Author: Angela Poh
The Washington Quarterly • 40:1 pp. 143–165
Given significant international attention over the 2016 arbitral tribunal ruling, this article examines allegations of China’s economic aggression in its disputes with the Philippines and Vietnam over the South China Sea. The selection of these two cases is natural as China’s relations with the Philippines and Vietnam have been severely challenged by the South China Sea disputes in recent years. This is especially as compared to the other territorial claimants, such as Brunei and Malaysia, which have sought to resolve their differences with China on a much lower profile. In addition, both the Philippines and Vietnam have much smaller economies than China. They would therefore be relatively “easy targets” for China to economically coerce, should it wish to do so.
Drawing on a range of primary written sources, as well as interviews with current and former policymakers, diplomats, and stakeholders from the Philippines and Vietnam, this article examines two widely publicized incidents in particular detail. The first revolves around China’s alleged sanctions against the Philippines following the Scarborough Shoal incident in 2012, which is now widely considered a “classic example” of China’s employment of sanctions to further foreign policy objectives. The second concerns China’s dispute with Vietnam over the deployment of the HD-981 oil rig in 2014, which provides an interesting point of comparison as Vietnam is much more economically dependent on China than is the Philippines. Therefore, the HD-981 oil rig incident of 2014 would appear to have presented, at the least, a “likely” opportunity for China to use (or threaten) economic sanctions in order to gain policy concessions, even though there are admittedly significantly fewer allegations to date that China used sanctions in this case than there are in the case involving the Philippines.
In this article, I examine these two identified cases within a framework based on principles of “coercive sanctions” as employed in the work of several sanctions scholars. More specifically, I examine sanctions as the efforts of a government to disrupt the trade, aid, finance, currency, or assets of a target state for the sole purpose of coercing the latter into changing its behavior when important political interests are at stake. To claim that China has been more inclined in recent years to employ economic coercion against states with which it has had disputes, one would need to show that China has intentionally undertaken actions to disrupt, or threaten to disrupt, economic benefits derived from cooperation—or from any financial and/or military aid—in the event that its target states continued with a line of action perceived as contrary to China’s interests. Alternatively, one would have to show that China’s actions can be expected to generate significant political costs for the leaders of its target states, i.e., that they stand a significant chance of losing their positions through electoral defeat or popular revolt. Given that a key component of coercive sanctions is the so-called “pain–gain formula”—i.e., the expectation that the higher the economic costs for the targets, the more likely it is for them to give in to the senders’ political demands—one should also expect China to apply pressure to the extent that it expects to successfully prompt a behavioral change from its targets. I argue that China’s behavior toward the Philippines following heightened tensions in the South China Sea did not meet these criteria. In the case of Vietnam, moreover, it would appear that, contrary to popular expectations, China did not even threaten economic consequences. Claims regarding China’s “mounting use of unilateral economic sanctions,”  at least in these cases, would therefore appear to be exaggerated and, at least to some degree, misleading. Indeed, many claims of this kind have been put forward without sufficient acknowledgment of the ambiguity of the data on which the analyses were based, or of the presence of confounding variables. There is therefore a need for deeper, more careful analyses of evidence regarding China’s behavior in the international sphere since 2008/2009.
The body of this article is organized into three sections. The first revisits the Scarborough Shoal incident between China and the Philippines in 2012, including both the background to and aftermath of this incident, and concludes that the dominant narratives regarding this incident have been constructed on the basis of data that are in fact inconclusive. The second section reviews the dispute between China and Vietnam in 2014 over China’s deployment of the HD-981 oil rig in disputed waters in the South China Sea. Based on primary sources gathered in Vietnam, I show that, contrary to the expectations of Vietnamese policymakers and elite, China has exercised restraint in employing economic pressure against Vietnam, even during the height of tensions. The third section argues that the media and, to some extent, academic discourse have responded to China’s assertive posture regarding the South China Sea by promulgating an ill-founded “sanctions myth.” In it, I suggest several hypotheses that might explain China’s exercise of restraint in employing economic coercion against its smaller and more dependent neighbors, despite its obvious and increasing power to use economic coercion. Finally, in the conclusion, I assess the implications of the present study, and suggest avenues for further research.
Read the full research paper at TWQ_Spring2017_Poh [PDF].
About the author: Angela Poh is a Ph.D. Candidate at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore.