Beijing’s Economic Statecraft during the Cold War: 1949–1991 by Shu Guang Zhang (review)

Even though China’s economic statecraft is now often in the global spotlight, few scholars have addressed important historical questions about this statecraft. What are the origins of China’s foreign aid program? What lessons has China learned from facing economic sanctions? How have Chinese leaders dangled the lure of market access for diplomatic leverage? Has China’s economic statecraft actually succeeded— and if so, when and how? In this tour de force survey of China’s economic statecraft throughout the Cold War, Shu Guang Zhang provides compelling answers to these crucial questions.

One of Zhang’s most important contributions is to remind us of the impact of the U.S.-led embargo on China’s early Cold War strategy. Following the onset of the Korean War (1950–1953), the People’s Republic of China (PRC) faced a withering array of U.S. economic sanctions designed to isolate and cripple the PRC economy. As Zhang rightly asserts, China’s pragmatic approach to economic statecraft emerged in response to this challenge. Many of China’s techniques of offering aid in exchange for economic benefits—including access to valuable raw materials—also mirrored Soviet aid to China in the 1950s. Yet even as Beijing turned to Moscow for economic support, it sought to avoid becoming overly dependent, which proved to be a smart move.

Having been both a sanctions target and a vulnerable recipient of foreign aid made Chinese leaders sympathetic to their own aid recipients. As the Sino-Soviet split deepened in the late 1950s, Beijing began to expand its aid program to “nonaligned” countries. China countered Moscow’s greater quantity of aid with higher quality—pledging assistance without preconditions. Zhang suggests, however, that Beijing was often unsuccessful. North Korea, Mongolia, and even Albania played on the PRC’s fears of Moscow to extract considerable benefits while offering scant political loyalty in return. China’s substantial assistance to North Vietnam during the U.S. war also yielded limited success, insofar as the Soviet Union remained Vietnam’s most important ally. The Chinese relationship with Vietnam deteriorated rapidly after the U.S. withdrawal, culminating in China’s 1979 border war with Vietnam. Aid to Africa was more effective—most notably in lifting Beijing into the United Nations Security Council permanent seat in 1971 and laying the foundation for China’s close relationships across the continent today.

In response to the U.S.-led economic embargo, Chinese leaders developed an array of innovative strategies. They reached out to the ethnic Chinese diaspora, particularly in Southeast Asia, playing on loyalties and cultural affinities to attract valuable investment and technology. They retained trade channels through Hong Kong, drawing the British away from the U.S. embargo. Most significant, however, was Beijing’s engagement of Japan.

Although often forgotten today, Japan was an invaluable potential source of investment, technology, and markets for China. In an impressive display of realpolitik, Chinese leaders downplayed Japan’s wartime atrocities while reaching out to sympathetic Japanese business groups. Using the lure of China’s market potential and vast natural resources, Mao Zedong and Zhou Enlai successfully convinced Japan to weaken its compliance with the U.S. embargo. The 1960s-era trade ties formed the basis for a rapid expansion in Japanese aid and investment to China in the 1970s and 1980s—a crucial element in China’s economic resurgence.

Zhang’s final substantive chapter covers Beijing’s efforts to deploy the lure of its domestic market to influence U.S. policy toward China in the late 1980s and early 1990s, first to shape the normalization process in 1979 and then to pressure Washington to restore normal ties following the 1989 Tiananmen Square massacre. Drawing once again on its historical lessons, Beijing turned to overseas Chinese communities, particularly Hong Kong, in an effort to counter U.S.-led sanctions. The strategy worked, first weakening the Bush administration’s resolve to implement sanctions and then encouraging the Clinton...