Tag Archive for: Economic coercion

To counter China’s coercion of Taiwan, we must track it better

The threat of a Chinese military invasion of Taiwan dominates global discussion about the Taiwan Strait. Far less attention is paid to what is already happening—Beijing is slowly squeezing Taiwan into submission without firing a shot.

Instead of launching a full-blown attack, China is ramping up a full spectrum of coercion: political meddling, economic pressure, information operations, legal manoeuvres, cyberattacks and diplomatic isolation, all conducted within the pressure cooker of constant military threats. The goal? Wear Taiwan down bit by bit until it has no choice but to give in to Beijing’s demand for unification.

ASPI has launched State of the Strait, a weekly Substack that keeps track of all the ways China is putting the squeeze on Taiwan. The international community can’t afford to ignore China’s evolving tactics. These coercive strategies don’t just increase tensions; they create a serious risk of miscalculation that could spiral into a larger conflict. That’s why it’s important to keep a close watch on these developments. By tracking China’s actions, policymakers can better understand where the red lines are, strengthen deterrence efforts and help Taiwan remain a resilient democracy.

Chinese President Xi Jinping’s approach is clear: he’d rather pressure Taiwan into submission over time than launch an all-out invasion. In late 2024, US intelligence reported that while Beijing is still committed to taking control of Taiwan, it’s hesitant to start a direct war. China’s coercion tactics are carefully calibrated to stay just below the threshold of outright war, creating a new normal that benefits the Chinese Communist Party while avoiding an immediate international crisis, reflecting Sun Tzu’s principle of ‘subduing the enemy without fighting’.

Taiwan’s fall would have devastating consequences. A war over Taiwan could cost the global economy up to $10 trillion—far more than the economic damage caused by the war in Ukraine or the Covid-19 pandemic. Even without an actual war, ongoing tensions could cause financial chaos, with global markets taking a hit and a potential $358 billion trade disruption if China were to block imports from G7 nations. If China manages to annex Taiwan without starting a war, this would also send a dangerous message to authoritarian regimes everywhere that democracies aren’t willing to stand up against territorial expansion.

While other think tanks and intelligence analysts do a great job covering China’s military and paramilitary moves, there’s no widely trusted platform that tracks the full range of coercion tactics in one place. That’s where State of the Strait comes in. By compiling and analysing data on all aspects of China’s coercive strategy—not just military actions—it fills a crucial gap and gives a more complete picture of what’s happening.

One example of coercion is when countries engage with Taiwan in ways deemed unacceptable, Beijing typically responds with strong rhetoric in official statements designed to deter further interaction. As the graph below shows, in 2024, Beijing’s most common grievance (representing 48 percent of observations) was foreign governments ‘violating China’s One-China principle’—a broad category that encompassed any action perceived as recognising Taiwan as distinct or autonomous, even if it fell short of full diplomatic recognition. Another 22 percent of criticisms stemmed from foreign officials meeting with Taiwanese counterparts, reflecting former president Tsai Ing-wen’s increased participation in international security forums.

What are China’s reasons for criticising countries engaging with Taiwan in 2024? (Source: ASPI’s State of the Strait Database.)

In another form of coercion, Beijing consistently and deliberately revokes the tariff-free status of Taiwanese exports as a means of leverage and punishment, as indicated in the graph below. Taiwan’s Mainland Affairs Council, which is responsible for cross-strait relations policy, has characterised this form of coercion as ‘economic oppression’. In 2024 alone, China imposed trade restrictions on 169 Taiwanese exports, primarily through the removal of tariff-free status; the only exception was polycarbonate, which faced anti-dumping tariffs. Machinery and parts constituted the largest category of Taiwanese exports, followed by plastics.

China lifted its ban on the import of wendan pomelos, a type of citrus fruit from Taiwan, in 2024. That occurred two weeks before the Mid-Autumn Festival (2 September), but the ban was reinstated a week after the holiday (25 September), along with bans on 33 other Taiwanese imports. The pomelo symbolises prosperity and good fortune in Chinese culture and is often given as a gift during festival times.

