Audrye Wong writes that China is able to use its market power to pressure foreign companies and business leaders—perhaps most notably Tesla CEO Elon Musk—to lobby on its behalf. The practice raises questions about foreign influence in American and European policymaking and the disproportionate clout of business and oligarchic interests.
This article is based on comments and conversations from the 2025 Stigler Center Antitrust and Competition Conference– Economic Concentration and the Marketplace of Ideas.
Though companies have profited immensely from selling to the Chinese market, they have also found themselves on the wrong end of China’s economic stick for political reasons. A month ago, the Chinese government blacklisted PVH, the owner of Calvin Klein and Tommy Hilfiger fashion brands, over its policy to avoid using cotton from Xinjiang, where Beijing has engaged in horrific human rights abuses against Muslim Uyghurs. In summer 2024, French brandy faced tariffs from China in retaliation for the European Union’s imposition of tariffs on Chinese electric vehicles. This has muted corporate criticism of Beijing’s policies while transforming some of these companies and business people into vocal supporters and lobbyists for the Chinese government. The reactions of the corporate world demonstrate how China can leverage its market power to promote the regime’s strategic interests and silence unwanted criticism.
China’s use of economic threats to achieve political goals is not just a recent phenomenon and is not restricted to the Chinese alone, either. Economic statecraft is often the name of the game in international relations—see American financial sanctions on Russia for its invasion of Ukraine. However, China is not only using its economic power to coerce governments but also companies over their specific policies, or sometimes as collateral punishment for their home country’s policies. American airlines and hotel chains previously came under fire for referring to Taiwan (which China claims as part of its territory) as a standalone country, apparel brand H&M was boycotted and scrubbed from the Chinese internet for its decision not to use Xinjiang cotton, and NBA broadcasts in China were canceled after the manager of the Houston Rockets tweeted in support of Hong Kong pro-democracy demonstrators. In essence, Beijing is weaponizing its market power to encourage support and silence criticism of Chinese Communist Party (CCP) policies, especially on issues relating to national sovereignty, territorial disputes, and human rights.
Consumer-facing companies, by nature of their products, are easily targeted by public boycotts, often (though not always) steered by government rhetoric and amplified by social media outrage. Beijing leverages the Chinese middle class as an attractive market with growing purchasing power alongside its well-tuned propaganda apparatus. Nationalism has long been cultivated and manipulated by the Chinese government as a powerful force, feeding Chinese citizens narratives of exploitation by foreign powers during China’s “Century of Humiliation” around the turn of the twentieth century.
Another way in which China exerts market power is by cultivating key economic stakeholders who can exert political influence. Businesses invested—literally and figuratively—in the Chinese market, whether for manufacturing production or selling to Chinese consumers, have proven to be powerful advocates for more accommodating policies toward China. Over the last several decades, German industry has proven to be very influential in Berlin’s policymaking toward China. During the EU’s 2024 anti-subsidy investigation into Chinese electric vehicles, the German chancellor described the EU move as “protectionist,” while the CEO of Mercedes-Benz urged Brussels to do the opposite: to lower rather than raise tariffs on Chinese EVs in order to ensure a “level playing field” and build “economic win-win situations.” Such language not only parroted Beijing’s win-win narrative but was also ironic given analyses of Chinese government subsidies leading to artificially cheap EVs.
Perhaps no business person better exemplifies the political implications of China’s market power than Elon Musk. Musk has long and deep business interests in China. Tesla’s Shanghai Gigafactory (a massive manufacturing plant designed to produce electric vehicles, batteries, and other energy storage products) benefited from preferential Chinese government policies, including preferential loans from Chinese state-owned banks and exemptions from Covid restrictions. The company recently built a new battery factory in China. Tesla has won the overwhelming majority of cases against Chinese consumers in Chinese courts, suggesting strong government support in a legal system under the CCP’s thumb (alongside evidence of state censorship of public complaints over safety issues). China is Tesla’s second-largest market, accounting for 37% of its global sales. China is also crucial for Tesla’s production and profitability, contributing over half of the company’s global output and most of the 68% of its $10 billion profit in 2023 that came from overseas. Additionally, Tesla is heavily reliant on Chinese suppliers for car and battery components, including mineral refiners.
What are the effects on Musk’s views regarding China? Musk (who describes himself as “kinda pro-China”) has heaped exaggerated praise on Chinese leaders as “more responsive to the happiness of people than in the US.” He has also lauded China for its advancements in renewables, electric vehicles, and space technologies. Musk has publicly expressed support for Beijing’s claims over Taiwan, describing the island as akin to what Hawaii is to the United States, recommending a Taiwan special administrative region like Hong Kong, and suggesting an “inevitability” of integrating Taiwan into China. He also said there are “two sides” to the Xinjiang issue. Musk has avoided launching Starlink services in Taiwan due to Beijing’s disapproval. Moreover, Musk’s ownership of X, formerly Twitter, and his frequent social media posts, provides an easy platform to be a powerful amplifier of CCP talking points.
Musk has also displayed a tendency to bow to CCP demands to protect his business interests. In December 2024, he was accused of tanking a bipartisan spending bill because it included a provision on limiting and screening U.S. investments in China. Tesla was the only foreign company to sign a statement committing to China’s “core socialist values.” In response to Beijing’s concerns over data security, Musk opened a data center in China to localize data from Tesla cars (Tesla is also the first foreign company approved by a Chinese provincial government for public procurement). The Chinese government certainly has political leverage over Musk. When the U.S. Commerce Department announced in February 2024 an investigation into data retention by Chinese EVs, the nationalistic tabloid Global Times warned of Chinese consumer retaliation against Tesla. The 2025 launch of Tesla’s self-driving software was reportedly delayed as a potential bargaining chip in trade negotiations with Washington. But Beijing has trodden relatively carefully thus far. Too much overt pressure could backfire when dealing with the world’s wealthiest person with a major ego.
Admittedly, at least from the outside, Musk doesn’t seem to have dabbled much in trying to shape China policy under the second Trump administration, having expended his political capital on DOGE. Recent reports point to a fraying relationship between Musk and Trump, with the president himself stopping Musk from receiving a Pentagon briefing on war plans with China, saying that the latter had too many business interests in China. Trump personally cares too much about tariffs and is also surrounded by many China hawks in the administration, which could limit Musk’s influence. But there are also broader conflicts of interest and national security concerns with Musk and his Top Secret clearance. The bulk of Musk’s wealth has come from U.S. government contracts, yet Musk maintains close ties with Russian President Vladimir Putin and often parrots CCP talking points.
On a brighter note, market power may not always guarantee political influence; there is a delicate balance to be had between carrots and sticks. If foreign companies find China less attractive for exports or investments, their exposure to the Chinese market will naturally decrease. Beijing’s overt flexing of its coercive muscle, coupled with its crackdown on private enterprise and overall tightening of political controls, could ultimately undermine its very economic clout in the long run.
