Chinese Assessments of De-risking
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Chinese Assessments of De-risking

Drawing on newly translated scholarship, leading experts examine how Chinese analysts are assessing U.S. and partner de-risking efforts and their impacts on China’s economic and technological development.

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Newly translated documents discussed in these analyses include:

  1. U.S. Economic and Trade Policy Toward China and New Trends in U.S.-China Economic and Trade Relations by Song Guoyou, deputy director of the Center for American Studies and director of the Center for Economic and Diplomatic Studies at Fudan University.
  2. U.S. Technology Competition with China and China’s Countermeasures from the Perspective of Technology Power by Gu Xueming, president, Party secretary, and chief expert at the Ministry of Commerce-affiliated Institute of International Trade and Economic Cooperation and Liu Yiming, PhD candidate at the Institute of International Economic Studies, University of International Business and Economics.
  3. Faced with Technology Decoupling by the United States, China Must Establish an Industrial Base for Integrated Circuits by Lu Feng, director of the Institute of Business and Government at Peking University School of Government.
  4. “De-risking” Looks Mild, But How Many Risks are Hidden Behind It? by Jian Junbo, deputy director and associate professor at the Center for China-Europe Relations, the Institute of International Studies at Fudan University.

Jump to commentary from:

Matthew Turpin | Francesca Ghiretti | William Klein

Matthew Turpin

Senior Advisor, Palantir Technologies

If these four articles accurately reflect the discourse taking place within China, we should conclude, as other Interpret: China projects have, that China’s “republic of letters” is alive and well. Over the last year, the authors have wrestled with the same topics that animate debates elsewhere over how countries should adapt to what seems like the end of an era of globalized neoliberalism.

The four articles, split chronologically on either side of Chinese president Xi Jinping’s decision to end his zero-Covid policy, describe an international environment of fierce competition for China. The authors grapple with what it means for China to compete economically, technologically, and geopolitically in an increasingly hostile international system. All conclude that China cannot back down from this challenge and that Beijing should employ the offensive and defensive tools it has been sharpening for years.

While only one author, Jian Junbo, explicitly employs the term “cold war,” each tiptoes around the rivalry that has already emerged. From their perspective, the United States has imposed this geopolitical condition on a guiltless China, seeking to drag third countries into its anti-China coalition. Because this theme sits at the center of Chinese government discourse, it should not be surprising that in parroting the government’s views, the authors fail to acknowledge the role Chinese policy has played in dismantling in the international system that has benefited China and the Chinese people.

Each author observes that technology competition sits at the center of these tensions and will become more pronounced over time as it reverberates through the broader trade and economic relationships between China and the United States and between China and Europe. Systems built to normalize trade and capital flows between China and developed economies have started to break down, and this breakdown will accelerate as Beijing implements the kinds of actions the authors recommend.

The logic expressed by these authors, along with the logic driving policymakers in other countries, demonstrates a clear trend: China will become relatively less interconnected economically, technologically, and financially with the United States, Japan, and Europe while becoming more interconnected with Russia and portions of Southeast Asia and the Middle East. Simultaneously, the United States, Japan, and Europe will become relatively more interconnected economically, technologically, and financially and will seek to compete with Beijing for economic influence and markets in third countries.

This “great reordering” of the international economic and geopolitical system will unfold over time, imposing significant costs on all players but also providing new and important opportunities. The authors of these four pieces suggest Chinese thinkers are well attuned to these changes and are actively considering how to position their country for competitive advantage.

Francesca Ghiretti

Analyst, MERICS

When European Commission president Ursula von der Leyen proposed the term “de-risking” in a March 30 speech on China, there were different reactions from China. Following the speech, Wang Lutong, director general for European affairs at China’s Ministry of Foreign Affairs, wrote on Twitter, “If there is any risk, it is the risk of linking trade with ideology and national security and creating bloc confrontation.”

As presented in an analysis from the Mercator Institute for China Studies (MERICS), some scholars were less negative. For example, Yan Shaohua and Peng Chongzhou from Fudan University Center for China-Europe Relations viewed the proposal of de-risking as a way for the European Union to construct a policy response different from that of the United States while sharing similar concerns on the risks China poses. Admittedly, many of the milder assessments on de-risking came after a visit by French president Emmanuel Macron, which China largely viewed as a positive engagement.

In any case, hopes that EU de-risking would trace a different path than U.S. de-risking waned a few weeks after von der Leyen’s speech when U.S. national security advisor Jake Sullivan endorsed and embraced the concept for the United States itself. By adopting de-risking, Sullivan probably strengthened the argument of those in China who did not see a substantial difference between de-risking and decoupling.

