The shift in the U.S.'s approach to China

Context: The article is discussing a shift in the United States’ policy towards China from a focus on decoupling to a new concept called de-risking. Decoupling refers to the idea of gradually reversing the economic integration between the U.S. and China that has been built over the past four decades. On the other hand, de-risking aims to limit the risks posed by China in areas that undermine U.S. national security and industrial competitiveness. The article mentions that the U.S. is now adopting the path of de-risking in its approach to China and is working to keep its allies closer in the geopolitical rivalry with China. This shift in policy has gained significant support, as evidenced by the G-7 summit in Hiroshima, Japan, where the leaders expressed their consensus on de-risking in their communiqué. Overall, the article highlights the changing dynamics in the U.S.-China relationship and the growing emphasis on de-risking as a strategy to address the challenges posed by China while maintaining some level of economic engagement.

Decoding the Editorial

The article is explaining the historical context of the economic relationship between the United States and China since the establishment of diplomatic ties in 1979.

US-China Ties:
- Both countries pursued a path of increasing economic interdependence, which allowed China to significantly expand its diplomatic and economic engagement with the rest of the world.
- As China’s economic and military power grew, it became evident that China aimed to challenge the United States’ dominant position in the international system.
- China’s rise had consequences for the United States.
  - Not only did it diminish America’s global influence, but it also hollowed out the US’ domestic industry.
  - In other words, certain industries in the United States may have faced challenges and declines due to competition from Chinese products or outsourcing of manufacturing to China.
Decoupling to De-Risking:
- There has been a shift in the U.S. approach to China from “decoupling” to “de-risking” under the Biden administration.
- When Donald Trump assumed office, addressing the economic and technological challenges posed by China became a priority.
- - The Trump administration focused on reducing the bilateral trade imbalance and protecting the U.S. high technology sector from Chinese influence.
  - This led to a trade war between the U.S. and China, and the concept of “decoupling” emerged, aiming for a reversal of the economic integration between the two countries.
The Biden administration continued with the overall China policy of the Trump administration but introduced its own modifications.
- - The term “decoupling” has been replaced with “de-risking.”
  - De-risking involves establishing resilient and effective supply chains to prevent coercion from any country.
  - Unlike decoupling, which suggests a complete separation of the U.S. and Chinese economies, focuses on limiting the effects of economic integration in areas that undermine U.S. national security and industrial competitiveness.
- Additionally, recent legislations, such as the Bipartisan Infrastructure Law, CHIPS and Science Act, and the Inflation Reduction Act, align with this new approach.
- The U.S. also aims to reflect the spirit of de-risking through geo-economic initiatives like the Partnership for Global Infrastructure and Investment and the Indo-Pacific Economic Framework for Prosperity.
Reasons for De-Risking: The article explains the reasoning behind the shift from decoupling to de-risking in the U.S.’s approach to China. The timing of this policy change is highlighted, considering various significant geopolitical events.
- Firstly, the world is recovering from the disruptive impact of the pandemic, and there is hope for an economic rebound.
- Secondly, the U.S.-China rivalry has intensified in recent months, with tensions rising across the Taiwan Strait and incidents like the spy balloon episode.
- Additionally, Chinese President Xi Jinping has entered his second decade of rule, which is an unprecedented third term in various leadership positions.
- Furthermore, the ongoing Russia-Ukraine conflict and Xi’s diplomatic engagements in West Asia have prompted the U.S. to reassess its posture towards China.
- In this context, framing U.S.-China relations as a new Cold War or a zero-sum game is seen as risky.
- The Biden administration aims to bring more nuance to its approach to potentially reduce China’s guard and create more space for the U.S. to consolidate its strength.
- The Biden administration has been focused on reassuring its European allies, especially as China has supported Russia in its conflict with the West.
- Decoupling, which involves complete economic separation from China, is not appealing to the European Union (EU), which has been seeking to engage with China and encourage it to stop supporting Russia in evading Western sanctions.
- Therefore, the concept of de-risking, which is a watered-down version of decoupling, may be more acceptable to the EU.
Potential Geopolitical Ramifications of De-Risking: There could be potential geopolitical ramifications of the de-risking approach adopted by the U.S. and its impact on China and other countries.
- The U.S. has sought to align its allies in the geopolitical rivalry with China by emphasizing de-risking, and this was seen as a significant victory at the G-7 summit, with leaders declaring their coordination in economic resilience and security based on de-risking rather than decoupling.
- However, China has expressed skepticism about the de-risking approach, viewing it as a cover for the decoupling agenda.
- China also argues that the U.S., not China, is responsible for heightening geopolitical risks by pursuing political and military interventions and perpetuating a Cold War mindset.
- While de-risking aims to diversify supply chains away from China, it carries forward the spirit of decoupling from the Trump era, albeit with some changes. This approach could potentially create a more sustainable united front among Western allies to counter China’s rise.
- However, its effectiveness is uncertain, as dialing down the U.S.’s rhetoric against China may be interpreted as a sign of weakness by China.
- The article also mentions that countries like India could benefit from de-risking by attracting supply chains and confronting China’s aggressive actions.
- However, there may be a cost associated with de-risking, as the U.S. focus on the Indo-Pacific region could be diluted, at least in the short term, due to the major triggers behind this shift, such as the Russia-Ukraine conflict and the consolidation of the European alliance.