussion includes a curious anomaly in the cost-balancing theory, which is the
1996–2002 period when China should have used coercion due to a high need
to establish resolve, but it refrained from coercing European states. The reason
for this divergence from the theory is similar to why China refrained from
coercing the United States over arms sales to Taiwan in 1992: Economic con-
cerns trumped the fact that Tibet was a core interest.
As will be shown below, China began to coerce European states post-2006,
but it did not coerce states like Australia. The ensuing section, therefore, con-
ducts a case study of a paired comparison, pitting Chinese coercion of France
and Germany against the lack of coercion of Australia, even though the Dalai
Lama’s receptions in the three countries took place at roughly the same time.
The case study illustrates that the mechanism of the cost-balancing theory is at
work, explaining both “positive” cases (occurrences with coercion) and “neg-
ative” cases (occurrences without coercion). Following the case study, the next
section examines alternative explanations and refutes them. The final section
is a conclusion.

6.2 Explaining the General Trend in

Receptions of the Dalai Lama
If the cost-balancing theory is correct, we should see China using coercion
when the need to establish resolve is high and the economic cost is low. We
6.2 General Trend in Receptions of the Dalai Lama 167

should see China choosing nonmilitarized coercive tools when the geopolitical
backlash cost is high. The need to establish a reputation for resolve and the
economic cost of coercing were both high in the 1996–2002 period. Given the
high issue importance of Tibet, China should have used or threatened coer-
cion, but it refrained from coercion in general in this period (except for the
2002 coercion against Mongolia), as shown in Figure 6.1.
The direct goal of Chinese coercion was to force the target state to stop meet-
ing with the Dalai Lama.17 For example, when the Canadian Prime Minister met
with the Dalai Lama in October 2007, the spokesman of the MFA urged Canada
to “correct its wrongdoing regarding the Dalai issue” and stop “supporting
Tibet independence.”18 Similarly, when the Danish Prime Minister received the
Dalai Lama in May 2009, the MFA stated that Denmark harmed China’s core
interest and should “correct its wrong actions.”19 The broader goal, however,
was to deter other states from receiving the Dalai Lama. After the Austrian
Prime Minister met with the Dalai Lama in May 2012, the MFA claimed that
Austria sent “wrong signals” that promoted Tibet’s independence.20

6.2.1 The Need to Establish a Reputation for Resolve

China’s need to establish a reputation for resolve was low between 1990 and
1995, increased between 1996 and 2002, decreased between 2003 and 2006,
increased again in the post-2007 period, and then died down gradually after
2013. Figure 6.2 shows the number of countries whose head of state or govern-
ment received the Dalai Lama (data available in the online appendix).
In the pre-2002 period, the number of countries receiving the Dalai Lama
was high except for in the mid-1990s. Some of these receptions of the Dalai
Lama were salient from China’s perspective, including British Prime Minister
meetings with the Dalai Lama in 1991 and 1999, respectively. The French
President received the Dalai Lama in 1998, and other European heads of
government or state also met with the Dalai Lama in the 1990s and early
2000s, including Norway, Denmark, Lithuania, the Czech Republic, Austria,
and Italy.21 The number of countries receiving the Dalai Lama decreased in
the 2002–2006 period but increased again after 2007, with 2007 as the peak.
Figure 6.3 shows a Factiva search of reports containing “Dalai Lama visit”
in Reuters, AFP, and AP.

17
Interview KZ-#59, Wuhan, China, April 18, 2016.
18
MFA press conference, October 30, 2007, www.fmprc.gov.cn/web/fyrbt_673021/
dhdw_673027/t376498.shtml.
19
MFA press conference, May 30, 2009, www.fmprc.gov.cn/web/fyrbt_673021/dhdw_673027/
t565332.shtml.
20
MFA press conference, May 26, 2012, www.fmprc.gov.cn/web/fyrbt_673021/dhdw_673027/
t935327.shtml.
21
See the online appendix.
168

Figure 6.2 The Dalai Lama’s reception by head of state/government (1990–2015)

 Figure 6.3 Factiva search of English language reports on the Dalai Lama visits in Reuters, AP, and AFP (1990–2014)
169
170 Tibet and the Dalai Lama Visits

Greater media exposure increases the salience of the Dalai Lama issue and
China’s pressure to establish a reputation for resolve. As with Figure 6.2,
international media exposure was lower in the early 1990s, increased in 1997,
decreased in the late 1990s, increased again beginning in 2000, decreased
between 2003 and 2005, increased again after 2006, and eventually decreased
post-2012. Based on the two objective measures displayed in Figures 6.2
and 6.3, the need to establish resolve was low between 1990 and 1995, 2003–
2006, and roughly post-2013 because the Dalai Lama was not received by
many heads of state during those times, international media exposure was low,
or both. The need to establish a reputation for resolve was high in the 1996–
2002 and 2006–2013 periods because both the frequency of the Dalai Lama
visits and the international media exposure were high.
Official and semiofficial sources, government policy analysts, and former
Chinese diplomats also repeatedly stated that China used coercive measures
beginning in 2007 to deter other states from receiving the Dalai Lama in the
future.22 In particular, China was afraid of demonstration effects in Europe, with
the Dalai Lama’s reception in one European country leading to more European
states receiving him.23 To quote Chinese government analysts and diplomats, the
strategy was “killing the chicken to scare the monkey,” just as in the South China
Sea cases.24 In fact, of the seventy-three times the Dalai Lama was received by
foreign heads of state or government from 1990 to 2015, fifty-six percent took
place in Europe.25 As seen earlier, a Chinese MFA spokesperson also stressed
that the target state should not send the wrong pro-Tibet independence signals.

6.2.2 Economic Cost

Coercion has costs, including economic ones. China’s economic cost, especially
vis-à-vis Europe, was high in the pre-2006 period but lowered in the post-2006
period. The share of Chinese exports to Europe has been steadily increasing
for the last thirty years, but the importance of European FDI in China, a sig-
nificant driver of Chinese economic growth, has decreased in recent years. The
EU’s FDI in China was higher in the pre-2006 period, maintaining a yearly
average of about ten percent of overall FDI in China. In the post-2006 period,
however, the EU’s share of China’s FDI dropped significantly to a yearly aver-
age of about five percent. As in the previous chapters on Japan and Taiwan, the
trends are similar to those faced by Japanese and US FDI in China.

22
Interview KZ-#22, Beijing, China, December 15, 2015; interview KZ-#49, Beijing, China,
­February 23, 2016; and interview KZ-#100, Beijing, China, July 28, 2016.
23
Interview KZ-#43, Beijing, China, January 28, 2016; interview KZ-#70, Shanghai, China, May
5, 2016.
24
Interview KZ-#37, Beijing, China, January 19, 2016; interview KZ-#52, Beijing, China, March
9, 2016; interview KZ-#50, Beijing, China, March 3, 2016; and interview KZ-#59, Wuhan,
China, April 18, 2016.
25
For data, see the online appendix.
6.2 General Trend in Receptions of the Dalai Lama 171

Official sources also reflect China’s decreasing economic cost with respect
to the EU. In the 1990s and early 2000s, official MFA documents indicate the
importance of the EU for China’s economic growth. For example, the MFA’s
annual China’s Foreign Affairs of 1997 stated that between 1979 and 1996, the
EU constituted 48.8 percent of the technology transfers to China.26 Similarly,
the MFA’s China’s Foreign Affairs of 2002 and China’s Foreign Affairs of
2004 emphasized that the EU constituted the greatest share of foreign technol-
ogy transfers to China.27 Beginning in 2005, China’s Foreign Affairs no longer
mentioned the EU as the largest entity transferring technology to China, focus-
ing instead on joint Sino-EU economic cooperation that suggested a more bal-
anced economic relationship.28 Reflecting this relationship, the official 2006
EU policy papers on its China policy also began to emphasize China’s economic
revival, stressing that China should shoulder more economic responsibilities.29
Semiofficial sources concur with official assessments. Ding Yuanhong, for-
mer Chinese Ambassador to the EU, noted the EU’s economic issue in 2006.30
The Annual Bluebook on Europe, a semiofficial document published by the
Chinese Academy of Social Sciences (CASS), stated that China’s economic
growth had begun to put pressure on Europe in 2007,31 adding that Europe’s
economy lacked competitiveness and that interest differences among EU
members made it impossible for the EU to have a collective economic strat-
egy toward China.32 The Annual Bluebook on International Situation and
Chinese Foreign Policy, published by China Institute of International Studies
(CIIS), also stated that the EU was experiencing a low point (dimi) in 2007.33
Interviews are also in line with the temporal trends reflected by the EU FDI in
China. One former diplomat stated that China needed Europe economically
much more than vice versa in the 1990s, but this began to change around 2006
and 2007, when Sino-EU economic relations became more balanced.34 There
was a consensus on this observation among senior Chinese government policy
analysts and Chinese diplomats.35

26
Diplomatic history editorial office of the MFA (1997, p. 447).
27
Diplomatic history editorial office of the MFA (2002, p. 308); Diplomatic history editorial
office of the MFA (2004, p. 37).
28
See, for example, Diplomatic history editorial office of the MFA (2005); Diplomatic history
editorial office of the MFA (2006).
29
Commission of the European Communities report, COM(2006) 631 final: “Closer Partners,
Growing Responsibilities, A Policy Paper on EU-China Trade and Investment: Competition
and Partnership,” October 10, 2006, http://trade.ec.europa.eu/doclib/docs/2006/october/­
tradoc_130791.pdf; http://trade.ec.europa.eu/doclib/docs/2006/october/tradoc_130875.pdf.
30
Ding (2006).
31
CASS (2007, p. 105).
32
Ibid., p. 108.
33
CIIS (2007, pp. 61–62).
34
Interview KZ-#22, Beijing, China, December 15, 2015.
35
Interview KZ-#37, Beijing, China, January 19, 2016; interview KZ-#38, Beijing, China, Janu-
ary 20, 2016; interview KZ-#43, Beijing, China, January 28, 2016; interview KZ-#44, Beijing,
172 Tibet and the Dalai Lama Visits

Furthermore, China’s push to enter the World Trade Organization (WTO)

in the 1990s was an important economic factor that restrained Chinese actions
toward the EU, as indicated in CASS reports.36 Scholars close to the Chinese
government also concurred that the WTO issue was an important restraining
factor.37 After 2008, China began to gain the upper hand in its interactions with
the EU in the WTO.38 In short, Chinese economic cost with respect to Europe
was high in the pre-2006 period but began to decrease beginning in 2007.

6.2.3 Geopolitical Backlash Cost

Another cost in the cost-balancing theory is the geopolitical backlash cost,
which has generally been low regarding Europe for the past three decades.
After the 1989 Tiananmen incident, China’s relations with the Western world
improved in a relatively short period, which manifested itself in MFA’s annual
China’s Foreign Affairs from the 1990s.39 The 1995 China’s Foreign Affairs
particularly emphasized that China’s relations with Europe had made major
improvements.40 One former Chinese diplomat who was based in Europe
concurred with this assessment.41 CASS’s 1996 report on Europe noted that
Europe was divided when it came to political confrontation with China.42
The Chinese government’s assessment that Europe was politically divided
on China continued in the 2000s. For example, senior China Institutes of
Contemporary International Relations (CICIR) analyst on Europe Feng
Zhongping stated that European countries, and especially France and Germany,
were internally focused on issues regarding the livelihood of the domestic public
in 2006.43 Former Chinese Ambassador to the EU Ding Yuanhong concurred
that the EU had neither a leader nor unity in 2006, which made it difficult to
speak with one voice in foreign affairs.44 Ding’s assessment was echoed by
Chinese government analysts and CIIS and CASS reports.45 In 2012, former
Chinese Ambassador to Germany Mei Zhaorong put it more bluntly, saying
that “Europe does not have the hegemonic capability and therefore cannot

China, February 2, 2016; interview KZ-#50, Beijing, China, March 3, 2016; interview KZ-#52,
Beijing, China, March 9, 2016; interview KZ-#70, Shanghai, China, May 5, 2016; interview
KZ-#49, Beijing, China, February 23, 2016; and interview KZ-#46, Beijing, China, February
15, 2016.
36
CASS (2001, pp. 84–85); CASS (2015, p. 102).
37
Interview KZ-#14, Beijing, China, November 25, 2015.
38
CASS (2015, p. 101).
39
Diplomatic history editorial office of the MFA (1993); Diplomatic history editorial office of the
MFA (1994).
40
Diplomatic history editorial office of the MFA (1995).
41
Interview KZ-#38, Beijing, China, January 20, 2016.
42
CASS (1997, pp. 93–94).
43
Feng (2006).
44
Ding (2006).
45
See, for example, Zhang (2006); CASS (2007, p. 3); CASS (2009, p. 32); and CIIS (2007, p. 72).
6.3 Why Pick on the Europeans but Not Australia? 173

hurt China as much as the United States can.”46 Interviews with Chinese gov-
ernment analysts and other former diplomats concur with Mei’s assessment.47
In short, the geopolitical backlash cost for China regarding Europe has been
low since the post-Cold War period.
The major trends of the need to establish a reputation for resolve and eco-
nomic cost are congruent with patterns of Chinese coercion, except for during
the 1996–2002 period. As the cost-balancing theory predicted, China refrained
from coercion in the 1990–1995 and 2003–2006 periods because the need to
establish a reputation for resolve was low and economic cost was high. China
began to coerce other states, and European states in particular, beginning in
2007 due to the high need to establish resolve and low economic cost.
However, because of Tibet’s high issue importance, the theory predicted
that China would use coercion, despite the equally high need to establish
a reputation for resolve and economic cost, against European states in the
1996–2002 period. China did not use coercion, though. This anomaly resem-
bles the one described in the previous chapter, when China did not coerce
the United States for arms sales to Taiwan in the 1992 case. This sug-
gests that when it comes to relations with Western countries such as Europe
and the United States in the 1990s and early 2000s, Chinese economic con-
cerns trumped everything else. China was acutely economically vulnerable
in relation to Europe and the United States in the 1990s and thus prioritized
economic cost. When Chinese economic cost concerns are less acute, Chinese
coercive behavior regarding Dalai Lama visits conforms to the cost-balancing
theory. The following section conducts a case study and demonstrates that
the cost-balancing theory explains why China coerced European countries,
especially France and Germany, but not Australia, which is a “negative case”
where coercion is not utilized.

