Economic Coercion in an Independent Era: China Responds to the THAAD Crisis

Abstract

China uses economic coercion against smaller commercial partners, as well as large economies that contribute to its own economic success. For example, following South Korea’s deployment in March 2017 of the Terminal High-Altitude Area Defense (THAAD) anti-missile system, China adopted a range of informal economic sanctions. At the subnational level, some local leaders quietly shielded commercial ties to South Korea from escalating political tensions, but many others, despite lacking explicit orders from the center, forced Korean retail stores to close, suspended contracts with Korean investors, and waged anti-Korean media campaigns. What explains this variation in local official participation in foreign economic retaliation? I argue that whether a city’s economy is dependent on commerce with a targeted foreign state, and whether a city’s leaders are politically vulnerable, shape their responses to international political crises.

Utilizing an original dataset of sentiment analysis scores of local official media, I test this theory first in the context of local official management of anti-Korean sentiment, which played an important role in promoting a consumer backlash against Korean goods. I then provide a case study comparison of local leader treatment of South Korean commercial interests in the cities of Xi’an and Chengdu.