During the Cold War, economic statecraft was largely considered in terms of the ways in which states could reduce the economic or military competitiveness of other states by restricting trade, investment, and especially the transfer of advanced technology. Today, this topic is more vital than ever because of the rising importance of economic entities controlled by governments such as Russia and China that want to use those actors to advance their geopolitical and geo-economic ambitions. William Norris’ new book is one of the first to focus on Chinese state-directed economic activities and their political effectiveness. Even more important is his attempt to theorize the degree of state control over commercial enterprises and government entities—which he collectively calls “commercial actors” —that it wants to use as instruments of statecraft to achieve political objectives.

Norris’ research question is “not whether China’s economic power is used strategically, but rather under what circumstances it can be used effectively” (emphasis in the original, p. 6). Seven cases are examined to illustrate the success or failure of economic statecraft in three areas: acquiring overseas resource companies through state-owned enterprises, influencing the political preferences of Taiwanese businesses and farmers through both positive and negative economic incentives, and making overseas direct investments through Chinese sovereign wealth funds. These case studies are the most valuable part of the book and provide important insights into Beijing’s goals, the design of its strategies, and the implementation of its statecraft. The research conducted is both deep and broad and some of the empirics are not easily found elsewhere. Furthermore, the survey of literature by both Chinese and Western scholars on economic statecraft, China’s state-owned enterprises and sovereign wealth funds, and cross-Strait relations is comprehensive and thorough.

Norris sets a very ambitious research objective by not only selecting and examining seven extremely different cases, but also trying to build a new analytical framework based on principal-agent theory. Norris explains how states can be effective in their control of their agents by looking at five independent variables—the unity of the state, the concentration of the actor’s market, the compatibility of goals, the reporting relationship, and the balance of resources between the state and the commercial actor. All of these variables are “coded” in a binary fashion; therefore, the state is either “divided” or “unified,” and the reporting relationship is either “direct” or “indirect” (p. 239). He concedes that this is in order to make theorizing possible; in fact, the book’s stated objective is to identify the variables to be examined, “rather than . . . to signal how much of a given factor was driving the outcomes” (p. 235). Accordingly, all variables are weighed equally and the outcome is also categorized as either a success or failure. Thus, reality is reduced to a simple schematic that does not show the differences among the cases. For example, Beijing’s percentage of ownership of the actors varies greatly, but that is underexplored. Beijing’s control of the China National Petroleum Corporation and the China Development Bank is substantive and direct and certainly produces a principal-agent relationship. But to characterize as agents Taiwanese farmers—over whom Beijing has absolutely no control—distorts the reality.

Perhaps more problematic is how the facts are selected to fit the research. The most extensive research was conducted on the Taiwanese cases, but the conclusions there were the least substantiated. Norris tries to establish a causal relationship between lowering tariffs on Taiwanese fruits in 2005 and the erosion of support for the Democratic Progressive Party, a proxy for support for independence. He mentions in passing that voters were unhappy with President Chen Shui-bian (p. 153) but does not acknowledge that Chen’s implication in a major corruption scandal at that time was a key driver in the Kuomintang’s electoral success from 2005 to 2008. Also omitted was Beijing’s adoption of an Anti-Secession Law in 2005 that continued the coercive policies imposed on Taiwanese businesses in the earlier episode that Norris had described as a failure. The argument is further undermined by the lack of any evidence that the fruit farmers who benefitted from these incentives voted for the Kuomintang and became less inclined to support independence. In fact, several studies have suggested the opposite of what Norris concludes by observing that the fruit incentives were ineffective in achieving Beijing's political goals (e.g., Chi-hung Wei, “China’s Economic Offensive and Taiwan’s Defensive Measures: Cross-Strait Fruit Trade, 2005–2008,” China Quarterly 215: 641-62 [2013]; Syaru Shirley Lin, Taiwan’s China Dilemma: Contested Identities and Multiple Interests in Taiwan’s Cross-Strait Economic Policy: 126–161 [2016]).

The suggestion that these trade concessions had impressive long-term consequences and contributed to “even deeper cross-Strait economic integration in the years to come” (pp. 161–162) is contradicted by subsequent events. In March 2014, a large-scale student movement stopped the ratification of a service trade pact with China, and in January 2016, the Democratic Progressive Party achieved a landslide victory in both presidential and parliamentary elections.

In the sovereign wealth fund case studies, again the narrow focus on the degree of state control overlooks the context within which each of these funds operated. Volatility in the international financial market, strong ties between officials in Beijing and the leaders of these commercial entities, and how Beijing defines the missions of each of these funds are not fully considered. By design, some of these institutions (like the National Social Security Fund) may have more commercial objectives, whereas the State Administration of Foreign Exchange, like similar institutions in other countries, is more politically oriented. The China Investment Corporation may be somewhere in between these poles, but the author acknowledges that it “remains an arm of the state” and open to “direct political control” (p. 220). Rigorous analysis of the intent of the state and assessment of the outcome is therefore more important than the state-actor relationship in each transaction, especially under Xi Jinping, who signals his intent to exert more control over both domestic and foreign commercial actors.

Finally, the book draws policy implications for China and the world. Norris suggests that “China must reform to reassure” (p. 224), arguing that Beijing should allow its commercial actors to be completely independent of political goals in order to reassure the international community. Otherwise, Beijing’s use of those actors will be met with international backlash. After an excellent description of how the state can compel its agents to do its bidding, is Norris implying that such economic statecraft is unsustainable?

Although there are some shortcomings, this book presents important data in a new field and sheds light on China’s exercise of economic power and Chinese state capitalism. Further research would be enhanced by interviews with relevant commercial actors, such as executives of sovereign wealth funds or Taiwanese farmers, to see if they corroborate the observations made. Furthermore, the selection of more cases with similar state-actor relationships but different political outcomes would make the generalizations more robust. For example, examining the effectiveness of Beijing’s use of economic incentives or coercion to change foreign actors’ behavior would be an excellent next book. So would studying Beijing’s ability to control the activities of publicly listed state-owned enterprises. This book thus raises many additional questions that are timely and urgent. In short, this is indispensable reading for students of international political economy and Chinese economic statecraft.