However, there still seems to be a difference between EU and U.S. de-risking. Jian Junbo, deputy director of the Center for China-Europe Relations at Fudan University, signals that China is not particularly concerned about EU de-risking. Leaving aside the fact that the scholar seems to treat EU de-risking mostly as German de-risking—omitting the remaining 26 member states and signaling where China’s concerns, if any, lay—Director Jian uses some informative words to describe the impact of EU de-risking on China:

De-risking will operate on multiple levels, posing a continuing challenge to China-EU relations. Therefore, China’s enduring agenda will be to formulate corresponding hedging strategies at different levels. However, in any case, as long as China’s industrial upgrading and opening-up process remain unchanged, the risks to China from Europe’s de-risking policy will continue to diminish and even disappear.

Jian Junbo, “De-risking” Looks Mild, But How Many Risks are Hidden Behind It?

Other authors appear to view the U.S. economic competitive approach toward China (de-risking) in much more serious terms as result of U.S. economic strength and technological advantage. Chinese scholars have assessed in great detail China’s position in economic and technological competition with the United States and how to improve it.

Because de-risking, since its inception, has been a flexible concept with little operationalization, it is open to a variety of interpretations between countries, between different actors within the same country, and even between actors within the same institution. Nevertheless, de-risking has become a useful way to unify these different views and approaches under a single term.

William Klein

Consulting Partner, FGS Global

None of the authors think Western de-risking is substantively less risky for China than decoupling. All take it as given that the United States aims to thwart China’s modernization and maintain absolute long-term competitive advantage in key technologies, irrespective of how Washington characterizes its actions. They acknowledge the costs U.S. policy now imposes on China, yet several argue China has comparative advantages that can dilute the effectiveness of U.S. strategy. All predict China can ultimately achieve self-sufficiency in even the most cutting-edge semiconductor technologies which the United States is now denying the country.

Jian Junbo provides a notably accurate assessment of European thinking behind the idea of de-risking, which European Commission president Ursula von der Leyen rolled out prior to her March visit to China. Jian argues decoupling, with its connotations of Cold War–style containment, is too narrow to capture the diversity of European interests. De-risking, by contrast, characterizes a spectrum of policies ranging from hard decoupling to more nuanced efforts to limit but not cut off economic ties. On the surface, de-risking may seem less confrontational, yet, Jian notes, the term “is not so mild as we imagine, and it is quite deceptive and dangerous.” Its ambiguity—which, in Jian’s mind, is intentional—gives Europe, as well as the United States, now that Washington has embraced the term, far more room to maneuver in its policies toward China. He concludes Beijing’s response must be, therefore, sufficiently differentiated.

Peking University’s Lu Feng provides a blueprint for China’s response in the semiconductor industry. Lu argues China is among the few countries with capabilities across the entire production chain for mature chip technologies. The problem, he writes, is that competition has fragmented these capabilities, and they are now more integrated with foreign production chains than with domestic ones. Lu argues China needs a top-down approach to bring these capabilities together, citing the “two bombs, one boat” (nuclear weapons, guided missiles, and submarines) centralized industrial policy that he says successfully addressed earlier national security challenges. He uses similarly militaristic language to suggest China deploy its massive market as a “nuclear weapon” in response to U.S. use of technology as a nuclear weapon against China. Lu writes, “If you have the technology but not the market, the technology is ultimately a dead end.” He expects that controlling market access for Western suppliers will force them to take sides while giving domestic companies more space to catch up, even in the most cutting-edge technologies.

The remaining authors provide detailed overviews of U.S. policy actions toward China under the administrations of U.S. presidents Donald Trump and Joseph Biden. Song Guoyou coins the term “four highs” to characterize U.S. policy: high tariffs, high domestic subsidies, “high technology suppression” of China, and high-quality coordination with allies. Gu Xueming and Liu Yiming argue that diverse interests within the U.S. executive branch, between the major political parties, and among the business community will weaken the effectiveness of U.S. measures. They also claim the high cost of hard decoupling will limit how far the United States is willing to go, citing a study that predicts that a complete ban on selling U.S. chips to China would cost U.S. firms a 37 percent drop in revenues and the loss of tens of thousands of jobs.

None of the authors suggest U.S. actions may be a response, at least in part, to Chinese policies that adversely affect U.S. interests. Such self-reflection cannot be expected in these types of articles, even if it exists in Chinese policymaking circles. Yet its absence is consistent with mainstream thinking in China: a large and stable majority within China’s foreign policy community firmly believes the true source of bilateral tensions is U.S. unwillingness to accept a rising China as a peer power.

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