6.3 Why Pick on the Europeans but Not Australia?

Of the eleven times China used coercion over Dalai Lama visits, nine were
against European countries. Despite similar diplomatic rhetoric following
Dalai Lama’s visits to France, Germany, and Australia, China coerced the first
two states, but not Australia. These states are comparable because they are all
major powers that are similar in terms of their GDP per capita.48 Moreover, all
are US allies. The timing of the visits is also comparable: German Chancellor
Angela Merkel met with the Dalai Lama in September 2007, French President

46
Qtd. in Wang (2012, pp. 17–18).
47
Interview KZ-#22, Beijing, China, December 15, 2015; interview KZ-#46, Beijing, China,
­February 15, 2016; interview KZ-#52, Beijing, China, March 9, 2016; interview KZ-#74,
Shanghai, China, May 10, 2016; and interview KZ-#82, Shanghai, China, May 16, 2016.
48
Based on IMF data, see www.businessinsider.com/the-richest-countries-in-the-world-2017-
3/#30-japan-gdp-per-capita-38893-31732-1.
174 Tibet and the Dalai Lama Visits

Nicolas Sarkozy received him in December 2008, and Australian Prime

Minister John Howard met with him in May 2007.
It is, therefore, puzzling that China would coerce France and Germany but
not Australia. If the cost-balancing theory is correct, we should see the need
to establish resolve as high and the economic cost as low vis-à-vis France and
Germany. I adopt a most-similar case research design to tease out the mecha-
nisms through which China coerced France and Germany but not Australia;
that is, this section conducts a paired comparison of two positive cases and
one negative case. Choosing France and Germany as cases is important for
several reasons. First, given the frequency of Dalai Lama’s visits to Europe, if
we observe Chinese coercion at all, it is likely to take place in Europe. It is thus
paramount to understand why China chose Germany and France to coerce.
Second, Chinese coercion against France and Germany was among China’s
harshest coercion for the Dalai Lama issue, which calls for an analysis of why
China was so harsh in these cases.

6.3.1 Chinese Coercion Toward France and Germany

On December 6, 2008, French President and then-rotating Chair of the EU
Nicolas Sarkozy met with the Dalai Lama.49 The Chinese MFA immediately
responded, blaming France for interfering with China’s internal affairs and
urging the French to “take concrete measures to correct its mistakes.”50 China
subsequently used harsh coercive measures, including diplomatic and eco-
nomic sanctions. First, China delayed the 11th meeting between China and the
EU indefinitely. Then, it canceled senior diplomatic exchanges between China
and France, engaging in a “tour de France” beginning in January 2009 by
visiting all the European countries surrounding France, but not France itself.
Former Chinese State Councilor Dai Bingguo, as well as other former diplo-
mats and government policy analysts, confirmed that these measures were in
direct response to President Sarkozy’s meeting with the Dalai Lama.51
Next, China imposed economic sanctions by “freezing” and “delaying”
Airbus orders from France.52 It is important to note that China did not can-
cel Airbus orders, which would have been a breach of WTO rules. Rather, it
froze and delayed orders already made between China and France. As former
Chinese diplomats based in the EU noted, delaying Airbus orders caused job

49
Matthew Day, “Defiant Nicolas Sarkozy Meets Dalai Lama Despite China’s Trade Threat,”
Telegraph, December 6, 2008, www.telegraph.co.uk/news/worldnews/asia/china/3629865/
Defiant-Nicolas-Sarkozy-meets-Dalai-Lama-despite-Chinas-trade-threat.html.
50
MFA press conference, December 7, 2008, www.fmprc.gov.cn/web/fyrbt_673021/
dhdw_673027/t525253.shtml, accessed May 1, 2018.
51
Dai (2016, p. 350); interview KZ-#22, Beijing, China, December 15, 2015; interview KZ-#38,
Beijing, China, January 20, 2016; and interview KZ-#50, Beijing, China, March 3, 2016.
52
Interview KZ-#38, Beijing, China, January 20, 2016; interview KZ-#43, Beijing, China, Janu-
ary 28, 2016.
6.3 Why Pick on the Europeans but Not Australia? 175

creation issues in France.53 The production of Airbus orders begins only after
China has made a down payment, but if China freezes an order and does not
make a down payment, production will not begin, which means no job for
local workers in France.54 Furthermore, Airbus France could encounter poten-
tial monetary issues because of the lack of a down payment.55 Finally, freezing
Airbus orders could impact the French production chain, which involves local
French suppliers for the Airbus.56
On September 23, 2007, German Chancellor Angela Merkel met with
the Dalai Lama in private at her presidential residence.57 The MFA immedi-
ately responded by saying that Angela Merkel was “interfering with domestic
Chinese affairs” and that “Germany should take measures to improve Sino-
German relations as soon as possible.”58 Similar to the French case, China
used both diplomatic and economic coercion. On the diplomatic front, China
canceled senior-level exchanges between Chinese and German leaders, as con-
firmed by former diplomats,59 who also indicated that China imposed soft eco-
nomic sanctions, such as disrupting German investment in China.60 Figure 6.4
shows how China played the card of “delaying Airbus orders” against France,
and possibly Germany, as well.
In Figure 6.4,61 the darkest gray line denotes imports from France and the
lightest gray imports from Germany, most of which presumably came from
Airbus. The line at the top of the figure is the sum of German and French
Aircraft exports to China. The data from Chinese Customs include two cat-
egories: aircraft with the Operating Empty Weight (OEW) of over forty-five
tons and aircraft with OEW of between fifteen and forty-five tons. Most Airbus

53
Interview KZ-#46, Beijing, China, February 15, 2016; interview KZ-#49, Beijing, China,
­February 23, 2016; interview KZ-#74, Shanghai, China, May 10, 2016; interview, Beijing,
China, July 9, 2014.
54
Interview KZ-#49, Beijing, China, February 23, 2016.
55
Ibid.
56
Interview KZ-#70, Shanghai, China, May 5, 2016.
57
Judy Dempsey, “Despite Censure from Beijing, Merkel Meets with Dalai Lama in Berlin,”
New York Times, September 23, 2007, www.nytimes.com/2007/09/23/world/europe/23iht-­
berlin.4.7609899.html.
58
MFA press release as reported by BBC News, September 25, 2007, http://news.bbc.co.uk/­
chinese/simp/hi/newsid_7010000/newsid_7011700/7011781.stm.
59
Interview KZ-#14, Beijing, China, November 25, 2015; interview KZ-#22, Beijing, China,
December 15, 2015; interview KZ-#38, Beijing, China, January 20, 2016; interview KZ-#65,
Beijing, China, April 27, 2016; interview KZ-#74, Shanghai, China, May 10, 2016; interview
KZ-#82, Shanghai, China, May 16, 2016.
60
Interview KZ-#22, Beijing, China, December 15, 2015.
61
Data comes from the China Customs Statistics Yearbooks, compiled by the Chinese General
Administration of Customs. Note that the Yearbooks do not specify companies and only list
categories of the goods and countries of origin. I assume here that Airbus and Boeing sales
generally constitute most aircraft exports to China from the respective countries. The HS code
for Aircraft over forty-five tons is 88024020 and the HS code for Aircraft between fifteen and
forty-five tons is 88024010.
176

Figure 6.4 French and German aircraft export to China (2004–2010)

6.3 Why Pick on the Europeans but Not Australia? 177

models have an OEW of over forty-five tons, except for certain models of A319
and A320, which are under forty-five tons but greater than fifteen.62 I, there-
fore, include these two categories, even though the Chinese Customs data also
includes such categories as aircraft with an OEW below fifteen tons. Notably,
overall aircraft sales from Airbus dropped in the affected years of 2007 and
particularly 2009 in dollar terms. Before 2007, aircraft sales from Germany and
France grew at a similar rate, but when Chancellor Merkel received the Dalai
Lama in early September 2007, German aircraft exports to China dropped by
thirty-four percent in the fourth quarter compared to the prior quarter and
forty percent compared to the fourth quarter of 2006.63 The decline continued
until September 2008, when Germany reaffirmed that Tibet is part of Chinese
territory and China deemed Sino-German relations to have “comprehensively
recovered.”64 Imports from France continued to increase in 2007, and two
months after the Dalai Lama’s visit to Germany, China signed a contract to
buy 160 Airbus from France.65 In dollar terms, the decrease of German air-
craft exports to China was not substantial, as Germany, China’s largest trading
partner in Europe, exported mainly machinery and automobiles to China, with
aircraft constituting only about four percent of German exports to China. This
sanctions episode is interesting because it did not hurt Germany.
After this episode, however, China sanctioned France. When the French
president received the Dalai Lama in December 2008, French aircraft sales
to China in 2009 consequently dropped by 45.5 percent compared to 2008.
Again, the timing was indicative. French aircraft exports to China immediately
fell by 68.2 percent in the first quarter of 2009 compared to the first quarter
of 2008, and this decline lasted until the first quarter of 2010.66 Meanwhile,
aircraft sales from Germany picked up. The global financial downturn cannot
explain this significant reduction in French aircraft sales to China, especially as
German aircraft sales to China increased.
Press reports also indicate that the reduction in sales was intentional. After
the Dalai Lama’s visit, Chinese Premier Wen Jiabao visited countries such as
Germany and Britain but avoided France, leading French media to call his visit

62
For data regarding the OEW of different aircraft models, see the generic aircraft database
provided by Skyplan Services Ltd., at ftp://ftp.skyplan.com/Manuals/Generic%20Aircraft%20
Database.pdf.
63
Data comes from the Chinese Ministry of Commerce’s Country Report at http://countryreport​
.mofcom.gov.cn/record/index.asp?p_coun=%B5%C2%B9%FA. German aircraft exports to
China in the fourth quarter – from September to December – were $465 million in 2005, $714 in
2006, $431 in 2007, $632 in 2008, $526 in 2009, $533 in 2010, and $942 in 2011, respectively.
64
Zhao Ke and Lu Ruijun, “Jiangjiao sishinian laide zhongde zhengzhi guanxi [Sino-German
Relations in the Past 40 Years],” in Gu (2011, p. 241).
65
Tan Jingjing and Chang Lu, “Zhongguo jiang cong faguo goumai 160jia kongke feiji [China
will Purchase 160 Airbus from France],” November 26, 2007, Xinhua News, http://news.ifeng​
.com/mainland/200711/1126_17_311641.shtml.
66
Data comes from the Chinese Ministry of Commerce Country Report at http://countryreport​
.mofcom.gov.cn/record/index.asp?p_coun=%B7%A8%B9%FA.
178 Tibet and the Dalai Lama Visits

a “tour de France” (huanfa).67 This avoidance had economic impacts. When

Chinese Minister of Commerce Chen Deming led the “Chinese group of trade
and investment promotion” (zhongguo maoyi touzi cujintuan) to Europe with
€17 billion to spend, he also avoided France.68 Unlike China’s “small-dose”
sanctions on Germany, its sanctions on France were larger in scale and tar-
geted specifically at aircraft. French exports to China dropped by seventeen
percent compared to 2008, with aircraft sales contributing to ninety-one per-
cent of the drop. In dollar terms, the decrease of $2.1 billion, which usually
constitutes about thirty percent of total French exports to China, was not a
small amount in the aviation industry, and it contributed to sixty-six percent
of the total decline of French aircraft exports.
Chinese responses to France and Germany were coercion because they were
state actions that inflicted damage and had clear coercive goals. The immediate
goal was to force the target to stop receiving the Dalai Lama, as indicated by
the statements from the MFA above. Former State Councilor Dai Bingguo,
who dealt with the French president’s meeting with the Dalai Lama, put it
more bluntly in his memoir: China took harsh measures to force the French to
“stop stirring troubles in its China policy.”69 The broader goal, according to
former Chinese diplomats, was to deter other states from following suit and
meeting with the Dalai Lama.70
According to Dai Bingguo, France reached out to him following Chinese coer-
cion to arrange a bilateral meeting while promising not to meet with the Dalai
Lama.71 China set up a meeting between President Sarkozy and President Hu in
April 2009,72 and French presidents subsequently refrained from meeting with the
Dalai Lama. Similarly, former Chinese diplomats based in Europe, including for-
mer Chinese Ambassador to Germany Mei Zhaorong, indicated that both France
and Germany made promises in private that they would not meet with the Dalai
Lama in the future.73 As then-Chinese Ambassador to Germany Ma Canrong
noted, China and Germany reached a consensus in January 2008, followed by
Angela Merkel refusing to meet with the Dalai Lama again in May 2008.74

