The Two Tiers of Chinese Economic Coercion
Why China's Lightest Sanctions Are Reserved for Its Biggest Rivals
China’s sanctioning practices have been an area of scholarly interest for some time but have taken on greater salience since a series of important policy changes. Following the pivotal creation of the Provisions on the Unreliable Entity List in 2020, the Ministry of Commerce of the People’s Republic of China introduced the Rules on Counteracting Unjustified Extra-Territorial Application of Foreign Legislation.1 Also in 2021, China enacted the Anti-Foreign Sanctions Law.2 These policies increased China’s capacity for formal economic coercion.3 Meanwhile, the country’s notorious usage of informal sanctions — sanctions not publicly acknowledged or legally recognized — has drawn the ire of foreign governments and businesses for decades. For example, after the 2021 opening of a Taiwanese (as opposed to Taipei) labeled representative office in Vilnius, Lithuania, a Chinese state-owned rail company indefinitely delayed Lithuanian goods without making any formal announcement explaining the decision.4
In Jiaying Xing’s 2025 paper on the subject, she investigates the conditions under which China opts for formal versus informal sanctions. Xing compares 67 cases where China utilized sanctions from January 2019 to December 2024. Her effort to understand the PRC’s decision-making process centers on four variables, two domestic and two external. The domestic factors are the political significance of the issue and the political cycle, defined by proximity to major events in the political calendar, such as elections. The external factors are China’s economic dependency on the target state and the perceived political backlash of sanctions.
Xing’s comparative analysis identifies issue significance as the necessary condition for determining China’s use of formal sanctions. Formal sanctions consistently appear when disputes involve politically sensitive and non-negotiable core interests, and they do not occur in cases where such issue significance is absent. All formal sanctions in the dataset are linked to challenges involving foreign interference in China’s internal affairs or threats to its sovereignty and territorial integrity, particularly with respect to Hong Kong, Xinjiang, and Taiwan.
At the same time, issue significance alone does not automatically result in formal sanctions. Economic dependency and geopolitical backlash emerge as critical influencing factors. Contrary to expectations that higher economic or strategic risks would discourage formal sanctions, the findings show that China is more likely to impose formal sanctions against large countries with which they are highly economically integrated. The most prevalent pathway to formal sanctions combines issue significance with high economic dependency and high geopolitical backlash. This counterintuitive finding is clarified by Xing’s examination of sanction intensity. Formal sanctions are typically very targeted but limited in severity, allowing China to signal strong resolve without incurring exuberant costs. Conversely, Beijing often employs informal sanctions against weaker countries, on which it can afford to impose higher costs.
Existing scholarship explains China’s sanctions behavior primarily through a rationalist cost–benefit framework, emphasizing tools such as informal consumer boycotts, plausible deniability, avoidance of legal and WTO challenges, and strategic signaling of resolve.5 Building on this work, Xing’s study shows how multiple interacting domestic and international conditions shape China’s choice between formal and informal sanctions.
Xing’s results show that China’s sanctions behavior reflects the formulation of a two-tiered sanctions strategy rather than a shift away from informal coercion. Formal sanctions are consistently associated with disputes involving China’s core interests, but their use is further shaped by China’s relationship with the target. Informal sanctions, by contrast, remain central when Beijing seeks to impose more substantial economic costs, particularly against smaller or less powerful actors. Overall, China’s two-tiered sanctions policy reflects a deliberate balancing strategy that integrates risk management and political necessity. This framework provides a clearer understanding of China’s evolving use of economic statecraft on the global stage.
“MOFCOM Order No. 4 of 2020 on Provisions on the Unreliable Entity List.” Mofcom.gov.cn, 2020, english.mofcom.gov.cn/Policies/GeneralPolicies/art/2020/art_1889a24134054b5b841134c3fba44654.html ; “MOFCOM Order No. 1 of 2021 on Rules on Counteracting Unjustified Extra-Territorial Application of Foreign Legislation and Other Measures.” Mofcom.gov.cn, 2021, english.mofcom.gov.cn/Policies/AnnouncementsOrders/art/2021/art_f47febb76da64411b8de1845aeba4af4.html.
“China Passes the Anti-Foreign Sanctions Law, Adding More Legal Tools to Countermeasure Foreign Sanctions and Interference.” Www.hoganlovells.com, 2025, www.hoganlovells.com/en/publications/china-passes-the-anti-foreign-sanctions-law-adding-more-legal-tools-to-countermeasure-foreign-sanctions-and-interference_1.
“China Barley Antidumping and Counterveilling Tariffs | Grain Industry Association of Western Australia.” Grain Industry Association of Western Australia, 2015, www.giwa.org.au/china-barley-antidumping-and-counterveilling-tariffs/.
“Chinese Government Disrupts Trade with Lithuania over Its Closer Ties with Taiwan.” Alliance for Securing Democracy, 2024, securingdemocracy.gmfus.org/incident/chinese-government-disrupts-trade-with-lithuania-over-its-closer-ties-with-taiwan/
Wong, Audrye, et al. “Mobilizing Patriotic Consumers: China’s New Strategy of Economic Coercion.” Journal of Strategic Studies, vol. 46, no. 6-7, 8 May 2023, pp. 1–38, https://doi.org/10.1080/01402390.2023.2205262. ;Ferguson, Victor A., et al. “Market Adjustments to Import Sanctions: Lessons from Chinese Restrictions on Australian Trade, 2020–21.” Review of International Political Economy, vol. 30, no. 4, 7 July 2022, pp. 1–27, https://doi.org/10.1080/09692290.2022.2090019.
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