Jiakun Jack Zhang
University of California, San Diego
This timely volume offers a useful principal-agent framework to think about economic statecraft as concerns grow over China’s willingness to use economic leverage for strategic ends in international disputes. The central insight is that because international economic activity is conducted by commercial actors, not by states, economic statecraft depends on the state’s ability to control these actors. Norris identifies market structure and state unity as the two primary factors behind effective state control, with relational factors such as the balance of relative resources, the nature of the reporting relationship, and intrinsic goal compatibility playing a mediating role in the business-government interaction. He illustrates the theory with case studies of overseas investments in raw materials by state-owned enterprises, cross-strait trade between China and Taiwan, and China’s sovereign wealth funds that offer within-case variation of state unity and goal compatibility. A weakness of the theory is the endogeneity between state control and market structure. The reader is left wondering why the government cannot overcome monitoring and enforcement challenges by creating more state-owned oligopolies with sound reporting relationships, especially if we are to believe the author about the centrality of economics to Beijing’s grand strategy. Seen through the lens of economic statecraft, China’s reform and opening looks like a counterproductive effort that weakens state control. The irony is that market liberalization both created China’s new-found economic clout and constrains its ability deploy it for strategic ends. The book could have profited from a discussion of this trade-off, that is the central dilemma facing Chinese policymakers today, between building potential power through the relaxation of state control and exercising this power through tightening it.