China escalates 'coercive diplomacy' over past decade, new report reveals

The new report examines China's "coercive diplomacy". Photo / File

Companies are being warned to factor in the "heightened risk" of doing business with China, as a new report finds New Zealand and Australia are among targets of China's international agenda.

A new Australia Strategic Policy Institute report released on Monday shines a light on the Chinese Communist Party's "coercive diplomacy" over the past decade and comes as the Asian superpower launches its second investigation into Australian wine in the past fortnight.

Experts say there has been a "sharp escalation" of tactics that either threaten action, or use a limited amount, since 2018.

These include economic measures such as trade sanctions, investment restrictions, tourism bans and popular boycotts.

Non-economic measures include arbitrary detention, restrictions on official travel and state-issued threats.

"These efforts seek to punish undesired behaviour and focus on issues including securing territorial claims, deploying Huawei's 5G technology, suppressing minorities in Xinjiang, blocking the reception of the Dalai Lama and obscuring the handling of the Covid-19 pandemic," the report states.

Europe, North America, Australia, New Zealand and East Asia have been on the receiving end of the most instances of coercive diplomacy.

The report authors call on Five Eyes governments and businesses to join forces in the fight against the persuasion, saying this will make them "much more likely to succeed in pushing back".

It also recommends the government develop protocols with the business community on how to best respond to economic coercive methods used by the CCP.

"In cases of co-ordinated action against companies, the dispute should be elevated to a state-level discussion to prevent individual companies from being picked off and being forced to capitulate," the report states.

"As the CCP uses economic coercion more often, and more overtly, foreign companies with business operations in China need to factor in the increasing risk to trade flows, supply chains and market share.

"That risk is significant enough to warrant board-level attention and will no doubt be a standing topic in audit committees because of its bottom-line impact.

"This requires board-level involvement to protect shareholder value and is also likely to require companies to work more closely with their home-government policymakers."

The report also calls on the government to use forums such as the G7, G10 and European Union to build a coalition of countries affected by the same coercive methods.

"Those coalitions could be used to publicly call out examples of coercion in the same way that's currently used to attribute cyber attacks, and follow that up with countermeasures."

Meanwhile, China's Commerce Ministry has opened its second inquiry into Australian wine that will investigate any subsidies.

It comes after an anti-dumping investigation was launched into Australian bottles under 2 litres imported into China.

Australian Grape & Wine on Monday said it would collaborate with winemakers and the Federal Government to ensure "we co-operate fully throughout the investigation process".

"China is an important market for Australian wine and our wine is in demand from Chinese consumers," it said in a statement.

- Additional reporting, NZ Herald