China’s Economic Statecraft: Lessons Learned from Ukraine

Abstract

Economic statecraft has become an increasingly prominent part of China’s foreign policy toolkit. Beijing has often sought to use both economic coercion and inducements to achieve its political goals, albeit to mixed results. In that vein, Chinese leaders have attentively watched how the United States has deployed its economic power, including US-led sanctions on Russia following the invasion of Ukraine. This recent episode has underscored America’s continued global financial power and highlighted to Beijing its potential economic vulnerabilities, as well as the risks of international opprobrium. At the same time, Washington faces challenges in assembling a durable global coalition to exert pressure on Moscow, due to economic dependencies on Russian energy and political reticence outside of a core bloc of allies. I provide an overview of China’s approaches to economic statecraft and examine some of the key lessons that Beijing’s leaders are likely to draw from Russia’s war in Ukraine. I then discuss the implications for China’s economic statecraft going forward. Beijing is likely to redouble its efforts to increase economic self-reliance in critical technologies and sectors, better insulate the country from financial sanctions through de-dollarization, and continue to dangle economic inducements to peel allies and partners away from the United States, thus weakening US and allied leverage over China during a potential future crisis.