67
“Zhongfa guanxi lengdong 90tian, faguo minzhong duihua taidu fuza [Sino-French Relations
have been Frozen for 90 Days, the French Public Maintained Complicated Attitudes towards
China],” Guoji xianqu daobao [International Herald, a newspaper under China’s state news
agency, Xinhua news], March 6, 2009, www.chinaqw.com/news/200903/06/153882.shtml.
68
Ibid.
69
Dai (2016, p. 350).
70
Interview KZ-#22, Beijing, China, December 15, 2015; interview KZ-#38, Beijing, China, Jan-
uary 20, 2016; interview KZ-#65, Beijing, China, April 27, 2016; interview KZ-#74, Shanghai,
China, May 10, 2016; and interview KZ-#82, Shanghai, China, May 16, 2016.
71
Dai (2016, p. 351).
72
Ibid.
73
Interview KZ-#46, Beijing, China, February 15, 2016; Mei’s remarks was quoted in Gu (2011,
pp. 50–51).
74
MFA press conference, May 13, 2008, www.fmprc.gov.cn/ce/cede/chn/ssxw/t452108.htm;
Ma’s remarks were quoted in Gu (2011, p. 79).
6.3 Why Pick on the Europeans but Not Australia? 179

6.3.2 Why China Coerced France and Germany

In line with the post-2006 trend, China’s need to establish resolve was high,
which is especially the case concerning European countries. The receptions by
French and German heads of government were viewed particularly severely
by the Chinese government. As then-Chinese Ambassador to Germany Ma
Canrong stated, Merkel meeting the Dalai Lama in the Chancellor’s residence
set a bad precedent and had an extremely adverse influence on relations,
especially given that Merkel was the first German Chancellor ever to receive
the Dalai Lama.75 China was worried that subsequent German Chancellors
might follow suit. Ma, therefore, indicated that China had to take resolute
countermeasures to force Germany to realize the seriousness of its mistake.76
China was also anxious that Germany might set a dangerous precedent for
other European states. As former Chinese Ambassador to Germany Mei
Zhaorong stated, this is because Germany played a leadership role (lingtou
yang) in Sino-EU relations.77 Interviews with former Chinese diplomats based
in Europe also confirmed that China was afraid other states might imitate
Germany’s behavior.78 In short, China was concerned about potential demon-
stration effects.79
China’s need to establish resolve was similarly high regarding France. As
one former Chinese diplomat stated, President Sarkozy was the first rotating
chair of the EU to meet with the Dalai Lama.80 China feared that France would
also set a bad precedent.81 Like Germany, senior Chinese diplomats, including
former State Councilor Dai Bingguo, viewed France as a leader in Europe.82
China thus needed to coerce France to deter similar visits in the future.83
China’s concerns about establishing a reputation for resolve in Europe were
not mere perceptions. Twelve of the twenty times the Dalai Lama was received
in the post-2006 period, he met with European heads of state or government.
China was thus correct in worrying about the potential German and French
demonstration effects.
Also, in line with the post-2006 trend, the economic cost of coercing France
and Germany was low for China, with China able to “divide and conquer with
Airbus.” After the Dalai Lama’s visit to France, the Chinese MFA spokesperson

75
Ma’s remarks were quoted in Gu (2011, p. 79).
76
Ibid.
77
Mei’s remarks were quoted in Ibid., p. 12.
78
Interview KZ-#22, Beijing, China, December 15, 2015; interview KZ-#65, Beijing, China, April
27, 2016.
79
Interview KZ-#37, Beijing, China, January 19, 2016.
80
Interview KZ-#38, Beijing, China, January 20, 2016.
81
Ibid.
82
Dai (2016, p. 352).
83
Interview KZ-#22, Beijing, China, December 15, 2015; interview KZ-#14, Beijing, China,
November 25, 2015; and interview KZ-#49, Beijing, China, February 23, 2016.
180 Tibet and the Dalai Lama Visits

was asked whether the visit would affect Sino-French trade and commercial
orders from Airbus. He replied, “Sino-French trade relations are built on
mutual interests, and we hope the French side will create favorable conditions
for cooperation.”84 Although the spokesperson did not say so explicitly, China
targeted France and Germany with Airbus.
Airbus is a consortium, but China can use coercion by alternating purchases
between France and Germany. Some Chinese scholars stress that Airbus pro-
vides both profits and employment. Ordering from France or Germany may
affect local job creation at the respective manufacturing sites.85 Therefore,
Airbus orders can be politicized, which was especially the case for France.
Former Chinese Ambassador to France Cai Fangbo wrote that both Presidents
Chirac and Sarkozy were concerned about Airbus sales to China. As early as
1997, President Chirac told Ambassador Cai that he hoped that China would
order fifty instead of ten Airbus aircraft while he was visiting Beijing.86 The two
sides reached an agreement in which China ordered thirty Airbus and another
ten French aircraft. Cai recalled that Chirac was “pleased” by the positive and
intensive French media coverage of the agreement.87 In fact, Chirac linked Airbus
sales directly to job creation in France, stating that China’s order would create
4,000 jobs that could last for three years.88 Chirac’s emphasis on Airbus deals
was consistent. In his memoir, Chinese Foreign Minister Li Zhaoxing noted
that Chirac told President Hu Jintao that the purchase of twenty-one Airbus air-
craft in 2004 “is a sensitive and political project and that my [Chirac’s] Airbus
issue is your [Hu’s] Taiwan issue.” Chirac emphasized that France would feel
disappointed and lose face if China did not announce the decision to purchase
twenty-one Airbus aircraft.89 President Sarkozy continued this emphasis, say-
ing that he wanted to do better than Chirac and hoping that China would buy
even more aircraft.90 Accounts from senior Chinese diplomats make it clear
that China understands the salience of Airbus purchases as a political issue for
France, and it withheld French Airbus orders to its advantage.
In addition, Chinese scholars argue that freezing Airbus orders signals
that China is dissatisfied, with more “sticks” coming if the target does not
­comply.91 For example, German aircraft exports to China only constitute

84
MFA press conference, December 4, 2008, http://si.china-embassy.gov.cn/fyrth/200812/
t20081204_3037273.htm.
85
Interview, Beijing, January 14, 2014.
86
Dai Changlan’s interview with Cai Fangbo on September 22, 2008, http://news.xinhuanet.com/
world/2008-09/22/content_10088938.htm, accessed May 1, 2018.
87
Cai (2007, p. 204).
88
Ibid., p. 209.
89
Li (2014, p. 87). Emphasis added.
90
Li Jie’s interview, “Qinli zhongfa guanxi 24ge chunqiu [24 Years of Witnessing Sino-French
Relations],” Liaowang, August 31, 2009, http://news.xinhuanet.com/world/2009-08/31/­
content_11971399_3.htm, accessed May 1, 2018.
91
Interview, Beijing, December 30, 2013.
6.3 Why Pick on the Europeans but Not Australia? 181

about four percent of total exports to China. Although not purchasing air-
craft from Germany did very little damage to Sino-German trade, it sent
a clear message to Germany that China was upset about Merkel’s meet-
ing with the Dalai Lama. Moreover, in a condition conducive to Chinese
sanctions, freezing Airbus orders reduces China’s overall Airbus imports
in a given year. This could create tension between members of the Airbus
consortium, including Germany and France, who would bear the pain of
reduced Airbus orders. As one senior Chinese government policy analyst
noted, Airbus orders assumed important symbolic meaning, symbolizing
good results from high-level bilateral visits.92 Therefore, both Germany and
France wanted to secure Airbus orders each year, but China would agree to
one country while freezing the order of the country that had received the
Dalai Lama, thus putting pressure on that country.93 Also, such a freeze
would usually last no more than six months, having few adverse effects on
the Chinese economy.94
Interviews with former diplomats and Chinese government analysts also
indicate that China was not economically vulnerable vis-à-vis Germany and
France.95 France, Germany, and Britain were all vying for China economically.
As a former Chinese diplomat based in Europe stated, China could divide and
conquer Europe by dangling economic carrots selectively.96 In short, China
always had exit options for imports because of the competition between France
and Germany.97

6.3.3 Why China Did Not Coerce Australia

Australian Prime Minister John Howard met with the Dalai Lama in May
2007, followed by the spokesperson of the Chinese MFA voicing the stan-
dard protest.98 However, China did not coerce Australia, and Chinese
President Hu Jintao subsequently met with the Australian Prime Minister in
September 2007.99
China treated Australia differently because its need to establish resolve was
low, especially when compared with major European states. Foreign heads of

92
Interview KZ-#43, Beijing, China, January 28, 2016.
93
Ibid.
94
Ibid.
95
Interview KZ-#14, Beijing, China, November 25, 2015.
96
Interview KZ-#46, Beijing, China, February 15, 2016.
97
Interview KZ-#59, Wuhan, China, April 18, 2016; interview KZ-#70, Shanghai, China, May 5,
2016; interview KZ-#74, Shanghai, China, May 10, 2016.
98
MFA press conference, June 15, 2007, www.fmprc.gov.cn/web/fyrbt_673021/dhdw_673027/
t330345.shtml, accessed May 1, 2018.
99
MFA press conference, September 6, 2007, www.fmprc.gov.cn/web/ziliao_674904/zt_674979/
ywzt_675099/wzzt_675579/hcfa_APCE_675581/t359240.shtml, accessed May 1, 2018; inter-
view KZ-#19, Guangzhou, China, December 4, 2015.
182 Tibet and the Dalai Lama Visits

state or government received the Dalai Lama seventy-three times from 1990
to 2015, but countries in Oceania (Australia and New Zealand) only received
him six times. Furthermore, former Chinese diplomats, government policy
analysts, and scholars were aware of the varying degrees of potential demon-
stration effects. One senior Chinese scholar noted that France and Germany
had a much greater ability to influence major Western media than Australia;
furthermore, there were more countries in Europe than in Oceania, and China
coerced France and Germany because it was afraid other European countries
would follow suit.100 This scholar concluded that China selected targets that
were influential.101 Government policy analysts and former Chinese diplomats
based in Europe also concurred that other EU members could easily have fol-
lowed France and Germany.102 China’s need to establish resolve regarding
Australia was therefore low.
In addition, China’s growing need for energy imports and concerns about
the stability of the Middle East made it economically vulnerable to Australia
regarding the energy and natural resources sectors. In 2007, the Chinese gov-
ernment began to pursue a strategy of energy import diversification. Zhou
Dadi, head of the Institute of Energy Research under the Chinese NDRC,
claimed that China should “import more-than-adequate amount of oil and
gas to increase energy security.”103 One internal 2007 document from China’s
Ministry of Finance concurred with Zhou.104 Australia is important in China’s
diversification strategy because of its energy resources and secure transpor-
tation route.105 According to CICIR, China’s growing need led to a drastic
increase in Australian mineral imports.106 Beginning in 2006, China became a
net importer of natural gas, with imports increasing by 37.6 percentage points
and constituting half of China’s imports from Australia. These imports, in the

100
Interview KZ-#19, Guangzhou, China, December 4, 2015.
101
Ibid.
102
Interview KZ-#20, Beijing, China, December 9, 2015; interview KZ-#37, Beijing, China,
January 19, 2016; interview KZ-#43, Beijing, China, January 28, 2016; interview KZ-#44,
Beijing, China, February 2, 2016; interview KZ-#46, Beijing, China, February 15, 2016;
interview KZ-#49, Beijing, China, February 23, 2016; and interview KZ-#74, Shanghai,
China, May 10, 2016.
103
Zhou Dadi’s address during the annual conference of “Energy Diversification and Invest-
ment Security” (Nengyuan duoyuanhua yu touzi anquan), October 2005. The NDRC is
one of China’s most powerful bureaucracies. It wrote China’s first government white paper
on energy policies. See the white paper at www.scio.gov.cn/zfbps/ndhf/2007/Document/
307873/307873.htm.
104
Wang Li, “Duoyuanhua zhanlue: jiang huajie zhongguo nengyuan jinkou fengxian wenti [The
Diversification Strategy will Solve China’s Energy Issues],” Jingji cankao bao [Economic Ref-
erence], www.dss.gov.cn/Article_Print.asp?ArticleID=241340.
105
See Hou and Han (2012); Wu (2004).
106
Sun Hui, “Hu Jintao fang wen aodaliya, zhongao qiutongcunyi huligongying [President Hu
Visited Australia, China and Australia Pursued a Win-Win Relationship],” Zhongguo Wang,
September 6, 2007, www.china.com.cn/international/txt/2007-09/06/content_8829011.htm.
6.3 Why Pick on the Europeans but Not Australia? 183

form of liquefied natural gas (LNG), continued to grow at even higher rates
despite the Dalai Lama’s visit.107
LNG imports from Australia constituted a significant portion of overall
Chinese LNG imports. In the years immediately prior to the Dalai Lama’s
visit to Australia, China almost exclusively imported LNG from Australia.
By 2012, Australia still provided about sixty percent of China’s overall LNG
imports.108 The proportion of Australia’s LNG exports to China as the total
share of China’s LNG imports had decreased slightly by 2020 to approxi-
mately forty percent due to China’s LNG diversification strategy, which led
it to import from the United States, Qatar, Indonesia, Russia, and, lastly,
Malaysia, the country that China coerced less frequently in South China Sea
disputes.109 Nevertheless, Australia remained China’s largest source of LNG
in 2021, accounting for forty percent of LNG imports, while the five other
countries combined account for about forty-six percent.110 In other words,
when the Australian Prime Minister met with the Dalai Lama, there was no
exit option for China concerning LNG imports and it had no other options but
to continue importing LNG from Australia. Even now, despite China’s LNG
diversification efforts, it would be difficult for China to seek immediate alter-
natives to Australian LNG, which still makes up a significant forty percent of
China’s total LNG imports. Chinese scholars and government policy analysts
were aware of this asymmetry and Australia’s economic advantage.111
Furthermore, Australia is rich in uranium, which is essential for nuclear
energy. In April 2006, Premier Wen Jiabao signed an agreement with Australia
regarding the transfer of nuclear materials. The People’s Daily interpreted this
as an indication of economic complementarity, with China needing nuclear
power plants and Australia being one of the leading exporters of uranium.112
CASS analysts and other scholars also pointed out that Australia was China’s
largest source of iron ore imports, on which China was highly dependent.113

