G7 nations said in a declaration following the leaders’ summit in Hiroshima, Japan, on May 20 that they will increase their own economic resilience through a policy of “diversifying and deepening partnerships and de-risking, not decoupling.”
In the statement, the phrase “de-risking” was used once more to define the G7 nations’ approach to China’s economy.
Additionally, US President Joe Biden stated: “We’re not looking to decouple from China” at a news conference after the summit. We want to diversify and reduce the danger in our connection with China.
Despite the fact that “everything” in terms of how people communicate has altered as a result of the incident involving “this silly balloon that was carrying two goods cars worth of spying equipment,” Biden predicted a “thaw very shortly.”
In February 2023, the US Air Force, acting on Biden’s orders, shot down a Chinese-operated white high-altitude balloon above US territorial waters off the coast of South Carolina. This was the incident to which he was alluding. While acknowledging that it was their balloon, China refuted claims that it was a spy balloon, insisted that it was merely a weather balloon, and attacked the American move.
De-risking is defined as “the phenomenon of financial institutions terminating or restricting business relationships with clients or categories of clients to avoid, rather than manage, risk” by the US State Department. De-risking, expressed simply, is the process of directing corporate operations away from potential dangerous regions.
Back in 2016, the World Bank reported that due to the perception that smaller local banks in some regions wouldn’t be able to repay loans, international financial institutions were progressively ending or restricting business relationships with them in order to “de-risk.”
De-risking in the context of China can be seen as reducing reliance on China in the economic sector — for the supply of materials or as a market for finished goods — in order to lower the possibility of trade hazards and supply chain disruption.
The G7 nations declared in the statement that “neither do we wish to impede China’s economic advancement or development, nor are our policy measures intended to do so. A developing China that adheres to international norms would be of interest to everyone.
It was made clear that “We are not disconnecting or inwardly focused. At the same time, we understand that de-risking and diversification are necessary for economic resiliency. We shall take action to invest in the health of our own economy, both individually and collectively.
Here, the term “decoupling” is used instead of “economic boycott.” To improve the balance of trade with China in 2018, the Trump administration increased duties on China’s steel and aluminium exports. China retaliated by placing tariffs on US goods worth hundreds of billions of dollars, sparking a trade war.
Yes, on numerous occasions recently — despite the fact that commentators have noted that this current keyword is still vague and it is unclear precisely what actions will constitute de-risking.
US National Security Advisor Jake Sullivan stated on April 27 that his country was in favour of de-risking rather than decoupling. De-risking fundamentally entails preventing us from being the target of foreign pressure and establishing robust, efficient supply networks.
Ursula von der Leyen, president of the European Commission, had earlier stated in Brussels that relations between the EU and China are “neither black or white — and our reaction cannot be either. This is why de-risking, rather than decoupling, should be our main priority.
A week later, she travelled to Beijing with French President Emmanuel Macron and delivered the same message in person to the Chinese government, according to European media.
In addition, India’s External Affairs Minister S. Jaishankar spoke about de-risking the economy “in an era of global volatility and uncertainty” at the first meeting of the India-EU Trade and Technology Council (TTC) on May 16, however he omitted China from his remarks.
A day after Sullivan’s speech, the state-run Global Times in China published an editorial piece that stated, “So far, we haven’t seen enough sincerity from Washington towards Beijing in its attempts to ‘de-risk but not disconnect’. We continue to sense intense pressure and even repression coming from the US in industries like manufacturing and information and communications technology.
In fact, the US is making efforts to achieve self-sufficiency in the manufacture of semiconductors, which are essential for the creation of electricity.