China using wealth to advance foreign policy, says new Lowy Institute Analysis.

In a new Lowy Institute Analysis Dr James Reilly argues that China is using economic statecraft more frequently, more assertively, and in more diverse fashion than ever before.

Reilly notes however that fears of China’s economic coercion should not be overblown.

‘Economic statecraft is an important tool of Chinese foreign policy, worthy of serious and sustained attention; but it does not mean countries should avoid economic engagement with China’, said Reilly.

In China’s economic statecraft: turning wealth into power Reilly points out that preferential trade deals, ‘purchasing diplomacy’, foreign aid and economic sanctions have all been used to advance foreign policy goals.   

Yet the results of Chinese economic statecraft have been mixed and, in some cases, counterproductive.

Reilly argues that because Australia enjoys considerable economic leverage over China, its vulnerability to potential economic coercion from its largest trading partner is limited.

‘Suspicions that the Chinese government will manipulate its trade and investment to undermine Australian autonomy or security are overblown’, concludes Reilly.