China's economic statecraft: turning wealth into power

International relations Economics Australia China

China today is using economic statecraft more frequently, more assertively, and in more diverse fashion than ever before. Yet fears of Chinese economic coercion should not be overdrawn. In many cases, China’s use of economic statecraft has been counterproductive. China’s domestic challenges and Australia’s considerable economic advantages limit Australia’s vulnerability to potential economic coercion from its largest trading partner.

Key findings:

  • China’s socialist legacy, augmented by its state-led development model, enables Chinese leaders to deploy a combination of economic carrots and sticks to advance their diplomatic agenda.
  • Competing domestic interests, rising regional anxiety, and economic challenges at home limit the effectiveness of China’s economic statecraft.
  • Suspicions that the Chinese government will manipulate its trade and investment to undermine Australian autonomy or security are overblown.
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