107
Data comes from the Ministry of Commerce at http://countryreport.mofcom.gov.cn/record/
index.asp?p_coun=%B0%C4%B4%F3%C0%FB%D1%C7.
108
Hou (2012).
109
Australian Department of Industry, Science, and Resources, “Global Resources Strategy
Commodity Report: Liquefied Natural Gas,” www.industry.gov.au/data-and-publications/
global-resources-strategy-commodity-report-liquefied-natural-gas/established-markets/china.
110
Data comes from the U.S. Energy Information Agency (EIA), “China’s natural gas imports
from selected countries (2021),” www.eia.gov/todayinenergy/detail.php?id=52258.
111
Interview KZ-#19, Guangzhou, China, December 4, 2015; interview KZ-#20, Beijing, China,
December 9, 2015; interview; KZ-#37, Beijing, China, January 19, 2016; interview KZ-#59,
Wuhan, China, April 18, 2016.
112
Huang Qing (senior editor of the People’s Daily), “Zhong’ao youhao hezuo kancheng dian-
fan [Sino-Australian Cooperation as a Model],” People’s Daily Overseas Edition, June 29,
2006, section 1, http://paper.people.com.cn/rmrbhwb/html/2006-06/29/content_7126539​
.htm. According to the agreement, China will import 10,000 tons of Uranium from
­Australia annually.
113
Li (2015, p. 72); interview KZ-#59, Wuhan, China, April 18, 2016.
184 Tibet and the Dalai Lama Visits

This explains why Chinese leaders stressed that China should improve Sino-
Australian cooperation on energy and mineral resources.114 Although China is
seeking alternatives to Australian iron ore, it still depends on it. For example,
Australian iron ore constituted approximately sixty percent of China’s total
iron imports in 2020.115
Therefore, as summarized by a former diplomat, China chose to coerce
countries such as France, Germany, and Britain because it was no longer
economically vulnerable to them, and their influence was much more signif-
icant than smaller countries.116 Since China cannot coerce the United States,
it selected these major European countries.117 Another former Chinese
diplomat based in Europe similarly stated that the influence or demonstra-
tion effect of Latin American countries was smaller than European coun-
tries, leading China to mainly coerce European states.118 That is, barring
the United States, which China cannot coerce, the countries that have the
biggest influence on the Dalai Lama issue are European states.119 Chinese
coercion was quite successful in these cases, in that German and French lead-
ers subsequently refused to meet with the Dalai Lama. In addition, the num-
ber of countries receiving the Dalai Lama decreased, as seen in Figure 6.1,
which shows that even non-EU countries were deterred. For example, South
Africa declined to grant a visa to the Dalai Lama in 2011. Then, South Africa
refused to grant the Dalai Lama a visa again in 2014, with Foreign Minister
Nkosazana Dlamini Zuma stating that “[l]et’s be honest, it was also about
avoiding putting South Africa on a ‘collision course’ with China.”120 Due to
domestic politics in the United States, Obama was the last president that met
the Dalai Lama, in June 2016, just months before Donald Trump became
the president. Since the COVID-19 pandemic, the Dalai Lama has moved his
meetings and talks online.121

114
Sun Hui, “Hu Jintao fangwen aodaliya, zhong’ao qiutong cunyi huli gongying.” Chinese lead-
ers made such statements both before and after the Dalai Lama’s visit to Australia. See Wen
Jiabao’s speech in People’s Daily, January 16, 2007, section 3; Assistant Foreign Minister
He Yafei’s remarks on August 28, 2007, http://news.xinhuanet.com/newscenter/2007-08/28/
content_6620541.htm, accessed May 1, 2018.
115
Matthew Hall, “How China is Moving Beyond Australia for Its Iron Ore Hunger,” Min-
ing Technology, April 8, 2021, www.mining-technology.com/analysis/how-china-is-moving-
beyond-australia-for-its-iron-ore-hunger/.
116
Interview KZ-#22, Beijing, China, December 15, 2015.
117
Ibid.
118
Interview KZ-#46, Beijing, China, February 15, 2016.
119
Interview KZ-#37, Beijing, China, January 19, 2016; interview KZ-#46, Beijing, China,
­February 15, 2016.
120
“Need for an Explicit Government Policy on Dalai Lama,” Pretoria News, September 5,
2014, E1 Edition; Loyiso Langeni, “SA Denies China Pressure on Dalai Lama,” Business Day,
­September 27, 2011.
121
See the official Chinese-language website of the Dalai Lama: www.dalailamaworld.com/­
classified.php?f=20.
6.4 Alternative Explanations 185

6.4 Alternative Explanations

Now that we have examined the temporal trend of China’s coercion regard-
ing Dalai Lama visits, as well as one cross-national comparative case study,
the following passages assess the cost-balancing theory against alternative
explanations.

6.4.1 Individual Leaders

The leadership alternative expects certain leaders, such as hawkish leaders, to
be more prone to use coercion than dovish leaders. However, this alternative
explanation is not supported by empirical evidence. Both government policy
analysts and former Chinese diplomats based in Europe indicated that leader-
ship personality is not the deciding factor in Chinese coercion.122 In particular,
regardless of which leader is in power, he or she exercises rational calculus
when it comes to the Dalai Lama issue. In fact, of the ten times in which China
used coercion over the Dalai Lama issue in the post-2006 period, President Hu
Jintao used it nine times and Xi Jinping, allegedly the most assertive leader,
used it once. If leadership personality is the most critical factor, we should see
more coercion in President Xi Jinping’s administration over Tibet, but we see
the reverse instead, indicating the limit of the individual leadership alternative
in explaining coercion decisions.

6.4.2 Bureaucracies and Interest Groups

This alternative explanation concerns bureaucratic interests and domestic
interest groups. Empirically, however, the decision to use coercion came from
the central government. Both government policy analysts and scholars indi-
cated that bureaucratic politics or domestic lobbying groups are not drivers
of Chinese coercion decisions.123 When it comes to the Dalai Lama visits, the
United Front Department and the Bureau of Religious Affairs are involved,
with the MFA as the coordinator.124 Nevertheless, these agencies simply
implement policies, with the central government making final decisions.125
When French and German heads of government met with the Dalai Lama,
all decisions were elevated to Premier Wen Jiabao and Premier Li Keqiang,
respectively.126 Also, the fact that China did not change the overall quantity
of Airbus aircraft ordered indicated that such lobbies as domestic aviation

122
Interview KZ-#49, Beijing, China, February 23, 2016; interview KZ-#52, Beijing, China,
March 9, 2016; and interview KZ-#74, Shanghai, China, May 10, 2016.
123
Interview KZ-#49, Beijing, China, February 23, 2016; interview, Beijing, China, July 9, 2014;
and interview KZ-#100, Beijing, China, July 28, 2016.
124
Interview KZ-#100, Beijing, China, July 28, 2016.
125
Interview KZ-#49, Beijing, China, February 23, 2016; interview, Beijing, China, July 9, 2014.
126
Interview, Beijing, China, July 9, 2014.
186 Tibet and the Dalai Lama Visits

competitors do not drive coercion decisions. If domestic lobbying groups were

successful in reducing the number and value of imported aircraft, we should
have seen a decrease in the total aircraft imports from Airbus.

6.4.3 Nationalism
As explained in previous chapters, if popular nationalism is crucial in explain-
ing coercion decisions, then we should expect to see stable and repeated coer-
cion over time. However, China has not resorted to coercion every time a
foreign head of state or government received the Dalai Lama. For example,
China refrained from coercion until 2002, only beginning to use coercion more
frequently post-2006. In addition, as shown in the case study, China coerced
France and Germany but not Australia, even though the heads of each gov-
ernment met with the Dalai Lama at roughly the same time. It is unlikely that
the Chinese public harbors nationalistic feelings toward France and Germany
but not Australia, given their comparable natures. Finally, China’s coercion
over the Dalai Lama’s visits exhibits a curious cyclical pattern, as predicted by
the cost-balancing theory. China effectively coerced European states, and then
heads of government or state stopped receiving the Dalai Lama after 2015,
thus reducing the need for China to establish resolve. As such, popular nation-
alism does not dictate China’s coercion decisions.

6.4.4 Structural Realism and the Power Variable

If the argument of overall Chinese material power growth, and especially offen-
sive realism, is critical, then we should expect to see a linear progression of
coercion from fewer to more cases of military coercion over time. Empirically,
as discussed in the above paragraph, China’s use of coercion over Dalai Lama
visits does not present a linear pattern. Instead, it is a cyclical pattern of few
cases, more cases, and then no cases of coercion over time. China also did not
coerce every target state that met with the Dalai Lama. Therefore, the overall
power variable fails to capture when and how China coerces.

6.4.5 The Utility of Military Coercion

The argument focusing on the utility of military coercion would predict China
to use military coercion over issues of high importance, which includes Dalai
Lama visits. Empirically, however, China has not prioritized militarized
coercion. China does not use it because of the nature of Dalai Lama’s visits,
which is political, so China knows that nonmilitary measures will be effective.
Hypothetically, if a European state aided a military rebellion in Tibet, China
might use military coercion, especially considering that it considers Tibet a
core interest. As such, even though it is plausible for China to use military coer-
cion, there is no indication that China resorts to military measures exclusively.
6.5 Conclusion 187

As seen both in the Taiwan cases in the previous chapter and the Tibet cases in
this chapter, China does not only utilize military coercion.

6.5 Conclusion
Chinese coercion over the Dalai Lama issue varies both temporally and
cross-nationally. As in the previous chapter on Taiwan, China did not use coer-
cion against European states over the Dalai Lama visits in the pre-2002 period,
despite a high need to establish a reputation for resolve in the 1996–2002
period. The cost-balancing theory would have predicted that China would use
coercion in this period because Tibet is a core-interest issue. This slight devi-
ance from the theory suggests that China’s economic costs with respect to
the United States and Europe, in general, trumped other factors in China’s
coercion calculus prior to 2002. Except for during the 1996–2002 period, the
patterns of Chinese coercion are in line with the theory’s predictions. Similar
to the South China Sea cases in which China selectively chose disputants to
coerce, China did not coerce all the states that receive the Dalai Lama in the
post-2006 period. Instead, it focused on major European countries because
the need to establish a reputation for resolve was high in major European
countries, whereas the economic cost had lowered. This chapter indicates that
the cost-balancing theory applies not only to territorial disputes or national
security concerns but can also be generalized to more political issues, such as
foreign leaders’ reception of the Dalai Lama.
One might wonder, then, what the future holds for China’s relations with
Europe and Australia. Despite the European Parliament’s 2021 vision for a new
strategy on China that focuses on China’s human rights issues, disinformation
attempts, and the potential security risks posed by such Chinese telecommunica-
tion companies as Huawei, European countries’ China policies are not entirely
unified.127 A 2022 report by the European Think-tank Network on China indi-
cates that not all European states are concerned about China or their dependency
on China.128 Some states are not dependent on China, while others believe that
concerns about dependency on China are sometimes exaggerated.129 Therefore,
China might still be able to play European states against one another. As of
2022, China’s relations with both France and Germany appear to be smooth.130

127
European Parliament press release on China, September 16, 2021, www.europarl.europa​
.eu/news/en/press-room/20210910IPR11917/parliament-sets-out-its-vision-for-a-new-eu-
strategy-on-china.
128
John Seaman et al. eds., “Dependence in Europe’s Relations with China: Weighing Perceptions
and Reality,” A Report by the European Think-tank Network on China (ETNC), April 2022.
129
Ibid.
130
See, for example, “Xi Jinping’s Virtual Meetings with French and German Leaders,” Peo-
ple’s Daily, June 29, 2022, http://cpc.people.com.cn/n1/2022/0629/c64094-32459704.html;
Chinese Embassy in Germany, May 9, 2022, http://de.china-embassy.gov.cn/zdgx/202205/
t20220509_10683607.htm.
188 Tibet and the Dalai Lama Visits

As for Australia, relations between Canberra and Beijing have chilled since
the initial onset of the COVID-19 pandemic in early 2020, following Australia’s
policymakers calling for an independent investigation into the origins of the
virus and China’s initial handling of the outbreak in Wuhan.131 In response,
China imposed economic sanctions, such as suspending Australian beef imports
and banning timber imports from Australian states.132 Interestingly, China has
never touched the iron ore or LNG sectors and continues to import massive
amounts of iron ore and LNG from Australia. Moreover, relations between
the two appeared to be on the mend beginning in the summer of 2022.133 This
demonstrates how China has always been acutely sensitive to economic costs
and is strategic about the magnitude and choices of its coercion.

131
Hall, “How China is Moving Beyond Australia for Its Iron Ore Hunger.”
132
Ibid.
133
Chris Beckley, “After Years of Acrimony, China and Australia Cautiously Reach Out,” New
York Times, June 27, 2022, https://cn.nytimes.com/asia-pacific/20220627/china-australia-ties/
dual/.
7

Conclusion

Since the 1990s, China has used coercion when faced with threats to its
national security, particularly when they involve territorial disputes, Taiwan,
or Tibet. However, China is curiously selective in the timing, target, and tools
of its coercion. This chapter begins by summarizing the book’s arguments
while refuting alternative explanations, which is followed by a brief discussion
about the effectiveness of China’s coercion. It then discusses the possibility of
extending the cost-balancing theory to other issue areas, as well as the impli-
cations this book has for the study of Chinese foreign policy. The chapter
and book end by exploring the plausibility of generalizing arguments to other
states beyond China.