On which Taiwanese exports did China put new trade restrictions in 2024? (Source: ASPI’s State of the Strait Database)

This is only data on two coercion tactics from one year. In future, ASPI intends to expand State of the Strait by developing a searchable public database and assessment platform. That interactive tool will visualise coercion data across domains and years, distil key insights and help policymakers track long-term trends with greater clarity.

The goal is simple: to help decision-makers and the public understand how China is ramping up the pressure, how close we are to a tipping point, and how these tactics are affecting Taiwan’s government, society, and decision-making. Over time, State of the Strait will become an essential resource for tracking China’s tactics and shaping the strategies to counter them.

Economic security and geostrategic competition: fostering resilience and innovation

Australia and other democracies have once again turned to China to solve their economic problems, while the reliability of the United States as an alliance partner is, erroneously, being called into question.

We risk forgetting lessons of the past when we cling to the long-gone notion of the free market, which Beijing sees as democracies opening themselves to China’s unfair business practices. Economics and security are closely linked: we must build resilience and foster innovation to prevent economic dependencies that weaken our security.

We should be concerned when countries impose tariffs on friendly countries, as the US is doing. It erodes trust, weakens solidarity among like-minded democracies and dangerously risks a tit-for-tat approach of revenge tariffs that will leave us all poorer. This drives inflation while passing costs onto consumers.

But while we need to keep working for a different outcome—as the Australian government is doing—we mustn’t focus on spot fires when the forest is ablaze.

Almost a decade ago, Australia led the world by abandoning an outdated foreign policy of balancing economics and security. We recognised that trade interdependencies didn’t deter conflict and that short-term financial interests should never outweigh security concerns. Balance sounded good in theory but in practice meant trade-offs that left us unsafe.

It was China’s actions that forced the change: having become our largest trading partner, Beijing used our economic reliance as leverage to implement a systemic program of security breaches and threats against us, from cyber intrusions to foreign interference.

Unfortunately, recent trends reveal that security trade-offs weren’t abandoned so much as temporarily paused. Many democracies are responding to immediate cost of living pressures and hoping security threats can be kicked down the road. This is a policy of security crisis delay, not deterrence.

Economic prosperity is needed to pay for security, and security without prosperity leaves us vulnerable to decay. But as is the case for individuals and households alike, assurance comes at a cost. So, the key question that confronts is what is the short-term price—an insurance premium of sorts—that we are willing to pay for long-term confidence of our prosperity and security?

Western countries need to look beyond resilience and risk reduction to embrace a more comprehensive strategy—one equally focused on (shared) innovation and competitiveness, especially in those emerging technologies that will determine future prosperity and security.

Brad Glosserman correctly argues that, in response, the US and its allies have been ‘doing economic security wrong’ by focusing almost exclusively on resilience and risk reduction. This has meant overlooking deterrence, and not prioritising future competitiveness. Partners and allies must define key industries and sectors, and stop choosing cheapest associated supply chain.

They must strengthen resilience by establishing frameworks to protect critical and emerging technologies from intellectual property theft and economic coercion by China. And, as Raquel Garbers argues, enhanced deterrence requires education on what economic warfare is and how it works, and with tools that disincentivise economic activities with hostile states.

Glosserman correctly emphasises the importance of supporting innovation and ‘unlocking innovative potential’. Resilience requires us to move beyond traditional notions of just protecting the economy to an approach that prioritises innovation and technological leadership.

To establish an effective strategy, we must understand what specific policies governments can implement to foster a innovation in critical and emerging technologies. This also requires increased collaboration between the US and its allies, particularly in areas where China has a strong lead.

We need to leverage the strengths of countries such as India, which ASPI’s Critical Technology Tracker has identified as an emerging centre of research excellence, to diversify research partnerships and build a more resilient global innovation network. We must also be wary of the short-term focus of shareholder capitalism and its negative impact on long-term economic security.

We should consider how can we rebalance the capitalist model to prioritise, incentivise and reward long-term investments in innovation and resilience. The prosperity and economic growth needed to best provide national security won’t result from protectionism, but from a long-term strategic approach to emerging technologies.

