Informal economic sanctions: the political economy of Chinese coercion during the THAAD dispute

Contemporary economic coercion increasingly features the use of ‘informal’ sanctions—government-directed disruption of international commerce that is not enshrined in official laws or publicly acknowledged as coercive, yet which seeks to impose costs on key firms or industries in a target country in order to achieve strategic objectives. We investigate how ‘informality’ mediates the link between economic interdependence and coercive power, leveraging the most significant contemporary case of informal sanctions: China’s apparent retaliation against South Korea’s deployment of the terminal high-altitude area defense (THAAD) missile system between 2016 and 2017. We offer three contributions. First, we introduce a new qualitative dataset that carefully documents extensive evidence of the South Korean actors and industries that experienced disruption, the mechanisms through which disruption occurred, and its apparent impacts. Second, we use that evidence in a theory-testing exercise, evaluating the utility of hypotheses from the extant literature on formal sanctions in explaining how informal sanctions are used, and which industries they target. Finding the established wisdom offers some insight but only general expectations, our third contribution is theory development: we use the THAAD case as a heuristic to conceptualize informal economic sanctions, and specify two new variables—regulatory availability and opportunism—that mediate their use and impacts.