On the surface, “de-risking” seems to be milder than “decoupling,” but de-risking has great ambiguity of meaning, and scope for generalization based on security risks. This makes its operational space huge. It is not as mild as we imagine, and it is quite deceptive and dangerous. We must understand the real intention of Europe’s de-risking from China on the basis of its rising geopolitical awareness. Therefore, China’s enduring agenda will be to formulate corresponding hedging strategies at different levels.

Recently, there has been a great deal of rhetoric in Western media about Germany’s de-risking from China. Of course, such arguments are being raised not only by Germany, but also by the European Union and a number of other member states. In fact, it was European Commission President [Ursula] von der Leyen who first put forward the argument for trade and economic de-risking from China. She first proposed “de-risking” from China in a speech at two European think tanks at the end of March this year, prior to her visit to China, in order to replace the controversial “decoupling.” However, while de-risking rhetoric is gaining in popularity in Europe, the true meaning of the term and its practical implications for economic and trade policy toward China have yet to be clarified or clearly defined. This may be precisely the effect that Europe wants to achieve—using a vague term and an unspoken meaning to provide enough space for Europe to implement a more flexible economic and trade policy toward China.

Regardless of whether Europe intends to give a clear meaning to the term, why do the EU and some of its countries prefer de-risking to decoupling to summarize their economic and trade policies toward China? The reasons include the following.

Why does Europe choose “de-risking?”

First, by using this term, the EU is attempting to gain a moral advantage in Sino-European relations, and thereby inject an abundance of legitimacy into the implementation of harsh trade protection and even possible sanctions against China. Associate Professor Hang Yuan of Sichuan University has asserted that the so-called de-risking is “a discourse trap of the EU. … De-risking puts the blame on the other side, stigmatizes the other side, and puts the other side on moral trial. This becomes the moral basis for all subsequent actions.” I am convinced that this is the case.

“Risk” means that the EU faces a “threat” from China, meaning a passive, external constraint and challenge, and thus implying that the responsibility for its unfavorable relationship with the other party comes from the other party’s challenge, rather than involving Europe’s responsibility. Therefore, by pursuing a “de-risking” policy, the EU not only shifts the responsibility for the problems in Sino-European economic and trade relations onto China, but also legitimizes, to a great extent, its subsequent economic and trade policies toward China. By means of linguistic and ideological suggestion, the EU has pushed China onto a seat of moral judgment through the implementation of the de-risking policy. Thus, on this issue, the Europeans are not only the plaintiffs but also the judges. This disregard for facts and playing with words puts China-EU economic and trade relations in an ideological light and legitimizes the EU’s position and possible subsequent actions.

Second, the use of the term de-risking instead of decoupling can, to a certain extent, calm the internal controversy in Europe, which provides Europe an opportunity to adopt flexible economic and trade policies toward China. As most people see it, decoupling is synonymous with a radical, total and complete severance of ties. It seeks to break the value and supply chains with China. However, this is both unrealistic and difficult to truly achieve. What is especially important is that, politically, decoupling ultimately means containment of China, which would bring about a Cold War-like state of affairs in China-Europe relations.

During the Cold War era, mutual economic exchanges between the two camps were essentially zero. If the ultimate meaning of decoupling is to cut off economic and trade exchanges, then one facet of the Cold War would be realized between China and Europe. If this decoupling were then extended to the high-tech, financial, and political fields, then it would, in fact, mean a new Cold War. For Europe, this outcome is clearly not yet an acceptable goal for its China policy. Therefore, de-risking has become a kind of ambiguous term that meets the psychological expectations of many politicians, the general public, and enterprises, and has become a powerful tool for bridging the gap between Europe’s economic and trade policy and its overall policy toward China. In the name of de-risking, those politicians and enterprises that advocate decoupling can find a basis for casting off dependence on China, while those who advocate continuing economic and trade exchanges with China can also find opportunities in other areas after de-risking. And of course, it conforms very well to the appetites of those who seek selective, limited cooperation with China, or selective containment and supply chain breaking. In any case, it fits the China policy preferences of a diverse group of Europeans across the political spectrum, from hard line to lukewarm to relatively friendly.

Of course, the ambiguity of the meaning of de-risking provides a basis for the EU to develop a flexible and opportunistic policy toward China. This will both bring about European unity and the realization of a single voice on China policy, and be able to satisfy the demands and policy preferences of different groups of people, thus allowing European politicians to satisfy their own constituencies on China policy. Of course, it also enables the use of a variety of policy tools in dealings with China, and the formation of an economic and trade policy deterrent against China. In this regard, the EU may be intentionally blurring the concept, and will not give it a clear definition.

