May 07, 2024

America’s China Strategy Has a Credibility Problem

A Muddled Approach to Economic Sanctions Won’t Deter Beijing

In future crises or conflicts in U.S.-Chinese relations, the economic dimension will be critical. Yet Beijing currently has good reason to doubt the credibility of Washington’s sanctions threats. This is because the United States’s response has been muted in the face of recent Chinese provocations, including Beijing’s efforts to erode democracy in Hong Kong, the dispatching of a spy balloon over the United States, and Chinese aggression in the South China Sea.

Sanctions are a crucial part of the U.S. foreign policy toolkit, and they encompass a broad array of economic restrictions, including financial sanctions, export controls, and trade restrictions. They are intended to coerce entities or individuals into a course of action. The United States has many powerful sanctions at its disposal—including those that could eject major Chinese firms from the global financial system and weaponize the central role of the U.S. dollar in it. But Washington has preferred instead to respond to provocations by imposing controls on a handful of Chinese firms or personal sanctions on Chinese officials. Rather than using more powerful sanctions, the United States has opted for a more limited approach of imposing sanctions related to technology and levying tariffs and trade restrictions to counter China’s economic practices.

An effective U.S. sanctions strategy should play to U.S. strengths in the financial sector while reserving the most severe measures for acute crises or conflicts.

This measured response is defensible, as more extreme measures could be seen as an act of economic war and would escalate tensions with China. Yet Washington’s restraint may also be dangerous, encouraging China to assume that it would not face harsh sanctions even if conflict broke out over Taiwan, the South China Sea, or other potential flash points. This question is becoming more pressing as the United States grows increasingly concerned about China’s support of Russia’s defense industrial base. That support was at the top of U.S. Secretary of State Antony Blinken’s agenda during his recent visit to Beijing, which was quickly followed by a fresh raft of sanctions on Russia’s defense suppliers, including a handful of entities in China. Washington must decide whether to ramp up the use of its most powerful sanctions on Beijing now, as part of the broader effort to support Ukraine, or to preserve its leverage to deter or respond to a direct confrontation between the United States and China later.

The United States and its partners must urgently devise a clearer sanctions strategy that maximizes the modest economic leverage that they have over Beijing. This strategy should center on keeping China in the global financial system, in order to maintain a key U.S. advantage. At the same time, however, the United States must work to build the credibility of its threat to impose swift and severe sanctions on China if Beijing crosses certain redlines. It can do this by transforming its economic statecraft policy—that being its use of economic leverage to pursue geopolitical aims—through a strategic process that is integrated with military planning and carried out in cooperation with key international partners. War planning must be embedded in the economic agencies, critical supply chains delinked from China, and this strategy must also clearly convey Washington’s willingness to impose serious sanctions, when warranted. The United States must also work to strengthen its economic resilience, as well as that of its partner countries around the globe, to withstand the economic shocks that would follow from a military conflict with Beijing.

Read the full article from Foreign Affairs.

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