Doing so, however, will still require us to remember you get what you pay for. Any savings we gain from prioritising cheap supply chains in the present will ultimately be outweighed by higher security costs in the future.

We need to remember that short-term disagreements with friends will pass as they have before. National interests may on occasion come into sharp contest, but strategic alignment will persist. It is systemic and malign challenges that require our collective focus and investment.

Economic security and geostrategic competition: tariffs don’t equal coercion

The Trump administration’s decision to impose tariffs on Australian aluminium and steel has surprised the country. This has caused some to question the logic of the Australia-United States alliance and risks legitimising China’s economic coercion.

Australia must be level-headed and see the alliance as greater than the sum of its parts. It must be clear-eyed about the reasoning behind US decision-making and  remain sophisticated in its responses. Australia must also focus on the real threat of economic coercion from China.

Aluminium and steel make up just 0.2 percent of Australian exports to the US, and their value of $1 billion is a tiny fraction of Australia’s total global exports of $660 billion in the past financial year. Aluminium and steel producers will just redirect exports to other markets or shift production to their US-based manufacturers. The tariffs are more political than economic: they are less about Australia and more about the US resetting its ledger with the world and delivering on its national interests.

As Australian Ambassador to the US Kevin Rudd said, the US will be ‘hardline and transactional in its approach, even to long-standing friends, partners and allies’.

So, Australia must respond to the causes, not the symptoms. As with any competition, being beaten by a better rival is not unfair. But, having held up the international free trade system since its inception, the US is increasingly concerned about being cheated or taken for a ride. This includes the correct assessment China is not playing by the rules the rest of us have been following.

Australia must avoid drawing a false equivalence between the Trump administration’s tariffs and China’s economic warfare. The US is seeking to rebuild domestic production and level bilateral trade—albeit by wringing concessions, even from friends, partners and allies. But China’s objective is to recast the international system in its favour.

Since World War II, the global order has, for the most part, benefited from economic liberalism and free market incentivisation. But while the West granted the free market free rein, the Chinese Communist Party used controlled industrial policy to achieve rapid economic growth. It did two things at once: exploiting the open global market and combining it with a form of domestic industrial policy. The CCP has prioritised sectors defined as most relevant to manifesting national strength using subsidies, investment, and theft of intellectual property to drive Chinese innovation and companies. This has occurred most sharply under Xi Jinping.

Through its investments in manufacturing under its Made in China 2025 plan, Beijing showed a willingness to lose money to make the world dependent on Chinese support. It has used predatory pricing as a deliberate strategic ploy, selling low and bankrupting competitors to create a monopoly. We’ve seen that across multiple fields, including commercial drones and batteries in electric vehicles.

While many governments use economic incentives to support local industry, most generally maintain a market-driven approach to technology sectors. While such governments may provide research funding, tax incentives or targeted subsidies, their efforts are typically more transparent, limited in scope and not directly tied to state intelligence objectives such as creating levers of coercion or military modernisation programs.

That distinction highlights the unique risks posed by China’s approach. China combines aggressive state-backed industrial policies with a lack of separation between private enterprise and government control.

As a result, this supports Beijing’s regional and global agenda to supplant the US and its allies across critical technology sectors relevant to future economic prosperity and national security. In these fields, Beijing has simultaneously increased foreign dependence on China and reduced China’s dependence on the rest of the world.

This doesn’t just boost China’s own prosperity; it also deters democracies from standing up for their own security by making countering Beijing’s malign actions not just challenging, but impossible.

ASPI’s Critical Technology Tracker shows China’s significant lead in areas such as advanced sensors, AI and advanced materials. This diagnostic tool shows governments where to direct their efforts to maximise innovation and competitiveness.

China has acted in this way—wanting the global market open but its domestic one closed—because it sees industrial policy as a means to achieve its strategic ambitions and dominate globally. In comparison, Western governments narrowly view industrial policy as a domestic policy.

There should be two options: hold Beijing to account for rule breaches or play the new game. While the Trump administration tries to do both, the rest of us appear to choose a third option. We are allowing China to play by its own rules while we remain committed to the old game and expect the US to do the same.