Performing Panda: Chinese Economic Coercion in the Era of Xi Jinping

Lt Col Katherine Onstad

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Background

“Don’t say we didn’t warn you!”1 These cautionary words concluded a Chinese state-owned newspaper commentary in 2019 that signaled to the United States that the People’s Republic of China (PRC) was not afraid to restrict its export of critical raw materials. The commentary reminded readers that: “[C]onsumer electronics, military equipment and many other products produced in the [United States] are highly dependent on China’s rare-earth resources.”2China’s touting of its economic strength through this opinion piece was meant to serve as a coercive warning to the United States not to increase tariffs on Chinese exports. The timing was in the midst of the 2018–2020 trade war between the United States and China (which, for purposes of simplicity, I will refer to as the “US-China trade war”), which saw both sides raise tariffs on exchanged goods. This later combined with the coronavirus disease pandemic in 2019 and after (COVID-19)—where labor shortages from lockdowns in China caused supply shocks for many industries across the globe—and the United States’ economic dependence on Chinese production had reared its ugly head. “Decoupling from China” became one of the most popular phrases in 2020 within policy and business circles.

But China never limited its exports of critical materials. In fact, the other side of the Pacific revealed a China that is just as economically dependent on the United States to consume those goods. The two countries are deeply interdependent economically.4 Despite China not following through on its threat, concern within US policymaking circles did not diminish. In 2022, President Joseph Biden signed into law several measures aimed at protecting US industries, including the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act.5 These bipartisan-supported bills encouraged US-based science and technology-related manufacturing, away from East Asia, in order to secure supply chains for critical technology items. But is this an overreaction, or are China’s threats really that serious?