Research question: What factors influence post-Mao China’s sensitivity to relative gain in economic cooperation?
I. Background and Motivation
1) The relative gain debate
For realists, international anarchy and its self-help logic cause states to worry about cheating and relative gain. This concern prevents inter-state cooperation even when they share a mutual interest. International institutions can mitigate the problem of cheating in cooperation by providing information, reducing the enforcement cost, and turn cooperation into iterated games—but none of this relieves states’ fear that, in this uncertain world, the gain of a partner today may be the weapon of “a potential foe tomorrow” (Grieco 1993:485).
However, theoretical debate and empirical evidences have convinced both sides that relative gain concern is only conditional. The question now shifts from whether states care about relative gain to how much. Realists insist, “The coefficient for a state’s sensitivity to gaps in payoffs—k—can be expected to vary but always to be greater than zero,” because in an anarchical world of self-interested states anyone can be an enemy (Grieco 1993:323). On the other hand, the institutionalists holds that “this coefficient can be . . . negative, positive, or zero” (Keohane 1993:279). Realists thus charge institutionalists with underestimating uncertainty in anarchy. Institutionalists then accuse realists of overestimation.
How to get out of this quagmire? More theoretical debate is not the answer, for both camps have produced internally coherent theories. The disagreement roots in their differing assumptions about state’s sensitivity to gaps in gain, which only an empirical study of states’ behaviors can resolve. That is precisely the first purpose of this research.
2) Cooperative behaviors of the rising China
That China is rising has been proven many times with impressive statistics and needs not be retold here. With its massive domestic market and export volume, China’s has great potential to destabilize the interdependent global market. Thus, the United States as well as multilateral institutions has actively engaged China into the established economic order (Ross 1999).
They succeeded, to a large extent. Therefore, many gladly point to China’s heavy involvement in international institutions, as well as its cooperative posture,  as evidence of the “socializing” force of institutions. However, as Mearsheimer points out time and again, institutions may simple be “arenas for acting out power relationships” (Mearsheimer 1994:13). Since China may be concerned with relative gain, perhaps institutions cannot fundamentally alter its preferences, and perhaps it remains cooperative only insofar as it gains power over other states.
The previous statement sounds highly uncertain because it is. Even though relative gain is the most important debate on cooperation, no one has taken this approach to examine China’s cooperative pattern. To fill this jarring gap is the second purpose of this research.
II. The domain and significance of this research
This research is well aware of its restricted domain: the case of China and the field of economic cooperation. The findings cannot be generalized to states that do not share China’s regime type, position as a rising power, and many other idiosyncrasies. Neither do states’ behaviors in the economic realm neatly transfer into the security area. Therefore, this research claims far less than settling the relative gain debate for good.
What this paper does achieve is more insight into the cooperative behaviors of China, whose participation in the global economy is crucial. For practitioners, this information by itself has great value on the negotiation table and in the process of international institution design. For theorists, findings about China contribute one data point that can be pooled with others into a randomized, multiple-case study of states’ sensitivity to gap in gain. As King, Keohane, and Verba point out, only such an aggregate work can truly verify theory (1994:115-49). This research is only a humble steppingstone toward that achievement.
III. Hypotheses and Methodology
This research seeks to answer the question, “What factors influence post- Mao China’s sensitivity to relative gain in economic cooperation?” My hypotheses are that China becomes more sensitive when: a) it deals with larger and equal states, b) the stakes of the deal is high, and c) the cost of translating relative gain into force against China is low. The alternative hypotheses are that the effect of these factors on China’s sensitivity is either zero or in the other direction.
In order to measure the dependent variable—China’s sensitivity to relative gain—we need to identify behaviors that indicate China’s concern. If China cares more about absolute gain, it will mainly strive to prevent cheating by favoring deals that 1a) have longer horizon (which turns Prisoner’s Dilemma into an iterated game), 1b) have fewer actors (which facilitates verification and punishment of cheaters), and 1c) have more issue-linkages (which increases the iterativeness of cooperation across issue-areas).
If, on the other hand, China cares more about relative gain, it will have the opposite preference, i.e. deals that 2a) have shorter horizon (which allows easy exit if gaps in gain favor the partner), 2b) have more actors (which offsets relative loss to better-positioned partners with relative gain over weaker partners), and 2c) have less issue-linkages (which prevents relative gain in one area to be transferred in yet another area.) Thus, if presented with a choice, China’s preference along these three dimensions will reveal its sensitivity to relative gain.
Measuring the first two dependent variables is rather straightforward. Firstly, the size of China’s partner-states can be gauged via GDP (I will also consider other measurements of state’s power.) Secondly, the stake of the economic deal will be quantified in the amount of dollars. On the other hand, measuring the third dependent variable—the cost of translating relative gain into force against China—demands a closer look into the specific arrangement of the deal. I can provide two illuminating examples. A low-cost situation is the 1992 US-China Agreement: in this case, if China complied to eliminate nontariff barriers against US exports, US industries could easily dominate China’s market and crowd out domestic manufacturers (Ross 1999:186, United States 1995:4-5). A high-cost situation is the 1997 Asian crisis: in this case, even if China responsibly pledged not to pursue protectionist measures, its deeply-troubled neighboring states have little prospect of turning gains into pressures against China (Shambaugh 2004:68).
 See (Grieco 1988), (Mearsheimer 1994:12, 1995:86), and (Gilpin 1986:304).
 See (Powell 1991), (Keohane 1993:377), (Keohane and Martin 1995:44) and (Grieco 1993).
 See (Snidal 1991:173) and (Keohane and Martin 1995:41).
 (Johnston 2003:12-16) provides convincing statistics of China’s high rate of participation in institutions as well as its consistent record of compliance (see Appendix for statistics). Chinese officials and academics are also keen to emphasize China’s “Peaceful Rise” (Bijian 2005).
 Both sides acknowledge that states show different levels of sensitivity in the security and economic arena (Grieco 1988, Keohane and Martin 1995). (Lipson 1984) observes that political-economic relationships are more institutionalized than military-security ones.
 (Axelrod and Keohane 1985) discuss how states design cooperation to prevent cheating. Building on this work, (Grieco 1988) proposes the empirical methodology to distinguish between relative and absolute gain concerns, which I use in this research. Both realists and institutionalists generally agree with this distinction. See supporting arguments in (Snidal 1991), (Keohane 1993) and (Powell 1991).
So that is the attempt to dispel my worry that I have played too much Starcraft 2. The full version with bibliography and appendix can be download here. I wish I had time to explain why this research on particularly the issue of China’s sensitivity to relative gain can spell the fate of world peace, but by posting this I’m procrastinating the actual research lolz. So, to be continued, when the research finally bears fruits–real, original fruits that contribute to the scholarly debate, and not the paraphrasing bullshit that undergraduate researches often produce.
If there is any IR major who is also interested in the fundamental clash of realism and liberalism on relative gain, your critique is very much appreciated.