Title page
Contents
EXECUTIVE SUMMARY 5
INTRODUCTION 7
CHINESE ECONOMIC STATECRAFT IN A TAIWAN CRISIS: TOOLS AND APPLICATIONS 10
Access to Chinese Markets 12
China in the Global Economy 25
CHINA'S CAPACITY TO CIRCUMVENT FINANCIAL SANCTIONS AND G7 ECONOMIC STATECRAFT 36
Using International Renminbi Networks to Circumvent Sanctions 37
Current Scope of Renminbi Internationalization 38
Policy Constraints on Expansion of Renminbi Financial Networks 48
Responding to G7 Economic Statecraft in a Crisis 49
ASSESSING CHINA'S CAPACITY TO RESPOND TO G7 STATECRAFT 53
The Impact on Trade and FDI 53
Financial Statecraft and Consequences 54
Preventing Escalation in Economic Warfare 54
APPENDIX 1. CHINA'S FORMAL ECONOMIC STATECRAFT TOOLKIT 56
AUTHORS 57
ACKNOWLEDGMENTS 58
Table 1. Potential Applications of Chinese Economic Statecraft in a Taiwan Crisis 11
Table 2. Description of Moderate- and High-Escalation Scenarios 12
Table 3. Import-Related Statecraft Instruments 13
Table 4. US Exports to China Exposed to Retaliatory Measures in a Moderate-Escalation Scenario 16
Table 5. Rankings of the Top 10 US Export Products to China in the G7 and Europe, 2023 17
Table 6. China's Statecraft Tools Toward MNC Operations in China 21
Table 7. Portfolio Investment-Related Statecraft Instruments 24
Table 8. Export-Related Statecraft Instruments 26
Table 9. Major Dependencies on Chinese Intermediate Goods 28
Table 10. G7 Imported Goods with High Trade Dependence on China 29
Table 11. Outbound Investment-Related Statecraft Instruments 30
Table 12. Portfolio Investment and Other Capital Flow-Related Statecraft Instruments 32
Table 13. Central Bank Assets Held in Chinese Yuan 41
Figure 1. G7 Exports to Russia, 2015-22 18
Figure 2. G7 Goods Exports to China at Risk of G7 Sanctions and China Import Bans, 2012-22 19
Figure 3. China's Exports of Graphite, Gallium, and Germanium, 2023 27
Figure 4. Overseas Holdings of Renminbi-Denominated Assets, 2013-23 39
Figure 5. Proportion of Reported Foreign Exchange Reserves by Currency, 2000-Q3 2023 40
Figure 6. Proportion of China's Monthly Trade Denominated in Renminbi, Mar 2013-Feb 2024, (three-month moving average, RHS) 42
Table A1. Recent Legislation Expanding or Formalizing China's Economic Statecraft Tools 56