Third, by using the de-risking policy, the EU has found a so-called common narrative with its U.S. ally toward China, which will be conducive to coordination between the United States and Europe on economic and trade policies toward China. It is an interesting fact that after [European Commission President] von der Leyen used the term “de-risking” instead of “decoupling,” U.S. Secretary of State Antony Blinken soon used the same term to describe U.S. economic and trade policy toward China. The EU and the United States are allies with abundant bilateral communication and coordination mechanisms, so the fact that they have both begun to use “de-risking” instead of “decoupling” in their economic and trade policies toward China is most likely the result of internal coordination between the two sides. Whether that is the case or not, in economic and trade relations with China, Europe and the United States have found common ground to meet their respective internal requirements.

An obfuscated de-risking concept—the greatest common denominator in the economic and trade policy of Europe and the United States toward China—can be interpreted in its larger sense as decoupling, which is in line with the United States’ intention to contain China. In its more limited sense, it can be interpreted as a limited reduction of dependence on China in the supply chain, which meets the demands of many Europeans. This broad space for interpretation is of major significance for Europe and the United States to further coordinate their economic and trade policies toward China, as well as to deepen the alliance relationship between Europe and the United States in the context of the so-called great transformation of the international landscape. In fact, Europe and the United States differ on many international issues, and there has always been a temperature difference in their policies toward China, but the use of de-risking will become the adhesive for a common agenda of Europe and the United States toward China.

Fourth, de-risking in the ultimate sense implies viewing the EU’s economic and trade policy toward China in security terms, which is in line with Europe’s aim in recent years to increasingly see all its external relations from a security perspective. De-risking not only responds to concerns about supply chain dependence on China that the Western world has been dwelling on lately, but also responds to the concerns about the erosion of their countries’ security that the West, especially the United States, has been dwelling on since the Trump administration. Thus, de-risking means both reducing supply chain dependence on China (e.g., diversifying the sources of rare earths, lithium batteries, etc.) and removing China’s “threat” to their national defense and security (e.g., removing Huawei’s 5G equipment or public surveillance equipment made by Chinese companies). Considering that the reduction of Europe’s supply chain dependence is also being viewed as part of its defense security, de-risking is, in fact, the result of Europe’s security-centered perspective on its trade and economic relations with China. Under a security-centered perspective on China-EU relations, de-risking becomes a policy manifestation of viewing economic and trade relations with China in security terms, which will subject China-EU economic and trade relations to challenges under a more macro-security perspective.

Fuzzy Boundaries and Concrete Implications

To sum up, de-risking will become a tool for the EU and some European countries to maintain a position of moral superiority over China, a tool for accusations and struggles in political and ideological fields, a way to carry out trade protectionism and partial supply chain breaking economically, and a manifestation of viewing economic and trade policies toward China in security terms. For the EU, de-risking has become a flexible and wide-ranging China policy tool. However, while de-risking’s boundaries are still blurred in the economic and trade field, its concrete implications are increasingly evident, including, in particular, precisely eliminating or reducing dependence on China and so-called “security threats,” and preventing China from gaining relevant advantages. Specifically, this is reflected mainly in the following aspects:

First, reducing or eliminating dependence on key raw materials. This is because China is Europe’s provider of some key raw materials, including rare earths and related products, new energy materials such as solar panels or lithium batteries, raw materials in the pharmaceutical field, and some other chemical raw materials. The EU has listed a number of key dependent materials and is trying to reduce imports from China by diversifying its sources.

Second, reducing or eliminating dependence on the Chinese market. This is mainly reflected in investment. Some European politicians believe that a large amount of investment in China (especially in the manufacturing sector) increases the risks to European capital, and therefore advocate achieving diversification of foreign investment, shifting part of the investment in China to Southeast Asia and other countries, thereby reducing dependence on the Chinese market.

Third, preventing China from obtaining high-tech advantages. Europe will pay more and more attention to the export of dual-use technologies to China, and will prevent the flow of such technologies to China by all possible means. It will also try its best to prevent the transfer of high technology to China in the name of intellectual property protection. In short, in order to maintain Europe’s technological advantage over China and reduce the speed of China’s industrial upgrading, Europe may take a variety of deterrent measures in the name of de-risking.

Fourth, maintaining so-called social and national security. This is reflected in Europe banning trade in some specific sectors or goods, or preventing Chinese capital from entering some specific industries in Europe, such as power infrastructure, ports, or certain high-tech fields, all in the name of maintaining security.

Multiple levels of operation require having multiple levels of hedging

Therefore, de-risking seems to be milder than decoupling on the surface, as the former is mainly concerned with security issues, and it seems that normal exchanges can still be maintained in areas not related to security. Decoupling, however, represents leaving, a complete break at all levels. This is true as far as the seriousness of the semantics is concerned, but the problem is that the great ambiguity of de-risking and its generalization based on security risks make de-risking a policy with a great deal of room for maneuver, so while it may not be as serious as decoupling, it is also not as benign as we might imagine.

For China, the de-risking rhetoric popular in Europe is, in fact, quite deceptive and dangerous. As mentioned earlier, the ambiguity of its meaning is, to a very large extent, intentional on the part of the Europeans. We must understand the real intention of Europe’s de-risking from China on the basis of its rising geopolitical awareness. 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.