The Art of Economic Warfare: China Gains the Upper Hand by Playing a Different Game

Since the end of the Cold War, the world has witnessed a blurring of lines that were once seen as separate and distinct. Today, civilians and enemy combatants are virtually indistinguishable. Everything that can be weaponized has been—from jet airliners to your personal computer. “National security” and “economics” are no longer separate policy arenas. They now overlap.

The Chinese were among the first states to recognize this trend and capitalize on it. Many other American trading partners did as well. Yet, American leaders—either through ignorance or through stubborn indifference—failed to see this happening.

For 20 years or more, “We, The People,” have paid the price for our leaders’ ignorance and indifference.

The concept of economic statecraft, as Benn Steil and Robert E. Litan outline in Financial Statecraft: The Role of Financial Markets in American Foreign Policy, “encompasses efforts by governments to influence other actors in the international system, relying primarily on resources that have ‘a reasonable semblance of a market price in terms of money.’” Economic statecraft has been a vital tool in the conduct of foreign policy for most states since the beginning of time. Indeed, until the end of the Cold War, it was a fundamental component of American grand strategy. Since the end of the Cold War, however, America’s ability to conduct economic statecraft has eroded. Even worse, as America separated its security and economic policies, states like China fused them together.

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