Chinese Economic Statecraft: Commercial Actors, Grand Strategy, and State Control

by William J. Norris

In Chinese Economic Statecraft , William J. Norris introduces an innovative theory that pinpoints how states employ economic tools of national power to pursue their strategic objectives. Norris shows what Chinese economic statecraft is, how it works, and why it is more or less effective. Norris provides an accessible tool kit to help us better understand important economic developments in the People’s Republic of China. He links domestic Chinese political economy with the international ramifications of China’s economic power as a tool for realizing China’s strategic foreign policy interests. He presents a novel approach to studying economic statecraft that calls attention to the central challenge of how the state is (or is not) able to control and direct the behavior of economic actors. Norris identifies key causes of Chinese state control through tightly structured, substate and crossnational comparisons of business-government relations. These cases range across three important arenas of China’s grand strategy that prominently feature a strategic role for economics: China’s efforts to secure access to vital raw materials located abroad, Mainland relations toward Taiwan, and China’s sovereign wealth funds. Norris spent more than two years conducting field research in China and Taiwan during which he interviewed current and former government officials, academics, bankers, journalists, advisors, lawyers, and businesspeople. The ideas in this book are applicable beyond China and help us to understand how states exercise international economic power in the twenty-first century.

Genres: China, Economics, Politics, Political Science, Nonfiction

318 pages, Paperback

Published April 15, 2018

Reviews

[Stephanie · Rating 4 out of 5]

I approached “Chinese Economic Statecraft” as someone who is not a China expert nor a specialist in international political economy, but as someone who researches and teaches international security and has worked on national security issues. And while this is not a book you would read at the beach, William J Norris has written an interesting, timely and relevant work on how to think about Chinese economic statecraft that will be of benefit to scholars, policymakers and “China Hands”. This is especially the case given that we live in a time when we constantly hear a lot about Chinese economic power; a measured look at how the PRC tries to wield it is a welcome study.

Importantly, book is first and foremost a scholarly text – it presents a model and most of the book is dedicated to testing it. This can sometimes make the book a tedious read (and partially explains why it took me a while to get through it.) However, this minor complaint aside, I learned a lot from reading it. The beginning chapters offers an excellent discussion on what “economic statecraft” actually is. (“[T]he state’s intentional manipulation of economic interaction to capitalize on, reinforce, or reduce the associated strategic externalities”.) This makes the book valuable in and of itself.

However, the main focus of the book is premised on a puzzle: why does Chinese economic statecraft sometimes succeed and sometimes fail? Norris answers this question by unpacking the idea China is a monolith. Instead, Chinese economic statecraft is driven and directed by a competing group of actors in the PRC – entities with commercial interests versus the political leadership, bureaucratic politics between entities (such as the Ministry of Finance vs the Peoples Bank of China), national vs local interests and politics. The result is often struggle, incoherent or ineffective policy.

Norris presents a series of variables, but concludes the most important factor in determining whether Chinese economic statecraft is successful is whether the state can operate as a unified actor. Specifically, Norris is referring to situations where interests across many actors align, and the state is able to exercise control.

To demonstrate his case there are three major case study areas: Chinese investments in extractive industries (especially petroleum), Chinese economic policies towards Taiwan and Chinese Sovereign Wealth Funds. This last section is fascinating, indicating how actors behave different internationally and why. Yes, Beijing has a lot of control, but there is a great deal of variation between cases. To be brief, Norris stresses that not all Chinese sovereign wealth funds are alike. Indeed, Norris’ case studies demonstrate that China often struggles to control its SOEs, even when they are an arm of the state.

Norris usefully ends his book with some policy recommendations – he notes that the Chinese economic investments that present the least concern are those where there are transparency (in terms of offering annual reports as well as understanding command and control of the financial entity) and distance from the state. If China wishes to bolster its reputation abroad, and reassure states nervous about how it might wield its economic leverage, it must continue to liberalize and take steps to allow commercial actors to chase profit. While China may be giving up some tools of statecraft in the short term, the power that results from these steps will outweigh the loss. Moreover, he notes that his case studies show just how difficult it is to use economic statecraft effectively, even when a state is authoritarian.

As Canada begins the process of thinking about a Free Trade Agreement with China, the content and findings of this book is very relevant. Indeed, it suggests indicators of statecraft in economic activity, and presents strong arguments why countries like Canada should pressure China to be more transparent and to liberalize. While it is certainly not the most accessible book on China, Norris’ book is measured and relevant and very useful for thinking about economic statecraft and security.

[Stephen Stewart · Rating 4 out of 5]

Chinese Economic Statecraft, by William J. Norris, delves into what allows a state to effectively use economics to pursue their national objectives. The book is successful in giving a foundation in the topic, especially for a person like me who has no political science or statecraft background, and I enjoyed the evidence employed and the depth the book treated each event.

While the book focuses on three distinct policy areas for China (securing raw materials, Taiwan, sovereign wealth funds), I think the section on Taiwan was the most engaging and interesting to me. I enjoyed the historical background into the relationship between Taiwan and China, as well as the evolution of Chinese economic statecraft around that issue. I also thought the book’s argument for the five factors that lead to successful economic statecraft were plausible and well-reasoned, and I appreciated the charts at the end of each chapter that broke down the event into those key categories.

