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Webinar on the Economic and Social Impact of Engagement with Taiwan and China

2022.4.28 (THU) 21:00-22:30

Claudia Wessling  Mercator Institute for China Studies
  Chien-Huei Wu   Associate Research Professor, Institute of European and American Studies,
                                 Academia Sinica, Taipei, Taiwan
    Wen-Chin Wu  ▍ Associate Research Professor, Institute of E Institute of Political Science,
                                 Academia Sinica, Taipei, Taiwan
 Max J. Zenglein  ▍ Mercator Institute for China Studies



  • The Threat of China’s Economic Coercion


This presentation examines the characteristics of China’s use of economic coercion and assesses its effectiveness. We use four key indicators: policy changes or other responses to the measures; the trade volume between China and the targeted sector; the total volume of trade between the targeted country and China; the trade volume of the targeted sector with the rest of the world. We find that the effectiveness of Chinese economic coercion depends on a number of factors: power asymmetry; trade dependence; the elasticity of China’s demand; and the capacity of the targeted sector or country to swiftly diversify export markets. We argue that trade diversification is the first essential step to avoid economic dependence on China and becoming vulnerable to coercive measures. A collective response by like-minded countries also plays a critical role in helping targeted sectors and countries. Joint action can be undertaken to challenge the legality of China’s coercive measures at forums such as the WTO dispute settlement system. The EU’s recently adopted countermeasure – the Anti-Coercion Instrument - also serves as a good example for countries considering legislation to deter China. 



  • The Peril of China’s Foreign Aid


As China has become a major donor of foreign aid to developing and underdeveloped countries, concerns have been raised about the political and economic consequences for recipient countries. Traditionally, OECD countries offer aid to other countries in the form of official development assistance (ODA), which is usually concessional and conditional. Recipient countries are required to adopt policy reforms or adjustments to ensure continued aid. However, China advocates the principle of “non-interference” and often gives aid without hard conditionalities on political or economic reforms. Sometimes China also uses its aid to fulfill its political goal of isolating Taiwan, by demanding that recipient countries sever formal diplomatic relations with Taiwan. In this presentation, we argue that non-conditional Chinese aid leads to detrimental political and social consequences in recipient countries. These include the deterioration of democratic development, and an erosion of the rule of law, freedom of expression and gender equality. Poorer quality education can also result and corruption increase. Our arguments are supported by empirical data collected in 117 countries between 2000 and 2017 and by robust to alternative models addressing the issue of reversed causality. This chapter contributes to the literature on the perils of Chinese foreign aid.



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