US ‘de-risking’ from China is just economic decoupling by another name
Dropping the term ‘decoupling’ in favour of ‘de-risking’ shows the US knows the damage its policies can do, but its behaviour towards China has not changed
With Washington using national security to justify its actions, it is unlikely to abandon moves such as blacklisting companies or restrictions on investment
Of late, the Biden administration appears to have started to move away from decoupling from China’s economy. On April 20, Treasury Secretary Janet Yellen told an audience at Johns Hopkins University that the United States does “not seek to decouple our economy from China’s” and that “a full separation of our economies would be disastrous for both countries.”
A week later, National Security Adviser Jake Sullivan echoed her sentiment in a speech at the Brookings Institution, stating that “we are for de-risking and diversifying, not for decoupling”. These remarks were greeted with a measure of relief in some quarters. However, such optimism could prove to be a false hope.
Whether the Biden administration will press ahead with decoupling hinges on how it views the country’s national security. US economic policy is being driven by national security goals. Not surprisingly, both Yellen and Sullivan emphasised in their speeches that the United States prioritises national security concerns in its relationship with China, even if it comes at an economic cost.
This begs the question of what national security actually means to the Biden administration. Citing national security concerns, the US levied tariffs on Chinese-made steel and aluminium products and banned equipment from Huawei and ZTE.
Today, the US consistently views economic and commercial matters related to China through the prism of national security. In its attempts to compete with China, it often plays the “national security” card to legitimise its actions.
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The US has not bothered to provide a definition of “economic security” or outline its parameters. Instead, it has chosen to give itself a free hand. As a result, national security concerns know no bounds in Washington and its geopolitical aims are the limits.
The US has rejected and appealed against a World Trade Organization ruling that found the tariffs on steel and aluminium products from China and three European countries, imposed under former president Donald Trump on national security grounds, breached global rules. Washington has maintained that issues of national security cannot be reviewed in WTO dispute settlement and the WTO has no authority to second-guess the ability of a member state to respond to a wide range of threats to its security.
Dropping the term “decoupling” for “de-risking” reflects in part the Biden administration’s belated recognition of the perils of a comprehensive decoupling from the Chinese economy. It was also intended to assuage the concerns of the wider world, not least among its Western allies.
International institutions such as the International Monetary Fund and the Organisation for Economic Cooperation and Development have warned of the potential consequences for the global economy of the US approach to competing with China. The Biden administration wants to avoid using the word “decoupling” but is not really changing tack.
It seems highly unlikely that Washington’s professed move away from “decoupling” from the Chinese economy will translate into concrete action. Would the Biden administration stop blacklisting Chinese companies? Would it relax restrictions on Chinese investment in the US tech sector?
Would it annul the US Chips and Science Act or the Inflation Reduction Act, which appear to be intended, at least in part, to shut China out of the semiconductor and electric vehicle sectors? Would it disband its exclusive clubs such as Chip 4 and its critical mineral buyers club? Would it agree to resume scientific cooperation with China at the governmental level?
Those who wish to see these steps are likely to be disappointed. In a move that could be indicative of what is to come in US policy towards China, Senate majority leader Chuck Schumer announced on May 3 that the Senate would advance a bill dubbed the “China Competition Act 2.0”, aimed at preventing China from acquiring advanced technology through enhanced export controls and restriction of US investment in China.
Senate Majority Leader Charles Schumer and his committee chairs talk to reporters about their proposed China competitiveness legislation in the US Capitol in Washington on May 3. Photo: Getty Images/ AFP
The US will continue to trade with China as it has learned that totally cutting economic ties between the two is neither feasible nor desirable. Nevertheless, the Biden administration still appears intent on building a “small yard” with a “high fence”.
The truth is that this is nothing short of decoupling in action. This “small yard” is not what it seems. The Biden administration’s current scheme covers sectors such as artificial intelligence, quantum computing and bioengineering. It also covers supply chains and critical minerals. The “small yard” is actually a vast open field which could expand over time.
Added to this is the US pursuit of global technological supremacy. In his speech, Sullivan said the US would “unapologetically pursue our industrial strategy at home”. China’s efforts to develop hi-tech sectors will inevitably be viewed as a threat to US national security and meet the full force of its assaults.
The Biden administration has devised a template for China’s hi-tech sectors, first used in the chip sector. It features a comprehensive ban covering an entire sector and a whole production process, rather than individual companies, and worldwide enforcement in collaboration with allies, all designed to keep China behind the US.
The “small yard” with a “high fence” not only threatens China but also affects many developing countries. Washington clearly sees decoupling as critical to its strategy of reducing China’s economic ties with the rest of the world. As a result, its behaviour looks set to continue, even if it is under the new banner of “de-risking”.
Zhou Xiaoming is a senior fellow at the Centre for China and Globalisation in Beijing and a former deputy representative of China’s Permanent Mission to the United Nations Office in Geneva