For a while through the book, I was wondering if this was a book on Chinese economic statecraft, or economic statecraft with examples from China. The conclusion of the book really helped address this issue, noting that it had primarily been a work focusing on China, but the theory and structure should be readily applicable to other nations.

I think there were a couple of ways this work could be improved. Generally, the book was structured with an example of unsuccessful economic statecraft, followed by an example of successful economic statecraft. However, the unsuccessful examples were always chronologically before the successful examples. This left me wondering if what the book was witnessing was a learning or a maturation effect, where states learn from their mistake, becoming more successful overtime. This could easily be answered by showing an example of a state degrading from successful economic statecraft to unsuccessful economic statecraft over time, and I think the book would have benefited from examples like that.

I also struggled with the ending chapters, especially the chapter on the China Investment Corporation. These chapters were laden with institutional background, and it got very hard to follow the relationship between different Chinese ministries, people, etc. I found myself yearning for an illustration or a chart to lay out visually the relationship between these different groups and organizations, and I feel like that would have been a welcome crutch to that material.

Overall, I found this a very interesting and enlightening book on an area I knew nothing about prior to reading it. I am left wishing that the book had come out this year, not 2016, in order to incorporate more recent trends of Chinese economic statecraft and other examples.

[The Shanghaipreneur · Rating 4 out of 5]

I have a more comprehensive review of this book forthcoming in the Pacific Affairs journal published by the University of British Columbia. But I thought I would jot down a few thoughts here for posterity with the idea that Goodreads might be a bit more accessible.

There is a distinction between a country's "official" engagement with its economic partners and its "unofficial" interactions that the author William Norris terms "statecraft." Norris considers the latter more important and, with the recent rise of Trump tweet risk, it is hard to disagree with him. The author notes the tendency of the Chinese Communist Party to eschew the “direct, classical mercantilist power of the state to dictate policy” in favor of “intentional manipulation” of Chinese commercial actors to coerce them to align with the Party's "grand strategy."

To this extent, Norris constructs a generalized theory for evaluating the government-business dynamics of any state and any commercial actor. He then plows through a series of case studies to prove the validity of his theory in the context of China's unique socio-capitalist system. Of course, the behavior of state-owned oil conglomerates exhibits an entirely different character than individual Taiwanese fruit farmers. But how these differences manifest themselves in both government policymaking and signaling intentions can almost be predicted by simply observing the basic nature of the relationships between the actors in question. At least, that is the conceit of the author in this book.

The case studies used here are a little stale, but they do tend to aptly reinforce the theory. A lot has changed since the 2008 financial crisis and I look forward to more research using this nascent theory to describe, for example, the explosion of Chinese outward foreign direct investment (OFDI) in the United States and Europe in 2015 and 2016.

Overall, I found this book to be a little too academic but definitely a good read if you are in the business of trying to understand the Chinese economy.

[Reus · Rating 5 out of 5]

Will presents an interesting theory of international economics that uses focuses on commercial entities - not states as the primary economic actor. His analogy was that states are the umpires who set the playing field, but he presents five independent variables that determine these outcomes and provide the state with security externalities.

A well written and thoroughly researched book. Easily accessible to most undergraduates and policymakers while providing in-depth nuances applicable towards more data driven individuals.

[Jacob Mardell · Rating 3 out of 5]

Asks why state control sometimes works and sometimes doesn't and establishes a framework for these predictions. Only skimmed one of the chapters on Taiwan because I got a bit bored to be honest. Interesting ideas and very well researched but maybe I'm just not cut out for academic writing - it could be half as long, much simplified, and don't really think the diagrams are unnecessary. Despite my Chinese studies MA and think tank job, I don't think political science is a real science, so maybe I'm just resentful.

[Kevin Y · Rating 5 out of 5]

I want to give this book a 3.5 instead of 4 but if I had to choose, 4 is closer to how I feel for the book. The book is good for individuals that have not really followed Chinese usage of "economic statecraft" as an extension of its foreign policy. Compared to similar books, Prof. Norris makes an attempt at a more balanced and nuanced approach to Chinese economic actors including the government. I believe he succeeded (when compared to others) and provides an interesting framework to start from to better structure and analyze Chinese economic and foreign policy. Other books which end with policy prescriptions tend to be less objective and nuanced while being noticeably tilted towards the US perspective, which impairs clear pathways to making improved policies. By no means is the book objective but it restrains itself to a framework so that other countries can be compared on relatively similar grounds.

The book deals with some key cases and examples that are well publicized in the news media while providing sufficient add-on details related to the context of the circumstances especially relating to domestic Chinese politics and recent history. I definitely recommend the book as starter on the issues surrounding Chinese economic statecraft, and economic statecraft everywhere. The framework and theory are good guides for dealing with other countries including the US. After going through this book, I believe readers can choose to go deeper into different aspects of China's political economy and how different factors contributes to foreign policy (and even economic policy). For those deep in the weeds of China's political economy, the offered theoretical and academic framework is what matters and can offer an additional template to future analysis and observations.

[Aloe Yan · Rating 2 out of 5]

Norris states that 2008 is the watershed since which China has become more assertive in its foreign policies, but most of his cases are pre-2008, so that undermines his argument.