International Relations

Shifting US Policy in China Relations: From Decoupling to De-risking

  • The US is shifting its China policy from decoupling to de-risking, signifying a new approach.
  • The EU has already taken a de-risking approach in its China policy, and the G-7 summit likewise agreed on the importance of de-risking.

Understanding the De-risking Process

  • Following the establishment of diplomatic ties in 1979, the United States and China built a strong economic interdependence, which benefited China’s global engagement.
  • China’s rise posed a challenge to the United States’ global dominance and had an impact on its domestic businesses.
  • To counter China’s techno-economic threat, the Trump administration launched a “decoupling” plan.
  • The Biden administration has adopted a new strategy, changing from decoupling to de-risking.
  • De-risking focuses on robust supply networks to protect the United States from foreign pressure.

Rationale behind De-risking

  • Geopolitical Competition: China’s rise as a strategic rival calls into question the United States’ worldwide power, necessitating de-risking in order to eliminate vulnerabilities and maintain an edge.
  • Concerns about risks such as intellectual property theft and cyber attacks lead to de-risking in order to protect sensitive technologies and national security interests.
  • Resilient Supply Chains: The COVID-19 pandemic exposed supply chain vulnerabilities, necessitating de-risking to ensure diverse and resilient networks.
  • Fair Trade Practises: By diversifying partners, de-risking tackles concerns about China’s trade practises, such as intellectual property infringement and coerced technology transfers, with the goal of achieving fairer trade.
  • Alliance Development: De-risking aligns with the interests of allies, encouraging collaboration and a united front against China’s growth.

Geopolitical Consequences

  • De-risking for Stronger coalitions: As stated in the G-7 summit declaration, the United States uses de-risking to strengthen coalitions in its battle with China.
  • Scepticism in China: China sees de-risking as a camouflaged decoupling that shifts blame for risks to China.
  • Getting on board with Decoupling and the United Front: De-risking complements decoupling by diversifying supply chains and encouraging allies to work together.
  • Uncertainty about effectiveness: The efficiency of de-risking is dubious, owing to China’s reaction and the difficulties in diversifying supply chains.
  • Impact on the Indo-Pacific in the Short Term: De-risking may momentarily draw attention away from the Indo-Pacific, needing a delicate balance between maintaining a comprehensive strategy in the region.

The way forward

  • To effectively resist China’s rise, the de-risking strategy should be refined and coordinated with partners.
  • It is critical to balance the benefits of de-risking with the necessity to maintain a strong Indo-Pacific strategy.
  • Engaging in strategic conversations and establishing partnerships might assist shape a unified approach to dealing with China’s influence while mitigating dangers.
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