The evidence is now substantial. According to the Atlantic Council report on how Beijing uses inducements as a tool of economic statecraft, China’s economic statecraft has evolved from simple market leverage into a sophisticated apparatus designed to pressure democratic institutions, silence critics, and cultivate influential elites across the developed world. This assessment echoes the findings of the Australia Strategic Policy Institute (ASPI) report The Chinese Communist Party’s coercive diplomacy, which draws on documented cases to demonstrate their systemic significance.
What distinguishes Beijing’s approach from conventional great-power competition is its systematic targeting of democratic vulnerabilities. As scholars Matt Ferchen and Mikael Mattlin observe, China’s economic influence operates through multiple modes – not merely through trade sanctions or investment promises, but through carefully cultivated relationships that can transform foreign elites into advocates for Chinese interests. The Australian Strategic Policy Institute (ASPI) has documented 152 cases of coercive diplomacy between 2010 and 2020, with a marked escalation after 2018. Western democracies, it should be acknowledged, have historically employed their own forms of economic pressure and elite cultivation, though Beijing’s current approach operates with particular opacity and scale.
Beijing’s more subtle tool is inducement – the strategic deployment of economic incentives to cultivate decision-makers before any coercion becomes necessary. As Atlantic Council analyst William Piekos demonstrates, China has “tailored its measures to align with the specific needs of recipient countries and their leaders or political parties.” The Mercator Institute for China Studies (MERICS) tracked over 123 coercive cases between 2010 and 2022. As the European Parliamentary Research Service observed, China’s measures are “opaque and informal, and often either lack legislative justification or are based on deliberate misinterpretation of legislation.” This deniability complicates diplomatic responses and legal remedies.
The Canadian Laboratory
Canada illustrates how Beijing can exploit open societies. The case of Michael Chan, a former Ontario cabinet minister, is instructive. Justice Marie-Josée Hogue’s 2024 public inquiry found that Chan had “close relationships with PRC officials” and had been the subject of CSIS warnings dating back years. Despite intelligence assessments indicating susceptibility to foreign influence, Chan continued serving in provincial government. Chan denied wrongdoing, and no criminal charges resulted – a reminder that intelligence assessments and legal guilt are distinct categories. Nevertheless, the disconnect between intelligence warnings and political inaction represents a systemic vulnerability.
A second example involves undeclared Chinese “police service stations” operating in Toronto and Vancouver. In 2023, the RCMP confirmed investigations into these facilities, which ostensibly provided administrative services but allegedly conducted operations pressuring dissidents and their families. The Hogue Commission documented how these networks operated with the involvement of local community figures who benefited from Beijing’s patronage. These cases represent efforts to establish what Chinese strategic documents describe as a “united front” – networks of influence operating below formal diplomatic thresholds.
The Australian Crucible
Australia’s experience predates Canada’s public reckoning. Senator Sam Dastyari resigned in 2017 after revelations that he accepted payments from Chinese-linked donors and subsequently warned businessman Huang Xiangmo that his phone was likely monitored by intelligence agencies. Dastyari also contradicted his party’s South China Sea policy during a press conference alongside Huang. Huang himself, who donated millions to both major parties, had his permanent residency cancelled in 2019 on character grounds related to connections with the Chinese Communist Party’s United Front Work Department.
These cases prompted Australia’s foreign interference laws of 2018, legislation that Prime Minister Malcolm Turnbull explicitly linked to concerns about Chinese influence. As ASPI noted, “coercive diplomacy isn’t well understood, and countries and companies have struggled to develop an effective toolkit to push back against and resist it.” The Australian response demonstrated that democracies can act decisively when evidence becomes undeniable.
Understanding Beijing’s Logic
Chinese scholars provide insight into this strategy. Jian Jisong of Zhongnan University of Economics and Law has written that “China should liberate its thinking, and fully utilise the important tool of unilateral sanctions.”[1] The China Institute for Contemporary International Relations (CICIR) has argued for prudent use of “economic sanctions against those countries that threaten our country’s national interests.” From Beijing’s perspective, these tools represent legitimate responses to perceived Western containment – a framing democracies need not accept but should understand.
