Chapter 5 looks at Chinese coercion regarding Taiwan, involving foreign arms sales to Taiwan and the Taiwan Strait Crisis of 1995 and 1996. China used moderate coercion measures toward the United States over arms sales to Taiwan until 2008. The cost-balancing theory does not perfectly explain the 1992 case of US weapons sales to Taiwan, which instead highlighted economic concerns. As for the 1995–1996 Taiwan Strait Crisis, China escalated to militarized coercion, the magnitude of which was the greatest among all cases of Chinese coercion concerning territorial disputes, Taiwan, and Tibet in the post-Cold War era, because Taiwan is a “core interest.” This chapter demonstrates the significance of the issue importance variable in issues involving Taiwan and shows that the cost-balancing theory travels beyond territorial disputes. This suggests that because Taiwan continues to be one of China’s core interests, it is highly likely China will resort to military coercion again in the future. In particular, if Taiwan decides to pursue judiciary independence, then it is highly likely that China will resort to military coercion, or even the use of force.

Chapter 2 discusses the literature, the cost-balancing theory, observable implications, alternative explanations, measurement, and research design. Coercion is the use or threats of negative means to demand a change in the behavior of a target state. The underlying assumption of this book is that in an era of global economic interdependence through the intricate global supply chains and global financial network, coercion decisions are a result of balancing security and economic factors. China coerces when the need to establish a reputation for resolve is high and the economic cost is low. China will refrain from coercion when the economic cost is high and the need to establish resolve is low. In circumstances when both the need to establish resolve and economic costs are high, China will only use coercion when the importance of the issue at hand is high. As for the choices of coercion, all else being equal, nonmilitary coercion should generate lower geopolitical backlash. China is much more likely to choose nonmilitary coercive tools like diplomatic sanctions, economic sanctions, and gray-zone coercion when the geopolitical backlash is high.

Chapter 3 examines Chinese coercion in the South China Sea. My previous work examines the overall trends of Chinese coercion in the South China Sea. I find that China used coercion in the 1990s because of the high need to establish a reputation for resolve and low economic cost. China used militarized coercion because the US withdrawal from the Subic Bay in Southeast Asia and the focus on Europe reduced China’s geopolitical backlash cost of using coercion. China then refrained from coercion from 2000 to 2006 because of the high economic cost and low need to establish a reputation for resolve. It began to use coercion again after 2007, but because of the increasing geopolitical backlash cost since the post-2000 period, Chinese coercion remains nonmilitarized, which includes economic sanctions and gray-zone coercion. This chapter also examines three case studies – the cross-national comparison of China’s coercion against the Philippines, Vietnam, and Malaysia, the Sino-Philippine Mischief Reef incident in 1995, and the Sino-Philippine Scarborough Shoal incident in 2012. These case studies demonstrate that the mechanisms of the cost-balancing theory are present in them.

This chapter again uses data from the Bank’s ledgers, cash books, and other records to examine its policy decisions over much of the eighteenth century (1711—1791). Examination of these data indicates that the Bank’s accounting was highly focused on accurate tabulation of the total stock of Bank money. It is argued that this money stock had two functional components, de facto splitting the bank into two institutions: a passive bank whose money originated from customers’ deposits of coins under receipt, and an active bank whose money originated from open market purchases of metallic assets and credit operations. The data show that from 1727 forward, the active portion of the Bank’s money was systematically adjusted to balance out (sterilize) fluctuations in the passive portion. The chapter also discusses two crisis episodes when this policy approach broke down: (1) a financial panic in the autumn of 1763 that required a liberalization of the receipt system, leading to unbalanced expansion of the passive bank; (2) excessive lending to the Dutch East India Company during the Fourth Anglo-Dutch War (1780—1784), leading to a contraction of the passive portion and overexpansion of the active. The effects of the latter crisis were sufficiently severe that the Bank never fully recovered.