Central Idea

The US is transitioning its policy on China from decoupling to de-risking, signalling a new approach.
The EU has already adopted a de-risking approach in its China policy, and the G-7 summit also expressed consensus on de-risking.

Understanding the De-risking

After establishing diplomatic ties in 1979, the US and China developed a deep economic interdependence, benefiting China’s global engagement.
China’s rise challenged US global clout and impacted its domestic industries.
The Trump administration initiated a “decoupling” strategy to address the techno-economic challenge from China.
The Biden administration continues with a modified approach, shifting from decoupling to de-risking.
De-risking focuses on resilient supply chains to ensure the US is not subjected to coercion from other countries.

Geopolitical Competition: China’s rise as a strategic competitor challenges US global influence, prompting de-risking to reduce vulnerabilities and maintain an advantage.
National Security: Concerns about risks like intellectual property theft and cyber threats lead to de-risking to safeguard sensitive technologies and protect national security interests.
Resilient Supply Chains: The COVID-19 pandemic exposed vulnerabilities in supply chains, driving the need for de-risking to ensure diversified and resilient networks.
Fair Trade Practices: De-risking addresses concerns over China’s trade practices, such as intellectual property infringement and forced technology transfers, aiming for fairer trade by diversifying partners.
Alliance Building: De-risking aligns with allies’ interests, promoting collaboration and a united front against China’s rise.

De-risking for Stronger Alliances: The US adopts de-risking to strengthen alliances in its rivalry with China, as seen in the G-7 summit declaration.
China’s Skepticism: China views de-risking as disguised decoupling, shifting blame for risks to China.
Aligning with Decoupling and United Front: De-risking aligns with decoupling by diversifying supply chains, while fostering a united front among allies.
Uncertain Effectiveness: The effectiveness of de-risking is uncertain, influenced by China’s response and challenges in diversifying supply chains.
Short-Term Indo-Pacific Impact: De-risking may temporarily divert focus from the Indo-Pacific, necessitating a balance with maintaining a robust strategy in the region.

The de-risking approach should be further developed and coordinated with allies to effectively counter China’s rise.
Balancing the benefits of de-risking with the need to maintain a robust Indo-Pacific strategy is crucial.
Engaging in strategic dialogues and strengthening alliances can help shape a cohesive approach in addressing China’s influence while minimizing risks.