7.1 Review of the Argument and

Alternative Explanations
Building upon existing research on coercion, reputation and credibility, and
economic interdependence, this book proposed the cost-balancing theory to
explain China’s coercion calculus. China coerces a target state to deter other
states and the target from taking actions that it deems to be threatening its
national security. That is, China attempts to use coercive measures or threats
as a means to establish a reputation for resolve in defending its national
security interests. At the same time, coercion carries economic costs if China
depends on the target state for markets, supply, or capital. China will use
coercion when the need to establish resolve is high and the economic cost
is low. Furthermore, China is more likely to resort to nonmilitarized coer-
cive tools when the geopolitical backlash cost is high. Finally, when the need
to establish resolve and the economic cost are equally high, China will only
coerce when the issue importance is highest. In short, China is a rational and
calculating coercer.

189
190 Conclusion

The empirical chapters utilize China’s maritime and territorial disputes in

the South and East China Seas, issues regarding Taiwan, and foreign lead-
ers’ reception of the Dalai Lama to compare the cost-balancing theory against
alternative explanations. The cost-balancing theory performs best in the South
and East China Sea cases, while the Taiwan and Tibet cases generally, albeit
not perfectly, conform to it. The cost-balancing theory can be falsified and does
not claim to explain every single case of Chinese coercion, but it does a better
job explaining patterns of Chinese coercion than alternative explanations.
As shown in the empirical chapters, individual leadership differences do not
explain when and why China decides to coerce. Nevertheless, Yarhi-Milo’s
notion that leaders who are “high self-monitors” care more about reputation
than others cannot be ruled out. It may be that because Chinese leaders are in
an authoritarian environment where elite power struggles are intense, they are
all high self-monitors who need reputations for toughness, regardless of their
leadership styles. However, Chinese leaders still conduct cost-balancing calcu-
lations, and Yarhi-Milo’s argument does not explain the variation in China’s
coercion decisions and tools over time and across different countries.
Some take popular nationalism for granted as a factor explaining Chinese
foreign policy, but this also fails to explain when China decides to coerce and
which country it targets. Similarly, powerful domestic lobbies, such as business
interests, the People’s Liberation Army, and different civilian bureaucracies do
not explain China’s coercion decisions. This suggests that the cost-balancing
theory may be more likely to operate regularly in authoritarian states that have
strong state capacities. That is, bureaucracies tend to be tightly controlled by
the central government, with those deviating from allowed behavior facing
heavy punishments, thereby reducing the likelihood that local bureaucracies
or the populace could force the central government to make coercion decisions
against its will.
The “overall power” argument, especially as offered by offensive realists,
is also insufficient in explaining China’s coercion decisions. Offensive realists
predict that as Chinese capability grows, China will become more aggressive,
eventually leading to the use of force. However, the general trend of Chinese
coercion does not match the overall power argument. China used military coer-
cion in the 1990s, when it was weaker, and then resorted mostly to nonmilita-
rized tools in the post-2000s, aside from cases like Sino-Indian border disputes
and the recent military coercion over House Speaker Nancy Pelosi’s visit to
Taiwan. China’s use or threats of coercion and its choices of tools are not a
linear process: China does not become more militarily aggressive, as offen-
sive realists would predict. In fact, offensive realism is indeterminate when it
comes to explaining overall patterns of Chinese coercion, as shown in the ratio
of Chinese coercion to incidents taken by other states that challenge Chinese
national security. For example, the ratios of Chinese coercion regarding South
China Sea disputes and Taiwan, respectively, have been quite stable over time.
Even in the South China Sea, the ratio of Chinese coercion to incidents has
7.2 Evaluating the Effectiveness of Coercion 191

remained roughly under forty percent for the last thirty years. Offensive real-
ism makes predictions about when rising powers such as China will reach or
near power parity with the hegemon, but it is indeterminate in explaining what
China does and doesn’t do before reaching power parity, including its coer-
cion decisions. That is, these are different questions being tackled. Similarly,
Slantchev’s argument prioritizing the utility of military coercion does not hold,
given China’s track record of preferring nonmilitary coercion in the past two
decades.

7.2 Evaluating the Effectiveness of Coercion

Although this book is about coercion decisions and tools, one might natu-
rally wonder whether China’s use of coercion has been successful. Even
though evaluating the effectiveness of coercion and devising criteria for that
evaluation is an interesting and important project in and of itself, this section
will briefly discuss to what extent Chinese coercion regarding territorial dis-
putes, Taiwan, and Tibet might be considered effective. If effectiveness means
decreased challenges from other states, then Chinese coercion is probably most
effective regarding foreign leaders’ reception of the Dalai Lama. As discussed
in Chapter 6, after China coerced such major European powers as France,
Germany, and Britain, heads of European countries and governments refused
to meet with the Dalai Lama. In fact, it was mainly just US presidents who met
with the Dalai Lama after 2015.
Chinese coercion regarding Taiwan has had mixed effectiveness. China’s
1992 coercion against France was hugely successful in that it not only made
France change its course of actions but also deterred other European states
from selling weapons to Taiwan. However, China’s 1995 and later coercions
against the United States did not make the United States stop selling weapons
to Taiwan. Nevertheless, it did make the United States exercise “dual deter-
rence,” which deterred both Taiwan and mainland China from changing the
status quo, while establishing an implicit red line of what weapons can and
cannot be sold to Taiwan.
Chinese coercion in the Sino-Indian border disputes has also had mixed
effectiveness. Although this coercion may have strengthened China’s claim on
the disputed territories, India has not given up its claims and might move much
closer to the United States than it did before.1 As for maritime territorial dis-
putes, their degree of effectiveness is also mixed.
In East China Sea cases, China has yet to force Japan to acknowledge the
existence of the disputes, but it did force Japan to come to the negotiating
table to discuss crisis management and codes for unintended encounters in the

1
For assessment, see M. Taylor Fravel, “Why India did not ‘Win’ the Standoff with China,” War
On the Rocks, September 1, 2017, https://warontherocks.com/2017/09/why-india-did-not-win-
the-standoff-with-china/.
192 Conclusion

maritime realm.2 Similarly, although Association of Southeast Asian Nations

(ASEAN) countries, and especially Vietnam and the Philippines, are moving
closer to the United States in South China Sea cases, the Philippine government
does have a conciliatory posture when it comes to South China Sea disputes,
especially after President Durterte came into office.3 In short, coercion is not a
magic bullet. It might force target states to comply and deter other states from
challenging China in the future, but it could also have the effect of pushing
these states closer to the United States.

7.3 Implications for Research on

Chinese Foreign Policy
This section first moves beyond territorial disputes, Taiwan, and Tibet to
examine whether the cost-balancing theory can explain other issue areas in
Chinese foreign policy. It then proceeds to discuss the implications for research
on Chinese foreign policy.

7.3.1 Generalizing to Other Issue Areas

One issue area of national security concern to China is nuclear proliferation
and the US missile defense systems. China has a stake in preventing nuclear
weapons from proliferating in the Korean Peninsula and has been system-
atically opposed to the THAAD (Terminal High Altitude Area Defense) US
ballistic missile defense systems in South Korea. China has indeed imposed
economic sanctions on South Korea for its agreement allowing the United
States to install THAAD.4 It appears that the cost-balancing theory can explain
Chinese coercion when it comes to the economic sanctions.5 First, China is
concerned about its reputation for resolve – opposing THAAD – because other
East Asian states, and Taiwan in particular, could follow suit. Second, China
is not economically vulnerable with regard to South Korea. China, therefore,
coerced South Korea, but due to concerns about the geopolitical backlash

2
“Japan, China to Set Up Contact System to Avoid Sea, Air Clashes,” Kyodo News, December
6, 2017, https://english.kyodonews.net/news/2017/12/4193b335fc6e-urgent-japan-china-to-set-
up-contact-system-to-avoid-sea-air-clashes.html.
3
Regarding the Philippines, see Steve Mollman, “‘Ignore the Missiles’: Duterte Says China’s South
China Sea Militarization is No Problem,” Quartz, February 20, 2018, https://qz.com/1211014/
south-china-sea-militarization-nothing-to-fret-over-says-philippines-president-rodrigo-­duterte/;
Paterno Esmaquel II, “ASEAN Avoids Hitting China in Chairman’s Statement,” Rappler,
November 16, 2017, www.rappler.com/world/regions/asia-pacific/188636-asean-summit-2017-­
philippines-chairman-statement-china-militarization; Felipe Villamor, “Philippines Halts Work
in South China Sea, in Bid to Appease Beijing,” New York Times, November 8, 2017, www​
.nytimes.com/2017/11/08/world/asia/philippines-south-china-sea.html?mtrref=www.google​
.com&gwh=9840A24CDB3FC1F83CAE703886C0A6B4&gwt=pay.
4
Lee (2017).
5
Ibid.
7.3 Implications for Research on Chinese Foreign Policy 193

cost, and especially immediate escalation to a militarized conflict involving the

United States, Chinese coercion against South Korea remains nonmilitarized.
Another issue area concerns human rights. China imposed sanctions on
Norway after the Nobel Peace Prize was awarded to Chinese political dissident
Liu Xiaobo, who has been imprisoned due to his activism. Immediately after
the award, China canceled exchange visits between the two countries, termi-
nated trade negotiations, and froze negotiation on free-trade treaties. China
also denied a visa for a former Norwegian Prime Minister to visit China.6
Despite the Norwegian government’s explanation that the prize was indepen-
dent of government decisions, China imposed sanctions on Norwegian salmon
exports to China, with Norway’s market for fresh salmon in China falling
from about ninety percent in 2010 to under thirty percent in the first half of
2013.7 China also excluded Norway from being a beneficiary of its policy of
non-visa transit, beginning in January 2013.8 Beneficiaries can stay in Beijing
for up to seventy-two hours without a visa, including all European countries
except Norway. Officials in Beijing stated that this decision was made by the
Ministry of Foreign Affairs. Interviews indicate that, as of 2014, the sanctions
were ongoing, with some state-owned enterprises from Norway still having dif-
ficulty operating in China, such as getting contracts when they have expertise
and credentials.9 It is quite possible that China coerced Norway to establish
a reputation for resolve in order to stop other states from similarly “med-
dling” in what China considers to be its domestic issues. After all, the Nobel
Peace Prize is highly salient and visible. It is conceivable that if China had
not coerced Norway, other human rights organizations might similarly award
Chinese political dissidents in the future. The fact that China does not depend
on Norway makes it easier to impose economic and diplomatic sanctions.

7.3.2 China’s Foreign Policy and Future Trajectory

What do the findings of this book mean for the future trajectory of a rising
China? I begin with a brief discussion of Chinese grand strategy and the future
trajectory of China, followed by possible policy recommendations to manage
China’s rise.
First, there is a rich literature on Chinese grand strategy.10 The general con-
sensus is that China maintains a grand strategy of peaceful development and
needs a stable international environment for its development. I agree with this

6
MFA press conference, as reported by Xinhua News, June 13, 2012, www.360doc.com/
content/12/0614/01/5646261_218019392.shtml.
7
“Norway Penetrates China Blockage Through Vietnam,” The Nordic Page, August 31, 2013, www​
.tnp.no/norway/economy/3936-salmon-norway-penetrates-china-blockage-through-vietnam.
8
Ye Fan, “Norway was Excluded from Visa-Free Transit in China,” VOA, December 7, 2012,
www.voachinese.com/a/beijing-to-allow-visa-free-transit-trips-20121206/1559981.html.
9
Interview, Beijing, China, June 12, 2014.
10
See, for example, Goldstein (2005).
194 Conclusion

assessment, adding that my Chinese coercion research suggests that there has
always been a tension in Chinese grand strategy. On one hand, China’s eco-
nomic development is deeply intertwined with the international economic sys-
tem and needs a stable environment to continue its development. On the other
hand, China has security interests regarding territorial disputes, Taiwan, and
Tibet that it sometimes defends, needing to establish a reputation for resolve.
Defending China’s perceived security interests is not always in line with China’s
overall development objectives. These two conflicting interests, therefore, lead
China to make Goldilocks choices regarding coercion: China coerces to estab-
lish a reputation for resolve, but it prefers nonmilitarized coercive tools to
avoid geopolitical backlash cost. Former Chinese Deputy Foreign Minister Fu
Ying’s memoir demonstrates this tension. Fu notes that China should defend
its vital national interests but ensure the centrality of economic development.11
Second and relatedly, some might wonder about China’s future trajectory.
Will China become more coercive? Will it conform to offensive realists’ pre-
dictions? The cost-balancing theory argues that economic cost is an important
cost in coercion decisions. This trend is worrying because if China becomes less
dependent on other states for markets, supply, and technology, it might feel
freer to engage in coercive action. Similarly, if the geopolitical backlash cost
becomes lower in the future, China may even become more militarily coercive.
China has been trying to increase domestic consumption and indigenous
innovation, but this process can be quite lengthy.12 In a recent speech on sci-
ence and technology, Chinese President Xi Jinping noted that China should
strive for “independent development” (fazhan dulixing), especially empha-
sizing self-sufficiency in the scientific realm, including “core technologies.”13
Nevertheless, as Michael Beckley argues, China still lags behind the United
States in some areas of technological development, and it will be quite diffi-
cult for China to catch up to the United States soon.14 As seen in the empiri-
cal chapters, even though China’s economic costs vis-à-vis Japan, the United
States, and the EU have reduced in the past decade, there are still economic
costs associated with coercing them. Therefore, economic cost might be a stay-
ing factor for China for the foreseeable future, but it does not mean that China
is economically vulnerable to all states. Economic cost is a dynamic rather than
linear variable, in which China simply needs some countries more than others.
This shows the simultaneous power and constraints of global supply chains for

