China’s economic statecraft potential – the Chinese economy and interaction globally and with Norway

The purpose of this report is to strengthen the understanding of China’s capabilities to use economic means against Norway, now and in the future. The size of the Chinese economy and its willingness to use economic statecraft make it paramount to understand China’s potential for economic statecraft against Norway. Security planning involves preparing for different scenarios, also those that are less likely to happen. This report contributes to expand the knowledge of China’s economic statecraft capabilities needed for such planning. In this report, we conduct four analyses. The first analysis concerns the impressive rate at which China’s economy has grown for the past ten years, and what characterizes and explains this growth. By reviewing the economic literature on economic growth, we infer three perspectives on the Chinese growth miracle: standard economic growth theory, a theory of the transition from a low-income to a middle-income country, and economic complexity. The analysis contributes to a deep understanding of the Chinese economy. The second analysis concerns the resources available in the Chinese economy as well as the structure of the economy. We collect, present, and analyze information about the resources and the structure. The analysis provides insights into China’s economic statecraft capabilities. The third analysis concerns China’s economic interaction with the world, and with Norway more specifically. We collect, present and analyze information about China’s economic interaction globally, over time and today. In particular, we focus on investments and trade. However, we also include loans and financial aid. The analysis provides insights into China’s capabilities to use traditional economic statecraft both globally and towards Norway. We assess China’s potential to use economic instruments, such as trade and investments, to exert pressure on Norway to be fairly low, because of the relatively low degree of Sino-Norwegian economic interaction. Other advanced economies are far more dependent on the Chinese economy. If the Chinese economy continues to develop toward the technological frontier, however, China can pose new challenges for Norway. We may see the increased use of Chinese hardware and software in the Norwegian economy, and possibly also in critical infrastructure. This could integrate Norway in networks dominated by Chinese actors, and hence increase the vulnerability for pressure exerted through economic statecraft. The fourth and final analysis concerns the future of the Chinese economy, and the implications for Norwegian security in the future. We find both optimism and pessimism regarding Chinas economic outlook. We use growth predictions for the next ten years to illustrate a possible scenario for the largest economies in the world. Continued high growth rates in the economy will make China almost as large as the United States. Our conclusions regarding Norwegian vulnerability to economic pressure through manipulation of the bilateral instruments investment and trade may change in such a future scenario of the Chinese economy.