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A New Twist on Chinese Foreign Policy: Beijing Mixing Business with Politics?

by Elizabeth C. Economy
May 24, 2012

Filipinos chant anti-China slogans as they march towards the Chinese consulate in Manila's Makati financial district on May 11, 2012. Filipinos chant anti-China slogans as they march towards the Chinese consulate in Manila's Makati financial district on May 11, 2012 (Erik de Castro / Courtesy Reuters).

One of the cardinal rules of Chinese diplomacy is that China doesn’t mix business with politics. The precept fits in nicely with the primacy that China places on sovereignty, respecting the right of a country—or at least the leaders of the moment—to determine how things ought to work. And, of course, it also provides Beijing with the opportunity to rationalize its lack of enthusiasm for tough foreign policy action in places such as Iran, Syria, Sudan, or Zimbabwe as a matter of principle.

Of course, as I have written elsewhere, doing business in any country—particularly when you supply a country with arms as Beijing has done in both Sudan and Zimbabwe—is in fact mixing business with politics. And the ongoing competition between Beijing and Taipei to purchase diplomatic relations with small, often poor, states is nothing if not the blatant mixing of business with politics. So on the face of it, the claim is rather silly. Moreover, there have been more subtle cases in the past—such as when Beijing postponed a purchase of Airbus planes after then-President Sarkozy agreed to meet with the Dalai Lama in 2008 and its rare earth export slowdown to Japan in the wake of the East China Sea dispute in 2010, to name a few—that suggest Beijing has not been unwilling to exert a bit of economic leverage to punish a perceived political transgression.

In fact, it appears that Beijing’s willingness to mix business with politics is increasingly an open secret.  In the midst of China’s dispute with the Philippines over control of a shoal in the South China Sea, Beijing has called on Chinese travel agencies to suspend tours to the Philippines. There have also been some fruit shipments blocked from the Philippines to China, although this problem apparently began before the standoff in the South China Sea.

A similar theme is playing out this month across a couple of oceans. The state-supported Global Times has called for Beijing to suspend some economic cooperation with the United Kingdom in retaliation for Prime Minister David Cameron meeting with the Dalai Lama. The Ministry of Foreign Affairs has chimed in by saying that the meeting “Seriously interfered with China’s internal affairs, undermined China’s core interests, and hurt the feelings of the Chinese people.”

And of course, Tokyo felt Beijing’s political sting when it hosted the World Uyghur Congress, an exile group opposed to China’s policies in Xinjiang that is considered by Beijing to be a terrorist organization. Beijing cancelled a meeting between Foreign Minister Yang Jiechi and Hiromasa Yonekura, the Chairman of the Japanese business group Keidanren, to demonstrate its displeasure with Tokyo.

Despite Beijing’s massive economic weight, however, its efforts to throw that weight around are unlikely to succeed. The problem for Beijing, as I see it, is three-fold.

First, on the rare occasion that anyone listens to China’s protestations and does what Beijing wants, it seems that Beijing doesn’t then return the favor. (See, for example, President Obama postponing a meeting with the Dalai Lama before his trip to Beijing in 2009, and China’s ungenerous treatment of the U.S. president in return.) Once countries see that China takes without giving back, no one will want to give any more.

Second, it is very difficult to use economic leverage to get other states to adopt your interests as their own when they really don’t want to. Here Beijing can look to the United States for instruction. At a recent meeting I attended, when a senior Myanmar/Burmese official was asked whether the U.S. sanctions had any impact on the country’s decision to transition to democracy and open the economy, the official said—rather unsurprisingly, I think—that they really hadn’t, because the sanctions had been around for years.

Third, Beijing may simply be in danger of overestimating its economic leverage. In the case of the Philippines, for example, even though China is the Philippines’ third largest trading partner, the Chinese are not among the top three tourist groups visiting the Philippines and Filipino Tourism Secretary Ramon Jimenez Jr. seems unfazed by China’s pullout. He has simply suggested that the Philippines will look to Japan and other “traditionally stronger markets” to make up the difference.

China has long mixed business with politics in a most unattractive fashion; it just hasn’t been willing to admit it. Will it make a difference if Beijing finally fesses up? My guess is that greater honesty won’t make much of a difference outside China, where everyone is pretty well aware of the gap between Chinese rhetoric and Chinese actions on the ground. The opportunity rests within China itself. If China’s leaders can take the first step to acknowledge honestly what it is they are doing, they may be able to take the second step and realize that what they are doing is not, in fact, yielding what they want. That, at least, might put them a step ahead of the United States, where we are still waiting for Cuba to see the error of its ways.

Post a Comment 5 Comments

  • Posted by Ben Franklin

    China has always mixed business and politics, which is hardly surprising for a brutal dictatorship. I know a lot of American businessmen who won’t do business with China over two issues: Their IP (intellectual property) will be stolen, and they don’t trust goods from China to not be poisonous or adulterated.

  • Posted by anar

    very interesting read Only one question :Which government separates economy and politics ?

    Thanks .

  • Posted by Cleo

    I guess the Filipinos are telling the Chinese to take action against the Japanese who are sending 10 “patrol” ships to the South China Sea since Japan had already planned to send the ships 3 weeks before the Chinese and Filipinos engaged in a shuffle. Did the Fils secretly alert China that Japanese were generously sending “warships” as the Fils call them and so China sent ships for an open conflict as an excuse to have nonJapanese boats in the waters? Because you ask any Asian on the condition of anonymity if they believe that Japan is sending warships out of the goodness of their heart to protect Southeast Asia from China. When the Chinese show up, they’ll do the jobs nobody wants and their middle class will build infrastructure and cities like Kuala Lumpur. When a Japanese shows up, he’s doing recon, more will follow and eventually you have the Rape of Manila.

  • Posted by Cleo

    Because, Darling, it’s the Filipinos who are calling them “Japanese warships”:

    http://www.philstar.com/Article.aspx?articleId=810884&publicationSubCategoryId=63

  • Posted by glenn

    @cleo,

    I don’t understand how you were able to infer that Manila is telling (secretly) China that Japan is sending “warships” (which is patrol boats actually). I find it really flawed.

    You have to see that Philippines and Japan have good bilateral relationship. It was the Philippines who requested from among its “friends” in the region i.e. Japan, South Korea and Australia for probable “surpluses” in their arms and arm equipments that Philippines may acquire. Japan simply responded as a friend to the Philippine request.

    What you have to understand instead is, why the Philippines is calling its “friends” now to beef up its defense? Because China is bullying the Philippines!

    So, Philippines has risen to the occasion to equip itself with credible defense to be able to secure its territory.

    The more China bullies its smaller neighbors, the more China will be isolated.

    Tell your bosses in China, its time to change mind if they don’t want to be seen in history as the next Nazi or next Soviet.

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