11
Fu (2021, p. 49).
12
Conversations with Nicholas Hope, former World Bank Country Director for China and Mon-
golia, March 14, 2019; see also Lardy (2006).
13
“Xi Jinping zaihubei wuhan kaochashi qiangdiao: bakejide mingmai laolao zhangwozai
zijishouzhong buduantisheng woguo fazhandulixing zizhuxing anquanxing [Xi Jinping Empha-
sized Independent Development When Visiting Wuhan],” Xinhua News, June 29, 2022, www​
.gov.cn/xinwen/2022-06/29/content_5698391.htm.
14
Beckley (2018).
7.3 Implications for Research on Chinese Foreign Policy 195

economically integrated great powers like China. If China becomes technolog-

ically self-sufficient in the future and can rely less on global supply chains, it is
likely to become much more coercive.
As such, the importance of the economic cost variable suggests that eco-
nomic interdependence, and especially the intricate global supply chain that
characterizes the contemporary international economic system, might have a
dampening effect on the likelihood that a rising China will become linearly
aggressive in the future if it continues to be part of the global supply chains.
The economic cost of coercion, which is unlikely to change in the near future,
might reduce worries about what some scholars refer to as “the Thucydides’
Trap.”15 In other words, great powers – especially the rising powers and the
hegemon – are not bound for war in the future.
Finally, how do we manage China’s rise? What policy recommendations
can we derive from research on Chinese coercion? The United States is a criti-
cal actor in issues that might have a higher chance of escalating to militarized
conflicts, such as territorial disputes and Taiwan. On the economic front, the
United States needs to continue engaging China economically, using economic
carrots and sticks as leverage. For example, the US energy sector is an area on
which China sometimes depends. The United States might also use China’s
growing outward investment as leverage, allowing or curbing Chinese invest-
ment in the United States. Threatening to cut China off from the SWIFT code
system could also serve as a potential deterrent. However, a policy of economic
decoupling between China and the United States may not be optimal, as it
will push China further down the road to self-sufficiency. As discussed in the
previous paragraph, a China outside of the global supply chains will be less
constrained by economic costs and much more emboldened when it comes to
coercion. Therefore, the United States and its allies need to keep China in the
global supply and production chains.
On the geopolitical front, because the United States is considered to be the
hegemon, it should be particularly cautious about its statements and actions.
China watches US statements and actions around the world closely, deriving
assessments of the credibility of US alliances from these statements and behav-
ior, as seen in the empirical chapter on maritime and territorial disputes in
the South China Sea. One specific suggestion regarding maritime territorial
disputes is to regularize US freedom of navigation operations (FONOPs) and
increase their frequency. This could increase the geopolitical backlash cost for
China to use military coercion in maritime disputes.16 Regularizing FONOPs
will not be a salient, newsworthy issue. Consequently, the United States con-
ducting FONOPs will not become front-page news in the New York Times or
Reuters, which will in turn reduce the salience of the disputes and decrease the

15
Allison (2017).
16
For more details, see Ketian Zhang, “Chinese Coercion in the South China Sea: Resolve and
Costs,” Policy Brief (International Security), January 2020, pp. 1–7.
196 Conclusion

need for China to establish resolve. In short, despite the growth of Chinese
power, major conflicts or a war of power transition are not inevitable as long
as China still depends on the global supply chains and the United States main-
tains a physical but low-profile presence in the Asia-Pacific region.

7.4 Implications for International

Relations Theory
Although this book is primarily about China’s coercion decisions, it has impli-
cations for the broader International Relations literature and can potentially be
generalizable to non-China cases. Although the literature focuses on evaluating
the effectiveness of coercion, this book adds to bourgeoning efforts to analyze
coercion decisions. I especially specify the most important costs and benefits
influencing when, why, and how states coerce. The book contributes to the
coercion literature, and especially the literature on compellence and coercive
diplomacy, in two respects.
First, although the literature tends to zoom in on particular forms of coercive
tools, including military coercion and sanctions, I examine the full spectrum
of coercive tools and identify conditions under which states are more likely to
choose some coercive tools over others. The kinds of tools and the manner in
which coercion is carried out by China are worth noting. For example, when
the geopolitical backlash cost is high, China tends to prefer nonmilitarized
coercion, and especially gray-zone coercion when the issue concerns territorial
disputes. China’s use of gray-zone coercion suggests that more efforts should
be made to theorize gray-zone coercion, which is currently gaining policy trac-
tion but is yet to be comprehensively theorized. I argue that the literature needs
to further clarify and bound the concept of gray-zone coercion, distinguish-
ing it from actions taken by the military, which are not gray-zone measures,
regardless of whether they are kinetic or not. One distinct feature of gray-zone
coercion is plausible deniability, with the coercing state denying that it is using
the military and therefore possibly avoiding triggering alliance treaties and
getting involved in militarized conflicts. If military actions are included in the
concept of gray-zone coercion, such actions are no longer plausibly deniable or
conform to the “gray” aspect of gray-zone coercion. In Chapter 2, I show that
existing definitions of gray-zone coercion tend to include what is essentially
military coercion. As such, future research should expand on what specific
gray-zone tools different states use in different contexts and what rationale
prompts states to choose them over other coercive tools.
Relatedly, as mentioned in Chapter 2, there is a burgeoning literature on
nontraditional tools of coercion, such as Greenhill’s research on coercive engi-
neered migration, a tool that small states often utilize against great powers.
This book adds to this literature that looks beyond purely military coercive
instruments by analyzing how a rising China utilizes nonmilitarized coercion
and what drives its decision to choose between military and nonmilitary tools.
7.4 Implications for International Relations Theory 197

Second, since the crucial benefit of coercion for the coercer is to establish a
reputation for resolve, this book contributes to the rich literature on reputation
and credibility, a significant portion of which is tied to deterrence. This book
contributes to the reputation literature in two ways. On one hand, I show that
reputation is not only important for deterrence but also relevant when consid-
ering when and why states engage in compellence or coercive diplomacy. As
shown previously, state actors and non-state actors coerce one target to deter
others, in addition to discouraging the target state itself from taking certain
actions in the future, thus “killing the chicken to scare the monkey.” In this
sense, states are coercing or compelling to deter, blurring the theoretical line
between coercion (in the sense of compellence) and deterrence. After all, com-
pellence and deterrence are interrelated, meaning that there might not be a
clear-cut line between them. This book, therefore, highlights a particular kind
of coercion that is less discussed in the literature: China’s coercive responses to
perceived threats from other states.
On the other hand, a related issue is the debate about whether credibility
comes more from a reputation for resolve or a material calculation of capability.
Although Daryl Press challenges the notion that adversaries focus on current
capability rather than reputation (or past actions) when calculating credibil-
ity, this book shows that states pay keen attention to the reputation of their
adversaries when calculating their alliance credibility. It is clear from China’s
coercion calculus that it did take US credibility in the form of statements and
past actions into account when calculating the geopolitical backlash cost of its
coercion. Whether and how the United States gets involved in South China Sea
disputes significantly affects China’s coercion decisions. For example, according
to US scholars, the US closing of Clark Air Base and Subic Bay in the Philippines
produced not even a shiver of instability,17 but China actually took advantage
of this geopolitical vacuum in the early 1990s and used military coercion in
the Mischief Reef incident of 1994–1995. In this case, US capability was not
affected, as the US seventh fleet remained and the United States did not need
symbolic troops stationed at the Clark Air Base and Subic Bay to win against
China in a maritime battle. Instead, it was US statements and past actions that
suggested its lack of resolve in defending the Philippines, which prompted China
to militarily coerce the Philippines. This example suggests that not only do states
such as China care about their own reputation for resolve, they also calculate
their adversaries’ alliance credibility based on past actions and statements.
Third, and related to the reputation literature, this book contributes by con-
necting the current research to the signaling literature. There has been a rich
literature on audience costs as one form of costly signals to indicate resolve,18

17
Johnson and Keehn (1995, p. 111).
18
Fearon (1994); Weeks (2008); for a review of the audience cost literature, see de Mesquita
and Smith (2012); and for articles challenging the audience cost mechanism, see Trachten-
berg (2012).
198 Conclusion

but this book reinforces Schelling’s notion that states sometimes have to show
physical evidence of resolve, that is, physical coercive actions. China mostly
engages in coercive action as opposed to making coercive threats, with the
rationale that physical actions increase its reputation for resolve, especially
if other states are watching and if the purpose of the coercion is “killing
the chicken to scare the monkey.” The arguments in this book expand on
Slantchev’s argument that military actions send strong signals because they are
physical and costly by suggesting that other physical signals, such as economic
sanctions, diplomatic sanctions, and gray-zone coercion, can also act as costly
signals. The effectiveness of Chinese economic sanctions on countries such as
France and Germany demonstrates that nonmilitary signals can be just as or
even more important than military signals. This suggests that we need to move
beyond audience costs to explore more physical costly signals, be they military
mobilizations, economic sanctions, security guarantees, or arms transfers.

7.4.1 Generalizing Beyond China

Although this book focuses on China, the cost-balancing theory, or compo-
nents of it, travels beyond China. When it comes to the need to demonstrate
resolve in particular, all great powers, rising or otherwise, care about repu-
tation. All else being equal, a rising power will have a less certain reputation
than a standing power. Thus, it may have more reason to indulge in coercive
behavior. However, certain scope conditions must be met.
In order for the theory to apply, the state needs to be intricately connected
to global supply chains, as economically integrated contemporary rising pow-
ers are more likely to follow the theory’s logic regarding coercion. Historical
rising powers are much more coercive than contemporary rising powers, such
as China, India, Brazil, and South Africa. China, for example, has always been
a risk-averse bully that is less belligerent than historical rising powers. For
instance, the United States used aggressive gunboat diplomacy and interven-
tion in smaller countries in the late nineteenth and early twentieth centuries;
Bismarckian Germany used force toward smaller countries, especially colonies;
Wilhelmine Germany used force toward both smaller and great powers, focus-
ing on military use of force; and interwar Japan also focused on the use of force
against smaller powers.19 Contrary to conventional wisdom, and in contrast to
historical rising powers, China is a cautious coercer that uses military coercion
less when it becomes stronger, instead resorting to such unconventional tools
as gray-zone coercion.
Although more detailed research is needed on how frequently and with
which tools other contemporary rising powers coerce, it appears that rising
Brazil, India, China, and South Africa do not engage in coercion frequently,
nor do they have a preference for militarized coercion. This divergence from

19
See Nish (2002); Geiss (1976); Gifford and Louis (1967); and Munro (1964).
7.4 Implications for International Relations Theory 199

historical rising powers could be due to the centrality of economic develop-

ment to these rising powers, including concerns about economic cost and
geopolitical backlash. That is, in a world where the economy is intricately
intertwined through markets and a globalized production and supply chain,
the economic cost for rising powers to coerce can be much higher than it was
for historical rising powers.20 This is especially true for Brazil, China, India,
and South Africa, all of which are tapped into and benefit from the interna-
tional economic system, which in turn makes them economically vulnerable
to some targets upon which they depend. Furthermore, concerns about geo-
political backlash, and especially immediate escalation to conflicts, are acute
for rising powers because war and conflicts may disrupt markets and supply,
negatively affecting their economic growth.
Cautions about rising powers stand in contrast with a declining power like
Russia, which is much less tapped into the contemporary global economic
production chain, or at least not as intricately as China. We see Russia act-
ing much more aggressively with militarized coercion, including in its recent
invasion of Ukraine. As such, the cost-balancing theory may be applicable to
contemporary rising powers. When, why, and how rising powers coerce might
prove a fruitful venue for further research.
Finally, the crucial intended benefit of coercion – establishing a reputation
for resolve – can go beyond rising powers. In fact, such a reputational concern
has manifested itself in civil wars and US economic sanctions for nonprolifer-
ation. In particular, the logic of “killing the chicken to scare the monkey” is
evident in US economic sanctions against allies that attempted to proliferate
during the Cold War, as well as governments repressing one rebel group to
deter other groups in a civil war setting.21 This suggests that concerns about
reputation for resolve might be much more prevalent and applicable to other
state and non-state actors in inter-state and intra-state conflicts.22 Nevertheless,
the United States, as an economically integrated hegemon, might be less con-
cerned about the economic cost of coercion because it tends to be less eco-
nomically dependent on other states for key technologies and could find exit
options more easily than contemporary rising powers. The fact that the United
States is also a hegemon in the global financial network, as seen in its banning
of Russia from the SWIFT code system, means that it is not as vulnerable to
the economic cost of coercion as rising powers, such as China. Moreover, the
United States’ mature alliance system across the world makes it less vulnerable
to geopolitical backlash cost and much less constrained when it comes to using
military coercion. Nevertheless, the fact that the United States did not send
ground troops during the Russian invasion of Ukraine suggests that geopo-
litical backlash, especially in the form of a direct military escalation between

20
This conclusion is similar to Brooks (2005).
21
See Miller (2014) on nuclear nonproliferation and Walter (2009) on civil war.
22
See, for example, Renshon et al. (2018).
200 Conclusion

Russia and the United States, might be part of the US calculation. As such, it is
plausible that the reputation for resolve component of the cost-balancing the-
ory will be most applicable to the United States, whereas geopolitical concerns,
or intentions to avoid direct military confrontation with other great powers,
might loom in the background.
To sum up, instead of coercing all states and prioritizing military coercion,
China is a cautious actor that balances the benefits and costs of coercion. The
book identifies the centrality of reputation for resolve and economic cost in
driving China’s gambits of coercion. Despite the potential reputational benefit
of coercion, China is constrained by the imperative of developing the domes-
tic economy and, therefore, economic cost. Moreover, China will prefer non-
military coercion when the geopolitical backlash cost is high, thereby making
Goldilocks choices. This book, therefore, contributes to theorizing coercion in
an era of global economic interdependence. It sheds new light on policy impli-
cations for understanding China’s grand strategy, managing China’s rise, and
avoiding great power conflicts, while pointing out potential pathways where
the cost-balancing theory can be applied to non-China cases.
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Index

