Background: In recent years, China has increasingly resorted to using its economic clout for achieving political objectives. The most recent example in Europe was when Lithuania decided to allow the opening of a Taiwan representative office and subsequently faced blockage of its exports to China. While Lithuania exports relatively little to China, there was also a blockage of exports produced in other countries (such as Germany) and containing Lithuanian components, which led to serious impact on the European single market and heightened political pressure on Lithuania. Previously, Sweden and Norway also witnessed economic pushback by Beijing over their openly expressed concerns related to China’s human rights record. Compared to Europe, where Chinese economic coercion is a more recent phenomenon, other parts of the world and especially democratic countries in the Indo-Pacific, like Japan, Australia, South Korea, have abundant experience of political disputes with China which spilled over the economic relations.
 

Objectives: Macedonia has also seen a break-up in the diplomatic relations with China following the recognition of Taiwan in 1999. That move led to China’s veto to the extension of the UN-led peace mission in the country, which allowed for internal tensions, further fueled by the Kosovo war, to turn into an internal armed conflict. Given the current global polarization, recurrent tensions between China and the US, as well as the EU’s changing approach to China, countries in the region, including North Macedonia are increasingly faced with difficult policy choices. The EU sanctions against four Chinese officials in March 2021 or the Clean Network Initiative were only two of those when North Macedonia decided to side with the West, displeasing China. 

While China’s reactions to the above-mentioned moves amounted to mere warnings, it is difficult to foresee all the challenges to the Sino-Macedonian relations in future, the difficult policy decisions that may need to be made or the directions in which Chinese retaliation could go. Hence, this paper aims to contribute to the policy debate on the future relations with China by assessing North Macedonia’s vulnerabilities to potential Chinese economic coercion. To that effect, it will examine:

- The state of play of bilateral trade relations, focusing on the stability of supply chains, key export and import items and alternative markets;

- The level of foreign debt owed to China, especially amassed as a result of loans for infrastructure projects;

- Investments in key sectors and companies with the potential to influence trade, employment or the economy at large.
 

Methodology: The authors will remain vigilant to other elements of economic vulnerability that may emerge as relevant in the course of the research. Data will be collected using open source access to publicly available information and databases, freedom of information requests submitted to public institutions and interviews with relevant stakeholders in the authorities and the business community. The paper will draw conclusions and provide recommendations that will allow policy makers to adjust and improve their policies and potential responses to economic pressure coming from the Chinese side.