The vast Chinese market can be enticing, but businesses with it may require lowered heads and bent values. 

A survey by German think tank MERICS determines at least 123 cases of China’s economic coercion between February 2010 and March 2022. However, the group emphasizes that the actual figures could be higher.

Known instances of companies coerced by Beijing over political issues have mainly grown since 2018, with more red lines added to the list. A chart provided by MERICS shows that 2019 and 2021 saw a notable amount of new constraints. 

According to the survey, companies can run afoul of China’s market if they tamper with matters such as COVID origin, restrictions against Chinese entities like telecom equipment maker Huawei, or corporate donations to those considered anti-Chinese. 

More conventional taboos relate to human rights, national sovereignty, and China’s geopolitical issues. 

The researchers state, “For fear of being targeted, companies may avoid addressing unfair treatment of foreign firms in China. Or they may consider it safest to align themselves with the Chinese government’s positions and goals.”

Reuters reported that in 2018, German automaker Daimler had to apologize to China many times after using a Dalai Lama phrase in advertising.

China’s top choice for cornering foreign companies is a popular boycott, accounting for 56% of the identified cases. Although the boycotts tend to be linked with consumer sentiment, MERICS notices that they “spread over social media platforms that are carefully monitored by government officials and are in some cases spurred on by state media outlets.”

Beijing also has five other typical measures in its toolbox. One way is through administrative procedures and regulatory checks that would land a business with one-off fines or even closure and force them to adjust to new requirements. 

Another is sending out stern warnings of consequences. Although MERICS calls them empty threats, they can still play with a business’s mentality. The times that China issued a warning but skipped implementing a follow-up action accounts for 21% of the cases.

China may also heap pressure on companies via trade policies and restrictions and ban its residents from traveling to a targeted country. For example, Beijing’s recent import ban imposed on Taiwanese products when U.S. House Speaker Nancy Pelosi visited the island.

The top three most vulnerable sectors to China’s economic coercion are consumer goods, agriculture, and services. While easily replaceable businesses are frequently targeted, China does leave out those that offer key technologies, intermediary products, or significant investment to the country.

MERICS say, “China employs economic coercion to promote its national interests. It is willing to bear the cost of economic inefficiencies or trade diversion as part of this process but it will not undermine its core goals for economic development and industrial upgrading.”

Sign up to receive our latest news!

By submitting this form, I agree to the terms.