Airbus in France, 174–75, 178–81 Campbell, Kurt, 151–52

Airbus in Germany, 175–77, 179–81 Carson, Allen, 129
Alcorn Petroleum, 77 chain store paradox, 22
Asia-Pacific region, 29 Chen Deming, 178
Association of Southeast Asian Nations Chen Shui-bian, 118
(ASEAN), 61–64 China Institutes of Contemporary
audience costs, 5 International Relations (CICIR)
Australia asymmetrical ASEAN trade relations, 62
abstention from coercion by China, 173–79, maritime disputes, 59–60
181–84 China Maritime Development Report (2018), 61
energy/mineral resource exports to China, China threat, 1–2
182–84 China’s rise, 195, 198–99
resolve, need to establish, 181–82 Chinese foreign policy. See also coercion
Sino-Australian relations, future prospects, decisions; East China Sea; Tibet
187–88 central government and, 157
coercion decision-making and, 3–8
Bader, Jeffrey, 35 cost estimation and, 68, 160
Bai Ming, 87 domino dynamics and, 19, 21
balance of threat theory, 28 generalizable pattern of, 43, 192–96
balancing, defined, 9–10 ideology and, 19
Baldwin, David, 5 South China Sea and, 41–42
Biden administration, 20, 26–27 Taiwan issue and, 34, 130
bilateral trade relations, 38–39, 78, 87, 136 ultranationalists and, 93–94
boat clash incident, Senkaku Islands (2010), Chirac, Jacques, 180
115–19 Chubb, Andrew, 41–42
Brazil, 30–31 Clark Air Base, 197
Brunei, 11, 46–48, 68 Clinton administration, 138, 145–46
Bush (senior) administration, 140–41 Clinton, Hillary, 88–89, 151–52
Butt, Ahsan, 21, 23 coercion
Byman, Daniel, 40–41 defined, 13–14
coercion beyond China
Cai Fangbo, 143, 180 international relations, 196
Cairo Declaration, 97 rising powers, 198–99

223
224 Index

coercion by China. See also coercion decisions; inaction, 14

cost-balancing theory of coercion; measurement of, 32–33
militarized coercion; specific countries military power, 15–17, 196, 198, See also
cautious use of, 3–4, 198–200 military coercion
constraints on, 200 nonmilitarized, 189, 196
costs and benefits of, 159–60 physical actions, 197–98
domestic politics and, 51 compellence, 196–97, See also coercion by
economic cost of, 64 China; coercion decisions
goals of, 52–54, 189 core interests
individual leaders, role of, 89–90 Taiwan, 10–11, 34, 130
intentional selectivity in coercion decision- Tibet, 11, 34–35
making, 3–4, 72–73, 98–100 cost-balancing theory of coercion. See also
issue importance variable and, 155–56 coercion decisions; coercive tools;
nonmilitary, 3, 8, 149–50, 200 economic cost of coercion; geopolitical
overview, 1, 81 backlash cost; issue importance variable;
pattern of, 38 resolve, need to establish
tools of, 2–3 applied theory of, 189
trends, 48–52, 54 case selection, 43
coercion calculus, 8, 9, 23–24, 95, 187, 195, Chinese trends, prediction of, 48–51
197, See also coercion decisions; cost conditions of, 19
balancing theory of coercion costs/benefits analysis, 30–32
coercion decisions. See also cost-balancing domestic politics and, 41
theory of coercion; resolve, need to establish elements of, 3–4, 9–10, 19
bureaucracies and interest groups and, financial stability of China and, 27
90–93, 125–26, 134–35, 157–58, generalizability of, 43
185–86, 190 hegemony and, 42
central leadership and, 91–92, 94, 124–26, implications of, 35
144 international finance and, 26–27
implications of, 4 methodology, 9, 42–43
individual leadership and, 134, 156, 185, 190 threat assessment indicators, 40
involving Japan, 125; See also boat clash credibility
incident alliance, 197
material power growth and, 94, 126–27, bluffing and, 21–22
135, 159, 185–86, 190–91 elements of, 197
militarized coercion and, 127–28, 135, 159, resolve, reputation for and, 20
186–87 South China Sea dispute and, 95
popular nationalism and. See nationalism US alliances and, 195
US arms sales to Taiwan and, 133–37, 150 crisis escalation
coercion literature, 5–8 avoidance of, 67–68
coercion theories critical actors in, 195
bureaucracies and interest groups argument, degrees of, 18
41, 90–93, 125–26, 157–58, 185–86, 190 rising powers and, 199
individual leadership argument, 1, 40–41, 51,
89–90, 101, 124–25, 156, 166, 185, 190 Dai Bingguo, 35, 50, 116, 118, 174, 178,
nationalism argument, 126 179
coercive tools Dalai Lama state visits
diplomatic sanctions, 14–15 Chinese sovereignty and, 163
economic sanctions, 15, 24, 198, See also coercion pattern by China over, 187
France; Germany demonstration effects, China’s fear of, 170
engineered migration, 5, 196 international receptions, 167–70
financial sanctions, 15 resolve, need to establish, 179
gray-zone measures, 3, 7, 9, 15–18, 196, 198 Danilovic, Vesna, 19
Index
Deng Xiaoping, 34, 137–40, 142
Desgeorges, Jean-Pierre, 143
deterrence, 95, 191, 196–97
Ding Yuanhong, 171, 172
diplomatic sanctions, 8, 31
domestic economic growth, 9, 24–25, 30–31
domino dynamics, 19, 21, 35–38
Dumas, Roland, 136
Drezner, Daniel, 5
East China Sea. See also Senkaku Islands
coercion by China in, 12, 124–29, 191–92
cost-balancing theory of coercion and, 128
issue importance variable and, 129
oil and gas fields in, 97, 102, 118
power variable and, 128–29
resolve, need to establish, 128
Sino-US Relations and, 129
economic cost of coercion
cost-balancing theory of coercion and, 189,
194
defined, 9
impacts of globalized economy on, 24,
194–95
measurement of, 50
overview, 61–64
resolve, reputation for and, 32
Sino-US trade balance and, 138–43, 160
economic development, 24–25, 30–31,
108–13, 153–54
economic interdependence (global). See also
foreign trade (China); trade relations
balancing security and, 19
China’s coercion calculus and, 8, 9, 23–24,
95, 187, 195, 197
China’s resolve and, 23
cost-balancing theory of coercion and, 19
economic sanctions, 5, 8–9, 31
Edelstein, David M., 7
energy companies
in East China Sea, 41
impacts on coercion decisions, 101, 126
in South China Sea, 41, 51, 92–93
energy supply
coercion by China and, 24
energy exploration and, 52
energy import diversification strategy,
182–83
liquefied natural gas imports, 182–83
Malaysia, 51
mineral resource imports into China,
182–84
225
Natuna Islands and, 48, 68
nuclear, 183
South China Sea, 72
US energy sector and, 195
engineered migration, 5, 196
escalation ladder
avoidance of, 67–68
critical actors on, 195
levels of, 18
rising powers and, 199
European-Chinese relations, 172, 187
exclusive economic zones (EEZs)
Brunei, 46–47
China, 90–91
Indonesia, 46–48
Malaysia, 46–47
overlapping claims to, 84, 97, 100, 106
Philippines, 46–47
sovereign rights and, 52
Vietnam, 46–47
exit options, 24
export market (China). See also foreign trade
(China); trade relations
Chinese policy shift in, 152–53
domestic consumption compared with, 153
economic cost of coercion and, 38–39,
61–62
Sino-ASEAN trade balance, 62–63
Sino-Japanese trade volume, 108
Sino-Philippine trade volume, 78–79, 87
Sino-US trade balance, 138–40, 148–49,
152–53
Farrell, Henry, 26
Fearon, James, 7
Feng Zhaokui, 110
Feng Zhongping, 172
Ford administration, 131
foreign direct investment (FDI)
ASEAN as source of, 61–62
China as source of, 39
EU as source of, 61–62, 171
Japan as source of, 61–63, 108–13, 123
key sources of, 38–39, 62, 79, 170
US as source of, 61–63, 138
foreign policy. See also Chinese foreign
policy
economic factors and, 31
foreign policy behavior
beyond China, 8
China, 8, 193–94
offensive realism and, 7
226
foreign trade (China)
cost-balancing theory of coercion and, 24
free trade agreements (FTAs), 64, 87
general, 15, 27, 50, 63, 153–54
policy shift in, 153–54
Sino-European trade volume, 122–23, 136,
153–54
Sino-French trade volume, 136, 143, 178–80
Sino-German trade volume, 143, 179–81
Sino-Japanese trade volume, 101, 108–11,
113, 122–23, 153–54
Sino-Norwegian trade volume, 193
Sino-Philippine trade volume, 78, 86–87
Sino-US trade volume, 25, 78, 122–23,
138–42, 153–54
France
arms sales to Taiwan, 135–37
coercion by China, 173–82
resolve, need to establish, 181–82
Fravel, Taylor, 8, 11, 19
free trade agreements (FTAs), 64, 87
free trade zones (FTZs), 63–64
freedom of navigation operations (FONOPs),
195–96
Fu Quanyou, 146–47
Fu Ying, 54, 85–86, 88, 89
Fukuda Yasuo, 118
geopolitical backlash costs
of coercion, 9–10, 27–29, 31, 50–51, 64–66
of military coercion, 194–96
of Mischief Reef incident, 79–81
of Scarborough Shoal incident, 87–88
of Senkaku Islands disputes, 113–14, 123–24
of South China Sea disputes, 72–73
spiral model and, 27–28
of Taiwan issue, 134
of Tibet issue, 165, 172–73
United States and, 154–55
George, Alexander, 5
Germany
aircraft exports to China, 175–77, 179–81
coercion by China, 173–82
Guangzhou subway bid, 143
resolve, need to establish, 181–82
global financial crisis, 152
global production and supply chains. See also
US-China relations: Chinese economic
dependence on US
China’s dependence on, 24–26, 196
China’s independence from, consequences
of, 194–95
Index
conflicts/war and, 196
cost-balancing theory of coercion and, 19
economic cost of coercion and, 23–24
North Korea and, 19
rising powers and, 198
globalized economy, 4, 63, 195, 199
Goldilocks choice, 4, 29, 31–32, 96, 194
gray-zone measures, 2, 3, 7, 9, 15–18, 196, 198
Great Britain, 145, 165, 181–82, 184, 191
Guo Jiping, 122
Haig, Alexander, 131
Hashimoto Ryutaro, 104
hegemonic stability, 7
Hermann, Margaret, 41
high-stakes issues, 3, 11, 19–20, See also
interest hierarchy; issue importance
variable
Hirschman, Albert, 24
Hitoshi Tanaka, 104–5
Hong Lei, 119–21
Horowitz, Michael, 41
Howard, John, 173–74
Hu Jintao, 34, 89–90, 96, 124, 181
human rights issues, 140–41, 193
Ikeda Yukihiko, 104
inaction, 14
Indonesia, 46–48
intentional selectivity in coercion decisions by
China, 3–4, 72–73, 98–100
interest hierarchy, 33–35, 50, See also high-
stakes issues; issue importance variable
international relations, 14, 18, 37, 196–98
issue importance variable
coercion by China and, 155–56
cost-balancing theory and, 19–20, 33–35,
189
East China Sea and, 129
Taiwan and, 154–55
Taiwan Strait Crisis and, 146, 148, 149,
159–60
US-China relations and, 154–55
Japan. See also foreign direct investment
(FDI); foreign trade (China): Sino-
Japanese trade volume; Sino-Japanese
relations; trade relations
defense strategy, 114
offensive realism theory and, 126–27
Peace and Friendship Treaty with China, 98
US-Japan relationship, 119
Index 227

