July 11: Decision Making During Crises: Prospect Theory and China’s Foreign Policy Crisis Behavior after the Cold War

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(Click to enlarge) Visiting fellow Kai He addresses the audience in off-the-record program as director of the East-West Center in Washington, Dr. Satu Limaye, looks on.
(Click to enlarge)Visiting fellow Kai He addresses the audience in off-the-record program as director of the East-West Center in Washington, Dr. Satu Limaye, looks on.

Decision Making During Crises: Prospect Theory and China’s Foreign Policy Crisis Behavior after the Cold War

WASHINGTON, DC (July 11, 2012) – The rise of China is one of the most dynamic political phenomena in world politics in the 21st century. Although U.S.-China relations have been relatively stable since the end of the cold war, the two countries are far from establishing a high level of strategic trust and mutual confidence. Because of diverse strategic interests and different ideologies, diplomatic and military crises still seem unavoidable in future US-China relations. As Dr. Kai He, East-West Center in Washington Asia Studies Fellow, warned at an off-the-record seminar, if the two countries cannot manage foreign policy crises effectively and peacefully, escalating conflicts—even war—may occur unexpectedly between the two nations. Therefore, he argued, it is imperative for policy makers to understand China’s dynamic behavior in foreign policy crises, specifically, when China will take risks to escalate conflict and when China will avoid risks to seek accommodation during crises.

Through examining four notable foreign policy crises with the United States since the end of the Cold War: the 1993 Yinhe ship inspection incident, the 1995-6 Taiwan Strait crisis, the 1999 embassy bombing incident, and the 2001 EP-3 midair collision, as well as the 2010 boat collision crisis between China and Japan, Dr. He introduced a prospect theory-based model to systematically explain China’s foreign policy crisis behavior after the cold war. Dr. He suggested that Chinese crisis behavior is shaped by three factors that frame the domain of actions of Chinese decision makers during crises: the severity of crisis, leaders’ domestic authority, and international pressure. When Chinese leaders are framed in a domain of losses-under a condition of high severity of crisis, low leadership authority, and high international pressure-a risk-acceptant behavior such as military coercion or diplomatic coercion, is more likely to be adopted. When Chinese leaders are framed in a domain of gains-under a condition of low severity of the crisis, high leadership authority, and low international pressure-a risk-averse behavior, either conditional accommodation or full accommodation, is more likely to be chosen.

China’s leadership transition might increase the possibility for China to choose risk-acceptant policies during future foreign policy crises. Therefore Dr. He concluded that countries, especially the United States, should pay more attention to shape Chinese leaders’ domain of actions to a constructive direction through both people-to-people and state-to-state channels.

Dr. Kai He is an Assistant Professor in the Department of Political Science at Utah State University and a 2012 Asia Studies Fellow at the East-West Center in Washington. He is the author of Institutional Balancing in the Asia Pacific: Economic Interdependence and China's Rise (Routledge, 2009), and his articles have appeared in numerous publications including: European Journal of International Relations, Review of International Studies, Security Studies, The Pacific Review, Journal of Contemporary China, Asian Security, Asian Perspective, International Relations of the Asia Pacific, and The Chinese Journal of International Politics. Dr. He received his Ph.D. in Political Science and MS in Economics at Arizona State University, and his BA in Indonesian Studies from Beijing Foreign Studies University.