The asymmetry remains the core problem. Democratic societies valuing free speech, open markets and political pluralism create conditions that closed systems can exploit without reciprocal vulnerability. Former Japanese ambassador to Australia Shingo Yamagami warned of “China magic” – democracies becoming “absorbed by this magical power and obsessed with making efforts not to displease their Chinese counterparts.”
The Alliance Imperative in an Era of American Uncertainty
Countering Beijing’s influence operations requires collective action, and collective action requires the United States. The Five Eyes alliance provides foundational architecture for intelligence sharing. Partnerships with Japan, South Korea and Taiwan offer complementary capabilities and shared interests. These relationships are essential to any serious response.
Yet the current moment presents democracies with an uncomfortable paradox. The United States under President Trump has pursued policies that strain the very alliances required to confront Beijing effectively – tariffs on allies, skepticism toward multilateral institutions and transactional approaches to security commitments. For Canada, which shares the world’s longest undefended border with the United States, this uncertainty carries existential weight.
The fundamental question is whether current trends represent temporary deviation or permanent reorientation. Will the United States return to multilateralism and consultative diplomacy, or will unilateralism deepen? Honest analysts acknowledge uncertainty – and this uncertainty itself becomes exploitable.
This ambiguity cannot justify paralysis. Canada and allied democracies must engage American institutions – Congress, the State Department and intelligence agencies – that remain committed to alliances even amid executive branch contradictions. Allies must voice concerns publicly when American policies undermine collective security, demonstrating strategic autonomy rather than reflexive deference. They must also frame advocacy in terms of American interests, showing that consultation serves Washington’s goals.
Japan offers a useful model. Tokyo has navigated uncertainty by deepening bilateral defense cooperation while investing in regional partnerships through the Quad, accepting increased burdens while insisting on consultation. This represents sophisticated alliance management under adverse conditions – not capitulation, but strategic adaptation.
Recommendations for Democratic Resilience
First, democracies should establish mandatory foreign influence registries with enforcement capacity. Australia’s Foreign Influence Transparency Scheme represents a starting point. These registries must capture cultivation relationships – donations, board memberships and hospitality – that precede policy influence. The trade-off involves administrative burden and potential chilling effects on legitimate diaspora engagement; calibration matters.
Second, intelligence sharing on foreign interference should be made actionable at political levels. Canada’s experience shows intelligence warnings remaining classified while subjects continued in government. The Five Eyes should establish dedicated channels for sharing assessments with cleared leaders. This involves genuine trade-offs between source protection and institutional defense that each democracy must navigate according to its legal traditions.
Third, democracies should develop coordinated economic resilience mechanisms extending beyond Five Eyes to Indo-Pacific partners. China’s coercion succeeds when countries face Beijing alone. Collective economic security arrangements would alter Beijing’s calculus, though implementation requires overcoming coordination challenges and divergent national interests. Japan, South Korea and Taiwan possess technological capabilities that make them indispensable partners, despite their complex relationships with both Beijing and Washington.
Fourth, middle powers such as Canada must invest in capacity to influence American policy. This means cultivating relationships with legislators, think tanks and business communities that can advocate for allied interests within American debates. Strategic autonomy complements rather than contradicts alliance commitment – interests are best served through functioning partnerships, even partnerships under strain.
Beijing has demonstrated both capability and intent in targeting democratic institutions. The path forward requires working with an America whose alliance commitment is uncertain, building coalitions with Indo-Pacific partners whose calculations differ, and defending open societies without abandoning the values that distinguish them from authoritarian alternatives. Democracies have navigated such challenges before. Whether they will do so again depends on choices yet to be made – choices requiring clear sight, honest assessment of trade-offs and collective will.
End notes
[1] Jian Jisong, ‘关于单边经济制裁的’司法性’与’合法性’探讨’ [Investigation into the ‘judicial’ and ‘legal’ aspects of unilateral economic sanctions], 法学 [Legal Studies], 2007, 1:87. See also Reilly, ‘China’s unilateral sanctions’.