Jervis, Robert, 21, 28 Merkel, Angela, 173–75, 179

Jiang Enzhu, 144 methodology, 10
Jiang Yu, 115–16 militarized coercion
Jiang Zemin, 89–90, 149 assertive leaders and, 41, 156
Johnston, Ian, 18 biased conventions about, 2–4, 6–7
China’s cautious use of, 198, 200
Kastner, Scott, 31 Chinese power growth and, 94, 126–27,
Keating, Tim, 151–52 190
Kertzer, Josh, 20, 29 cost-balancing theory predictions about, 4,
Korean Peninsula, 192–93 51, 161, 165
defined, 9
Latin American countries, 16–17, 153, 184 domestic politics and interest groups and,
Lee Teng-hui, 133, 144–47 41
Li Daoyu, 144, 148 economic repercussions of, 31
Li Jiaquan, 145 geopolitical backlash costs of, 30, 31,
Li Peng, 145, 149 94–95, 113–14, 195–96
Li Zhaoxing, 105 gray-zone coercion compared with, 15–18,
Lien Chan, 147 196
Lithuania, 161 high cost of, 5
Liu Guojun, 74 instances of between 1994–1996, 54
Liu Huaqing, 79 instances of post-2007, 93
Liu Huaqiu, 133 Mischief Reef incident and, 75–76, 79,
Liu Xiaobo, 193 197
Lynn, William, 151–52 overview, 2–3
Pelosi visit to Taiwan, 161
Ma Canrong, 178, 179 Sino-Japanese relations and, 126
Ma Zhaoxu, 116 Slantchev’s argument, 42, 198
Macclesfield Islands, 46–47 in South China Sea, 65–68, 88, 96
Macke, Richard, 79–80 Taiwan issue and, 133–34, 159
Maehara, Seiji, 118 Taiwan Strait Crisis and, 135, 144, 146,
Malaysia 147, 149, 150, 159
coercion by China against, 12, 68–69, 93 US Ukraine policy and, 199–200
oil and gas fields, 92–93 ultranationalists and, 93–94
overlapping claims in South China Sea, utility of, 42, 51, 94–95, 127–28, 159,
46–47, 54–56 186–87
Petronas oil company deal, 52 war escalation, risk of, 28, 33, 39, 199
Maller, Tara J., 14 Miller, Nicholas, 21
maritime disputes, 11, 34, 59–60, 191, mineral resource imports into China, 182–84
See also East China Sea; South China Sea; Mischief Reef incident, 12, 48–49, 74–77,
territorial disputes 79–81, 197
media exposure. See also salience most-favored-nation status (MFN), 140–42,
Dalai Lama state visits, 170 150
East China Sea disputes, 102–4, 107, 128 Mullen, Mike, 151–52
impacts on coercion decisions, 38
resolve, impact on need to establish, 50, Naoto Kan, 106
57–61, 70, 83–84, 100–5, 114 National Institute of South China Sea Studies
Senkaku Islands, 102–4, 107 (NISCSS), 52–54
South China Sea disputes, 57 national security issues. See also Taiwan;
Tibet, 170 territorial disputes; Tibet
US arms sales to Taiwan, 138, 150–52, 160 devising policy on, 19
Mei Zhaorong, 172–73, 178, 179 incident, defined, 38
Mercer, Jonathan, 20 visibility of, 37
228 Index

nationalism Qian Qichen, 104, 136–37, 144–46

coercion and, 126
coercion frequency, pattern of and, 51, Ramos, Fidel, 77
93–94, 101 Renshon, Jonathan, 37
Dalai Lama state visits and, 186 resolve, general
foreign policy and, 41–42, 190 China and, 23–24, 29–32, 118
weapons sales to Taiwan and, 135, 158–59 defined, 20
Natuna Islands, 48, 68 economic cost and, 38–39
natural gas imports, 182–83 geopolitical backlash costs of, 39–40
Newman, Abraham, 26 measurement of, 35–38
Nine-Dash Line. See South China Sea national security issues and, 78, See also
Nobel Peace Prize, 193 Taiwan; Tibet
Nobutaka Machimura, 105–6 repeated transgressions and, 37–38, 85, 121
Noda Yoshihiko, 100 resolve, need to establish
North Korea, 19 Australia, 181–82
Norway, 193 compellent threats and, 22
nuclear proliferation, 192–93 cost-balancing theory and, 23–24
Dalai Lama state visits, 179, 181–82
offensive realism theory defined, 20
as applied to case studies, 190–91 domino dynamics and, 21, 35–38
Dalai Lama state visits and, 186 France and Germany, 181–82
explained, 94 issue importance variable and, 114–15, 189
Japan and, 126–27 media exposure and, 50, 57–61, 70, 83–84,
Taiwan Strait Crisis and, 159 100–5, 114
traditional scholarship on, 7 overview, 54–61
Official Development Aid (ODA) to China, reputation for, 20–24, 197, 199–200
38–39 selective coercion by China and, 70–72,
oil contracts. See energy supply 83–86
Owens, Bill, 151 Senkaku Islands and, 119, 121–22
Spratlys disputes and, 77–78
Paracel Islands, 46–47 Taiwan Strait Crisis, 146–49, 152, 160
Pelosi, Nancy, 161 US arms sales to Taiwan and, 137–38
People’s Republic of China (PRC). See China rising powers
performative war theory, 23 Brazil, 198–99
Peterson, Timothy, 22 China, 193–95, 198–99
Philippines. See also Scarborough Shoal coercion beyond China and, 198–99
incident (2001); Scarborough Shoal crisis escalation and, 199
incident (2012) economic cost of conflict for, 199
coercion by China against, 12, 68–69, 92–93 global production and supply chains and,
Mischief Reef incident, 12, 48–49, 74–77, 198
79–81, 197 India, 198–99
overlapping claims in South China Sea, South Africa, 198–99
46–47, 54–56, 61 strategies of, 7
prioritization of economic indicators, 30–31 theories of, 7–8, 191
Reed Bank, 52 Russia, 199
resolve, need to establish, 61
US policy on, 79–80, 197 salience
Pollack, Kenneth, 40–41 boat clash incident (2010) and, 118
Potsdam Proclamation, 97 of claims to South China Sea, 57–61,
power transition, 7, 196 70–72, 76–78
Pratas Islands, 46–47 national security issues and, 35–37, 57
Press, Daryl, 197 Scarborough Shoal incidents and, 85–86
Index
Senkaku Islands and, 121
South China Sea disputes and, 57–61,
59–61, 70–72, 76–78, 118
US arms sales to Taiwan and, 138, 150–51,
160
Samuels, Richard, 40
Sanya dialogue, 151–52
Sarkozy, Nicolas, 173–74, 178–80
Sartori, Anne, 21–22
Scarborough Shoal incident (2001)
comparison with 2012 incident, 81–89
economic cost of coercion and, 87
fishermen arrested in, 52
Philippine policy shift and, 85
resolve, need to establish, 86
Scarborough Shoal incident (2012)
China’s goals, 82–83
coercive tools used, 81–82
comparison with 2001 incident, 81–89
cost-balancing theory and, 49–50
economic cost, 86–87
fishermen arrested in, 52
repeated transgressions and, 85
resolve, need to establish, 23, 83–86
salience and, 85–86
US intervention, potential for, 88–89
Schelling, Thomas, 5, 7, 13, 14, 197–98
science and technology in China, 194
Sechser, Todd, 7, 22
selectivity in coercion measures. See
intentional selectivity
Selten, Reinhard, 22
Senkaku Islands
alternative coercion explanations, 101
boat clash incident (2010), 115–19
coercion by China over, 23, 114–15,
120–21, 124
conflicting claims over, 97–98, 119–20
cost-balancing theory of coercion and,
100–2
importance to China, 100
Japan-China Peace and Friendship Treaty
and, 98
Japanese nationalization of, 119–20
Japan-US security treaty and, 113–14
media exposure, 102–4, 107
oil and gas fields, 102
repeated transgressions by Japan, 121
resolve, need to establish, 102–8, 114–15,
119, 121–22
selective coercion by China, 12, 98–100
Sino-Japanese clashes over, 98, 106
229
Sino-Japanese relations over, 104–8
sovereignty of, 97–98, 119–20, 122
US occupation aftermath, 98
Shambaugh, David, 11
Shen Guofang, 78
Shifrinson, Joshua R. Itzkowitz, 7
Sino-EU economic relations, 170–71, See also
foreign trade (China): Sino-European
trade volume
Sino-European relations, 172, 187
Sino-Indian border disputes, 11, 29, 31, 191
Sino-Japanese relations. See also trade
relations: Sino-Japanese
China Institutes of Contemporary
International Relations (CICIR), 113, 128
economic interdependence (global) and,
108–13, 118–19
maritime territorial disputes and, 12, 100
military coercion and, 126
second Sino-Japanese war and, 121
stabilization of, 128
Sino-Philippine Mischief Reef incident. See
Mischief Reef incident
Sino-Philippine Scarborough incidents. See
Scarborough Shoal incident (2001),
Scarborough Shoal incident (2012)
Slantchev, Branislav, 5–7, 42, 198
Society for Worldwide Interbank Financial
Telecommunication (SWIFT)
cost-balancing theory of coercion and, 35
defined, 26
fallout of ban from, 27, 35, 195
South China Sea
Chinese foreign policy and, 41–42
Chinese sovereignty in, 56–57, 78, 85
coercion by China in, 11–12, 29, 31, 46–48,
50–54, 95–96
coercive tools used, 66–68
geopolitical backlash costs, 65–66
salience of claims to, 57–61, 70–72, 76–78
US-China relations and, 95–96
South Korea, 192–93
sovereignty
in South China Sea, 56–57, 78, 85
Taiwan Strait Crisis and, 145
Spratlys disputes, 46–47, 57, 76–77, See also
South China Sea
State Oceanic Administration (SOA), 49, 52,
59, 60, 72–73, 86, 91, 106, 125–27
statecraft, 1
Su Chi, 137, 147
Subic Bay base, US withdrawal, 79, 197
230
SWIFT code system, 195
cost-balancing theory and, 35
defined, 26
fallout of ban from, 27, 35
Taiwan, 10–11, 34, 130, See also US arms
sales to Taiwan
alternative coercion explanations, 134–35
arms sales to, 131–37, 150
as Chinese core issue, 34, 130, 134, 161
coercion by China against, 12, 133–34,
160–61
cost-balancing theory of coercion and, 10,
134, 135, 150, 159
economic cost of coercion, 134, 138–44
effectiveness of coercion over, 191
French arms sale to, 135–37
geopolitical backlash costs, 134
issue importance variable and, 154–55
military balance of power with China, 133,
143
as national security issue, 34
presidential elections in, 149–50
resolve, need to establish, 134, 135
sovereign status of, 130–31, 145
Taiwan Strait Crisis
cause of, 144
coercion measures taken, 135, 144
cost-balancing theory of coercion and, 150
economic cost of coercion in, 148
goals of coercion, 144–45
issue importance variable and, 115, 146,
148, 149, 159–60
militarized coercion and, 148, 159
resolve, need to establish, 146–49, 152, 160
sovereignty of China and, 145
Tang Jiaxuan, 34, 105
technology and science in China, 194
territorial disputes. See also East China Sea;
Senkaku Islands; South China Sea
coercions decisions in, 42
cost-balancing theory and, 10
East China Sea, 97–98, 124, 127
gray-zone measures used in, 16
incident, defined, 38
issue importance variable and, 35
maritime, 11, 34, 59–60, 191
national security issues in, 11, 34
Sino-Indian border clash and, 11, 29, 31, 191
Sino-Japanese maritime, 12, 100
in South China Sea, 50, 124
Vietnam, the Philippines, and Malaysia, 68
Index
threat assessment indicators, 40
Thucydides Trap, 2, 195
Tian Zengpei, 110
Tiananmen Incident, 140–41
Tibet
alternative coercion explanations, 166,
185–87
background, 162–63
as Chinese core issue, 34–35, 163
coercion by China against, 163–66, 173–74
cost-balancing theory and, 165–67, 173,
174, 187
Dalai Lama and. See Dalai Lama state visits
economic cost of coercion, 165, 166
effectiveness of coercion over, 191
geopolitical backlash costs, 165, 172–73
goals of coercion, 167
media exposure, 170
militarized coercion and, 165
resolve, need to establish and, 165, 170,
181–82
Tingley, Dustin, 22
trade
Sino-US, 143–44
trade relations
bilateral, 78, 87, 136
Sino-ASEAN, 50, 62–63, 122–23, 153–54,
See also foreign trade
Sino-EU economic and. See foreign trade
(China): Sino-European trade volume
Sino-French, 135–37, 143, See also Airbus
in France; foreign trade: Sino-French
trade volume
Sino-German, 143, 173–82, See also Airbus
in Germany
Sino-Japanese economic-, 108–13, 118–19,
122–23, See also foreign trade: Sino-
Japanese trade volume
Sino-Philippine, 78, 79, 86–87
Sino-US, 78, 138–43, 148–49, 154–55,
160
trade sanctions, 5–6
trade war
China-United States, 25, 142
Tsai Ing-wen, 20
US arms sales to Taiwan
Chinese coercion decisions over, 133–37, 150
coercive measures post-2008, 150
cost-balancing theory of coercion and, 134,
135, 150, 159
F-16 sale, 135–37
Index 231

media exposure about, 138, 150–52, 160 Walt, Stephen M., 28

salience and, 138, 150–51 Walter, Barbara, 22
US-China relations and, 131–34, 136–38, war
143–44, 150–52 China threat of, 1–2
US presence China’s history of, 2
in Japan, 123–24 coercion risks of escalation, 28, 33, 39, 199
in Southeast Asia, 65 Cold War, 2, 5, 18, 30, 31, 148–49
US-ASEAN relations, 65, 66 crises leading to, 18
US-China relations. See also East China Sea; diversionary, 126
South China Sea; United States; US arms foreign trade as alternative to, 24
sales to Taiwan geopolitical backlash costs and, 39–40
Chinese economic dependence on US, hegemonic, 7
141–43, 154–55, 160–61 likelihood of, 41, 196
East China Sea and, 129 performative, 21, 23
issue importance variable and, 154–55 of power transition, 196
Lee Teng-hui US visit, 144–45, 147–48 resolve, reputation for and, 20
US policy on Taiwan, 145–46, 152 Sino-Japanese, 121
US-Japan alliance, 114, 119, 123–24 Sino-US trade and, 25, 142
US-Japan economic relations, 113–14 World War I, 25
US-Japan Security Treaty, 123 World War II, 46, 47
US-Philippine Mutual Defense Treaty, 79–80 Weisiger, Alex, 21
Ukraine invasion by Russia, 26–27, 199–200 Weiss, Jessica Chen, 105, 110, 115
United States Wen Jiabao, 100, 116, 124, 177–78, 183
alternative coercion explanations, 156–59 World Trade Organization (WTO), 63, 140,
coercion by China against, 154–56, 161, 171–72
181–82 Wu Guifu, 141
cost-balancing theory of coercion and, Wu Shicun, 52–54
199–200
U-Shaped Line. See South China Sea Xi Jinping, 89–90, 124, 194
Xinjiang region, 100
Vietnam Xiong Changyi, 77
coercion by China against, 12, 68–69, 93 Xiong Guangkai, 151
oil and gas contracts with Japan, 52
oil and gas fields, 92–93 Yarhi-Milo, Keren, 21, 41, 90, 190
overlapping claims in South China Sea,
46–48, 52, 54–56 Zeng Qinghong, 34–35
prioritization of economic indicators by, Zhan Qixiong, 115
30–31 Zhang Liangfu, 48, 77
salience of South China Sea disputes and, Zhang Tuosheng, 105
61 Zhu Rongji, 63