The London School of Economics and Political Science The ‘Dragonomic Diplomacy’ (De)code A Study on the Causal Relationship between Chinese Economic Diplomacy Preference Formation and the Influence of Multilateral Economic Regimes Shuxiu Zhang A thesis submitted to the Department of International Relations of the London School of Economics for the degree of Doctor of Philosophy, London, June 2013 1 Declaration I certify that the thesis I have presented for examination for the MPhil/PhD degree of the London School of Economics and Political Science is solely my own work other than where I have clearly indicated that it is the work of others (in which case the extent of any work carried out jointly by me and any other person is clearly identified in it). The copyright of this thesis rests with the author. Quotation from it is permitted, provided that full acknowledgement is made. This thesis may not be reproduced without my prior written consent. I warrant that this authorisation does not, to the best of my belief, infringe the rights of any third party. I declare that my thesis consists of 104,276 words. 2 Abstract Since the reformation of the Chinese economy, two notable trends have developed. First, the growing prominence of multilateral economic regimes (MERs) on the political agenda of Beijing has propelled deepened engagements between Chinese policy actors and institutions, and the agencies of MERs. This development is accompanied by a second trend, which is a growing dynamism in China’s economic diplomacy within the multilateral arenas. This dynamism is reflected in the evolving national preferences and approaches for multilateral economic negotiations, from outright resistance to gradual flexibility, and in some cases, acceptance. The simultaneous and parallel developments of these two trends stem a curiosity on whether a causal relationship exist between the deepened China-MER engagements and the dynamism of China’s economic diplomacy. Has Beijing’s open-door policy to global economic integration opened new windows of opportunity for the MER agencies to influence China’s economic diplomacy and its preference formation? In what way(s) and/or in which capacities can the agencies of MERs assert influence on China’s economic diplomacy preference formation? Under what conditions is this form of external influence successful? What are the long-run implications of the deepened China-MER engagements on Beijing’s economic diplomacy preference formation structure? What does the China-MER relationship tell us about China’s economic diplomacy preference formation in the 21st century? Although China’s partake in the international political economy has received much scholarly attention, few studies have attempted to decode China’s economic diplomacy preference formation, and even fewer have investigated the important nexus between the China-MER relationship and the behaviours of Chinese economic diplomacy. This thesis is a response to the knowledge deficit in these regards. By examining China’s participation in the multilateral climate change, and trade 3 negotiations, the thesis addresses the primary research question, how do multilateral economic regimes and their agencies influence China’s economic diplomacy preference formation? The study finds that the MER agencies do affect Chinese economic diplomacy preference formation. However, their influence peaks at an absorption level whereby Chinese preferences adapt to external preferences but not to the extent of reforming traditional principles and beliefs. The comparatively more effective ways of asserting influence for the MER agencies is through a costs-and-benefits calculus, information dissemination, shuttle diplomacy proximity talks, and informal negotiation practices. In general, Chinese policy actors do not refute the influence of the MER agencies; rather they absorb and adapt to it. In addition, the MER agencies assert influence at different stages of the preference formation, and over time, implicitly establish themselves as integrated policy actors in Beijing. On the whole, this thesis contributes to a deeper understanding about how, why, and when international linkages matter in China’s economic diplomacy, and to the extent of driving preference transformation. The study provides useful analytic lenses that flesh out the variety of functions the MER agencies have in shaping and informing China’s national preferences and negotiation approaches. At the same time, it offers a fuller description of how the Chinese policy actors and institutions respond to (implicit) external interventions in its policy processes. Consequently, this thesis is a significant contribution that adds value to the scholarly debates and knowledge-building about one of the most important