To Punish or Protect? Local Leaders and Economic Coercion in China

Abstract During foreign policy disputes involving China and some of its most important economic partners, why do local leaders punish or protect foreign commercial actors? Understanding this variation is important because how local leaders treat foreign businesses can influence the overall effectiveness of the Chinese government's use of economic coercion against foreign states. Two variables help determine whether local leaders participate in economic retaliation: (1) whether they regard commercial ties to the targeted state as essential to achieving the economic growth necessary for career advancement; and (2) whether they are politically vulnerable, either because they lack powerful patrons or because their locality recently experienced social unrest. Economic importance creates incentives to protect foreign commercial interests, and political vulnerability provides incentives for local leaders to demonstrate their patriotic credentials through economic retaliation. Drawing on interviews with Chinese, Korean, and Japanese sources, an examination of local leader behavior in Chinese cities illuminates why they responded differently during foreign policy disputes with Japan in 2012 and South Korea in 2017.