China and Its Transactional Diplomacy: A Strategy of Self-Interest

China's negotiating strategy, both domestically and internationally, is neither uniform nor predictable. The Chinese Communist Party (CCP) employs a broad spectrum of tactics. Depending on the challenge it faces, these range from coercion to strategic compromise. Internally, it negotiates with dissent through a calculated mix of repression and selective concessions. Externally, it approaches diplomacy with a transactional mindset, often shaping agreements that disproportionately serve its long-term strategic interests.

China portrays itself as a proponent of mutual benefit. However, its negotiation patterns reveal a deeply asymmetric approach where the balance of gains seldom favors the opposing party.

Containing Dissent Through Controlled Concessions

Negotiation within authoritarian structures, particularly within China, follows a model that accommodates dissent only to the extent that it consolidates state power. The CCP has mastered the art of co-opting dissenting voices when suppression alone is insufficient. For example, during the economic reforms of the 1980s and early 1990s, grassroots protests over corruption and economic disparity led to selective policy shifts. These shifts absorbed some grievances while simultaneously reinforcing party control.

More recently, labor protests and dissatisfaction over land seizures have led to local adjustments rather than systemic reforms. This demonstrates the CCP's tactical use of limited negotiation to preserve stability without undermining authoritarian control.

However, this strategy has its limits. Interestingly, the CCP does not engage in good-faith negotiations with organized opposition. Instead, it isolates, absorbs, or neutralizes dissent through a range of calibrated responses.

The Hong Kong protests of 2019 illustrated this dual approach — initial tolerance followed by sweeping crackdowns. Rather than a sudden reaction, the passage of China's National Security Law was a long-term negotiation tactic. It allowed controlled expressions of dissent before implementing overwhelming force once international attention wavered.

People line up in front of the courthouse to attend the trial of pro-democracy activists charged with violating the Hong Kong National Security Law, while police officers stand guard. November 19, Hong Kong. (@Kyodo)

Debt Diplomacy to Tactical Retreats

As opposed to its internal policies, China's external negotiating strategy operates on a flexible continuum. It ranges from aggressive economic leverage to calibrated diplomatic retreats. Its Belt and Road Initiative (BRI) exemplifies China's transactional diplomacy — offering infrastructure investment while securing strategic assets.

Countries such as Sri Lanka and Pakistan have accepted Chinese funding under terms that, upon closer scrutiny, place them in long-term dependency. Sri Lanka's Hambantota Port, leased to China for 99 years after debt default, highlights how China negotiates deals that appear beneficial. Ultimately, these agreements consolidate its influence over weaker states.

Yet, Beijing is not always unyielding. When faced with concerted pushback, China exhibits tactical pragmatism. For instance, in its border negotiations with Vietnam, despite historical hostilities, China agreed to delimit parts of the land boundary in 1999. This was a rare instance of compromise driven by the need to stabilize regional ties.

However, in more strategically crucial theaters, such as the India-China border, China's approach remains rigid and uncompromising. It relies on incremental encroachments and negotiations as instruments of delay rather than conflict resolution.

The Illusion of Reciprocity

Beijing often frames its external engagement as mutually beneficial, yet the reality is often asymmetrical. In trade negotiations, it insists on greater market access while maintaining domestic protections. The Regional Comprehensive Economic Partnership (RCEP), for example, is a case in point of how China embeds itself within regional trade frameworks while safeguarding key domestic industries from foreign competition.

Similarly, security dialogues with the Association of Southeast Asian Nations ASEAN follow a pattern of engagement that acknowledges concerns. They rarely translate into substantive Chinese concessions on contentious issues such as the South China Sea disputes.

Chinese Coast Guard and maritime militia vessels surround a Philippine Coast Guard patrol boat (center) near Ayungin Reef in the South China Sea. On October 4, 2023 (©Philippine Coast Guard via Kyodo)

Even in areas where cooperation seems genuine, such as climate negotiations, China's commitments are often structured to maximize strategic latitude. Its pledge for carbon neutrality by 2060, while appearing ambitious, lacks binding short-term commitments, allowing economic and industrial priorities to dictate its approach rather than international expectations.

Internationally, China crafts engagements that consolidate influence while limiting genuine reciprocity. Recognizing this pattern is crucial for states and entities engaging with China. Negotiating with Beijing is not merely a diplomatic exchange. Rather, it is an exercise in strategic endurance, where understanding the Party's underlying calculus is essential to mitigating asymmetric outcomes.

Author: Professor Pema Gyalpo