China is using its financial power to erode Taiwan’s international recognition, but its strategy might be backfiring as developing nations increasingly question the long-term costs of accepting Beijing’s economic incentives.
At a Glance
- Taiwan’s foreign minister accuses China of using financial incentives to persuade developing nations to withdraw diplomatic recognition of Taiwan
- China has employed various economic coercion tactics including trade barriers on Taiwanese exports like pineapples and fish products
- A bipartisan U.S. coalition has introduced the Taiwan Allies Fund Act authorizing $120 million to help Taiwan’s partners resist Chinese pressure
- Analysts suggest China’s economic coercion has a mixed record of success and often incurs long-term strategic costs
- Taiwan has resources to withstand potential Chinese economic blockades, including a robust agricultural sector
China’s Economic Coercion Strategy
China has leveraged its rapid economic growth to exert market power for geopolitical interests, directly challenging U.S. interests and undermining international economic norms. According to testimony from Matthew Reynolds based on a Center for Strategic and International Studies report, Beijing’s economic aggression follows recognizable patterns.
The coercion often remains informal, providing plausible deniability while targeting items with political and symbolic importance rather than those that would cause maximum economic damage. This approach allows China to apply pressure while minimizing potential backlash from trading partners and the international community.
“The case of China’s import restrictions on Philippine bananas is illustrative,” noted Matthew Reynolds in his testimony before Congress, highlighting how China selectively targets products to maximize political impact.
China’s economic pressure on Taiwan has intensified ahead of Taiwan’s January 2024 elections. Beijing launched a trade barrier investigation into Taiwan’s alleged restrictive trade measures while banning specific Taiwanese agricultural exports including pineapples, sugar apples, and grouper fish. These measures appear strategically targeted at regions where Taiwan’s Democratic Progressive Party has strong support, demonstrating how economic tools are being weaponized for political purposes.
Targeting Taiwan’s International Recognition
The Chinese Communist Party has conducted a sustained campaign to isolate Taiwan diplomatically, using economic incentives and threats to pressure countries into severing relations with the island democracy. This strategy has successfully reduced the number of nations that officially recognize Taiwan while increasing those that acknowledge Beijing’s “One China” policy. Taiwan’s foreign minister has specifically highlighted how China provides financial support to developing nations that agree to withdraw diplomatic recognition of Taiwan, effectively using economic aid as a tool for advancing geopolitical objectives.
“The Chinese Communist Party has spent decades trying to isolate the free people of Taiwan from the world stage and coerce other nations into severing relations with the thriving democracy. Our legislation will help Taiwan’s diplomatic allies resist CCP authoritarian pressure campaigns while meeting their development needs. The United States must stand with those who stand with Taiwan,” said Chairman Moolenaar.
China’s economic coercion extends beyond Taiwan to countries that strengthen unofficial ties with the island. When Lithuania allowed Taiwan to open a representative office in its capital, China responded with trade restrictions. Similar measures have been applied to other nations that deepen engagement with Taiwan, creating a chilling effect on international cooperation with the island. Despite these efforts, some analysts note that China’s economic coercion has a mixed record of achieving its objectives and often generates significant strategic costs.
US strategic ambiguity on Taiwan won’t work any longer
Washington must be clear with Beijing about the consequences of an assault on Taipei
By Michael Schiffer
For decades, the US has relied on a policy of strategic ambiguity to deter conflict across the Taiwan Strait.
By… pic.twitter.com/AMARSQBYUk
— Indo-Pacific News – Geo-Politics & Defense (@IndoPac_Info) March 27, 2025
U.S. Response and Taiwan’s Resilience
A bipartisan coalition in the U.S. House of Representatives has introduced the Taiwan Allies Fund Act to counter China’s economic coercion. The legislation authorizes $120 million over three years for the State Department and USAID to assist Taiwan’s partners facing pressure from Beijing. This initiative represents a concrete step toward helping nations resist Chinese economic influence and maintain their diplomatic relationships with Taiwan. The bill reflects growing concern in Washington about China’s use of economic leverage for geopolitical purposes.
“The CCP has engaged in a years-long campaign to diplomatically isolate Taiwan, one of our closest friends in the world,” said Ranking Member Krishnamoorthi. “Their attempts to intimidate and influence countries who diplomatically recognize Taiwan and economically coerce those who seek to strengthen unofficial relations must be condemned and rejected. It is time for the United States to stand with Taiwan in the face of diplomatic pressure from Beijing that seeks to undermine Taiwan’s rightful participation on the international stage.”
Taiwan has demonstrated significant resilience against China’s economic pressure tactics. The island nation has resources to withstand potential blockades, including a robust agricultural sector and native energy production capabilities. Furthermore, China’s economy relies heavily on Taiwan for advanced semiconductors, creating mutual vulnerability that complicates Beijing’s coercive strategy. Analysts suggest that an economic blockade would likely harm China’s economy significantly while potentially escalating into a broader conflict involving the United States and Japan.
