‘We are not decoupling’: G-7 leaders agree on approach to ‘de-risk’ from China

Leaders
of
the
Group
of
Seven
agreed
there’s
a
need
to
de-risk,
not
decouple
from
China,
and
acknowledged
challenges
posed
by
the
mainland’s
practices
which
“distort
the
global
economy.”

“We
are
not
decoupling
or
turning
inwards,”
the
G-7
said
in
a
joint
statement
released
over
the
weekend
as
leaders
met
in
Hiroshima,
Japan.
“At
the
same
time,
we
recognize
that
economic
resilience
requires
de-risking
and
diversifying.”

Leaders
added,
“We
will
seek
to
address
the
challenges
posed
by
China’s
non-market
policies
and
practices,
which
distort
the
global
economy.
We
will
counter
malign
practices,
such
as
illegitimate
technology
transfer
or
data
disclosure.”

Reiterating
the
stance,
President
Joe
Biden
said
at
a
press
conference
on
Sunday:
“We’re
not
looking
to
decouple
from
China,
we’re
looking
to
de-risk
and
diversify
our
relationship
with
China. 

He
explained
that
means
taking
steps
to
diversify
supply
chains,
“so
we’re
not
dependent
on
any
one
country
for
necessary
product. It
means
resisting
economic
coercion
together
and
countering
harmful
practices
that
hurt
our
workers. It
means
protecting
a
narrow
set
of
advanced
technologies
critical
for
our
national
security.”

Speaking
after
the
G-7
finance
ministers
and
central
bank
governors’
meeting
earlier
this
month,
U.S.
Treasury
Secretary

Janet
Yellen
said
China’s
behavior
is
“a
matter
that
should
be
of
concern
to
all
of
us.”

“There
have
been
examples
of
China
using
economic
coercion
on
countries
that
take
actions
that
China’s
not
happy
with
from
a
geopolitical
perspective,”
she
said,
citing
China’s
trade
disputes
with
Australia
and
Lithuania
as
examples.

In
their
statement
the
G-7
leaders
said,
“We
will
foster
resilience
to
economic
coercion.
We
also
recognize
the
necessity
of
protecting
certain
advanced
technologies
that
could
be
used
to
threaten
our
national
security
without
unduly
limiting
trade
and
investment.”

The
world’s
leading
democracies
said
the
group
will
“reduce
excessive
dependencies
in
our
critical
supply
chains”
while
emphasizing
the
need
to
cooperate
with
China,
citing
its
role
in
the
international
community
and
the
size
of
its
economy.

“We
stand
prepared
to
build
constructive
and
stable
relations
with
China,
recognizing
the
importance
of
engaging
candidly
with
and
expressing
our
concerns
directly
to
China.
We
act
in
our
national
interest,”
the
statement
said.

President
Joe
Biden’s
administration
previously
briefed
industry
groups
such
as
the
Chamber
of
Commerce
on
measures
seeking
to
curb
American
investments
into
China,
according
to
media
reports.

Such
rules
would
mean
stricter
guidelines
for
U.S.
companies
that
will
be
required
to
inform
the
government
of
new
investments
in
Chinese
technology
companies,

according
to
Politico.
Deals
in
critical
sectors
such
as
microchips
will
also
be
banned,
according
to
the
publication.

U.K.
Prime
Minister
Rishi
Sunak
also
told
journalists
that
London
was
open
to
following
the
U.S.
lead
over
curbs
on
Chinese
investment,

the
Financial
Times
reported.

Ahead
of
the
weekend’s
G-7
summit, Goldman
Sachs
economists
Hui
Shan
and
Andrew
Tilton
said they
expected
steps
to
be
taken
by the
Committee
on
Foreign
Investment
in
the
United
States,
or
CFIUS
—
a
U.S.
government
agency
that
reviews
deals
involving
foreign
investment
in
the
U.S.
to
see
if
the
transaction
infringe
on
the
country’s
national
security.

In
a
note
previewing
the
set
of
measures
earlier
this
month,
they
said
there
may
be
“more
focus
on
refining
the
existing
tariff,
export
control,
and
investment
regimes
once
basic
frameworks
are
in
place.”

“We
expect
them
to
be
fairly
narrowly-focused
on
advanced
semiconductors
and
related
technologies,
paralleling
last
autumn’s
export
controls,
and
do
not
anticipate
significant
restrictions
on
secondary
market
portfolio
investments.”

The
impact
of
a
widening
rift
between
the
U.S.
and
China
may
lead
to
further
damage,
economists
at
Allianz
said
in
a
note
las
Wednesday.

“The
economic
implications
of
a
further
decoupling
between
the
West
and
China
could
be
far-reaching,”
they
wrote,
adding
the
damage
to
the
Chinese
economy
could
be
“far
from
negligible.”

“China
could
retaliate
by
curtailing
the
supply
of
critical
raw
materials
in
which
it
has
a
dominant
position,
which
could
severely
disrupt
global
supply
chains,”
they
said.

“But
this
is
unlikely
as
it
already
applies
some
forms
of
outbound
investment
restrictions
and
is
still
looking
towards
economic
pragmatism.”

Further
escalations
could
potentially
lie
ahead
for
U.S.-China
relations
after
Washington
concluded
negotiations
with
Taiwan
on
a
number
of
trade
items
on
Friday,
marking
a
potential
deal
on
the
first
part
of
the
bilateral

“21st
Century
Trade”
initiative.

The
first
agreement
under
the
initiative
includes:
customs
administration
and
trade
facilitation,
good
regulatory
practices,
services
domestic
regulation,
anticorruption,
and
small
and
medium-sized
enterprises,

the
office
of
the
United
States
Trade
Representative
said
in
a
release.

U.S.
trade
representative
Katherine
Tai
said
of
the
agreement,
“This
accomplishment
represents
an
important
step
forward
in
strengthening
the
U.S.-Taiwan
economic
relationship.”

China
has
repeatedly
warned
against
deepening
bilateral
engagement
between
the
U.S.
and
Taiwan.

Goldman
Sachs
argued
that
with
the
Taiwan
factor,
the
focus
of
U.S.-China
tensions
may
shift
from
trade
to
military.

“The
more
immediate
focus
has
been
on
building
Taiwan’s
military
capabilities
to
deter
a
conflict,”
U.S.
political
economists
Alec
Phillips
and
Tim
Krupa
wrote
earlier
this
month,
adding
that
they
see
“good
odds”
that
the
U.S.
Congress
passes
additional
support
to
currently
existing
schemes.