China and India Aren't Afraid to Use Money as a Weapon

Chinese yuan. Wikimedia Commons/Creative Commons/@Junjiewu99

While India and China publicly disapprove of economic coercion, both have used it as an instrument of statecraft.

Following the terror attacks on Mumbai in November 2008, the names of terrorist groups operating out of Pakistan came up again. New Delhi decided to adopt measures with new economic repercussions for Pakistan. As New Delhi suspended sporting ties, Pakistani cricket players were kept from playing in the lucrative Indian Premier League (IPL), despite being a part of the matches held earlier in 2008. Later, amid deteriorating peace talks between India and Pakistan, the diktat continued, even as former Pakistani players requested the Board for Control of Cricket in India to allow Pakistani participation in the IPL.

China’s Use of Economic Statecraft

China imposed economic sanctions on Vietnam in 1978, demanding the withdrawal of troops from Cambodia. The same year it also cut its aid to Albania. China’s use of, as well as its threats to use, economic coercion increased steadily in the last few decades, and was often directed against states that hosted or supported the Dalai Lama. In the 1990s, China gave the French government a month to shut down its consulate in Guangzhou and withdrew from negotiations over significant projects like the Guangzhou Metro and the Daya Bay Nuclear Power Station, which were meant to be built in collaboration. Later, in 2006, Beijing canceled an important summit with the European Union as a protest against President Nicolas Sarkozy’s decision to meet with Dalai Lama.

Over the last few decades, China has used economic sanctions to resolve a range of issues. Not only has China sanctioned U.S. companies for supplying arms to Taiwan, but it has also used this form of economic coercion on Taiwanese companies to make them comply with mainland China’s policies. In the past, demands to develop domestic law on economic sanctions have also been noted.

Another Asian state that has been threatened by, as well as faced, Chinese sanctions is Japan. In 2010, China banned the sale of rare-earth materials to Japan as a response to the Japanese navy’s arrest of a Chinese fishing trawler captain. In 2012, China again considered imposing sanctions on Japan, over its policy on the disputed Diaoyu/Senkaku Islands. In an opinion piece, Jin Baisong, the deputy director of an institution affiliated to the Ministry of Commerce, suggested that China should take strong “countermeasures, especially economic sanctions” against Japan. In another article, titled “Options and rules of economic sanctions against Japan,” a researcher discussed the possible types of economic sanctions that could be imposed against Japan.

Following the Scarborough Shoal standoff with the Philippines, China reportedly blocked numerous banana consignments from entering China. Since the Philippines exports a significant part of its produce to China, it proved a heavy blow to the island state’s economy. On occasions when China’s relations with the Philippines or South Korea have been unpleasant, reports of mainland Chinese travel agencies being discouraged to send tourists to the two states have also been noted.

Recently, news about China’s “transport obstruction” in Mongolia has come up. China is allegedly penalizing Mongolia for hosting the Dalai Lama by increasing tariffs on Mongolian trucks that pass through Chinese territory. Mongolia is believed to have made a request for India’s clear support.

As the Indian and Chinese economies grow and become more connected with the world, economic coercive measures will feature prominently in New Delhi and Beijing’s policy toolkits—much like those of Western powers.