political and economic phenomenon of our time. 4 Table of Contents Declaration…………………………………………………………………………2 Abstract……………………………………………………………………………..3 Table of Contents…………………………………………………………………...5 List of Tables ……………………………………………………………………...10 List of Figures……………………………………………………………………...10 List of Abbreviations……………………………………………………………….11 Dedication…………………………………………………………………………16 Acknowledgements…………………………………………………………………17 PART ONE: Connecting the Dots and Identifying the Nucleus of Study……….19 Chapter One: The Coded ‘Dragonomic Diplomacy’…………………………....20 1.1 Introduction………………………………………………………………..20 1.2 A Chinese Economic Diplomacy and Multilateral Economic Regimes.......25 1.3 The Research Design……………………………………………………....40 1.3.1 Why multilateral economic regimes?......................................42 1.3.2 Why Chinese economic diplomacy?.......................................45 1.3.3 Case selection and analysis ………………………………....49 1.4 Structure of Thesis………………………………………………………....51 Chapter Two: Laying the Theoretical Brickworks…………………………….54 2.1 Introduction………………………………………………………………..54 2.2 The Limits of Orthodox Traditions………………………………………...55 2.3 A Framework for Preference Formation…………………………………...59 5 2.3.1 Rationalism and the costs-and-benefits calculus…………..60 2.3.2 Cognitivism and information dissemination………………61 2.3.3 Contractualism and reputation reinforcement……………..63 2.3.4 Similarities and differences………………………………..65 2.3.5 The situational factors……………………………………..70 2.4 A Framework for Negotiation Approach…………………………………..72 2.4.1 Shuttle diplomacy proximity talks………………………....74 2.4.2 Informal negotiation practices……………………………..76 2.4.3 Side-payment bargaining…………………………………..79 2.4.4 The social instigators………………………………………80 2.5 Primary and Secondary Hypotheses…………………………………….....84 2.6 Concluding Remarks………………………………………………………86 Chapter Three: A Painting of the Dynamic Decision-Making Process……….87 3.1 Introduction………………………………………………………………..87 3.2 The Chinese Political Structure……………………………………………89 3.2.1 Bureaucratic actors………………………………………...92 3.2.1.1 Climate change policy actors………………………94 3.2.1.2 International trade policy actors……………...........97 3.3 The Evolution of China’s Economic diplomacy Decision-Making……...101 3.3.1 The exclusion period: 1949-1971………………………...102 3.3.2 The transition period: 1972-2002………………………...103 3.3.3 The proactive period: 2003-Present………………………113 3.4 Changes and Implications………………………………………………...119 3.5 Conclusion………………………………………………………………..122 6 PART TWO: Accounting for Influence and Its Variances…………………......125 Chapter Four: A Decryption of the China-UNFCCC Relationship...……….126 4.1 Introduction………………………………………………………………126 4.2 The Case Studies…………………………………………………………128 4.2.1 The clean development mechanism………………………129 4.2.2 Mitigation………………………………………………...135 4.3 UNFCCC and the Mechanisms of Influence…………………………......142 4.3.1 Costs-and-benefits calculus……………………………....142 4.3.2 Information dissemination……………………………......145 4.3.3 Reputation reinforcement………………………………...153 4.4 Concluding Remarks…………………………………………………......157 Chapter Five: A Decryption of the China-WTO Relationship……………….160 5.1 Introduction……………………………………………………………....160 5.2 The Case Studies………………………………………………………....162 5.2.1 The government procurement agreement………………...162 5.2.2 Trade in services………………………………………….168 5.3 WTO and the Mechanisms of Influence………………………………….176 5.3.1 Costs-and-benefits calculus………………………………176 5.3.2 Information dissemination………………………………..182 5.3.3 Reputation reinforcement………………………………...191 5.4 Concluding Remarks……………………………………………………..195 Chapter Six: A Comparative Analysis of the Shadow Relationship…………198 6.1 Introduction………………………………………………………………198 6.2 Costs-and-Benefits Calculus……………………………………………...199 7 6.3 Information Dissemination……………………………………………….204 6.4 Reputation Reinforcement…………………………………………..........211 6.5 Measuring Influence……………………………………………………...217 6.6 Accounting for the Variance of Influence…………………………..........221 6.7 Consequences of Influence on Decision-Making Structure……………...227 6.7.1 Stable factors…………………………………………......233 6.8 Conclusion……………………………………………………………......235 PART THREE: Approaches, Processes, and Some Last Thoughts..…………..237 Chapter Seven: Turning Tables to the Negotiation Approaches…………….238 7.1 Introduction…………………………………………………………........238 7.2 Shuttle Diplomacy Proximity Talks………………………………….......241 7.3 Informal Negotiation Practices…………………………………………...251 7.4 Side-Payment Bargaining………………………………………………...259 7.5 The Social Instigators…………………………………………………….268 7.5.1 Expectation……………………………………………….270 7.5.2 Trust…………………………………………………........274 7.5.3 Personal reputation……………………………………….281 7.5.4 A reinforcing relationship………………………………...283 7.6 Concluding Remarks……………………………………………………..287