Is the US pursuing a policy of “de-risking” rather than “decoupling” with China?

A little over a year ago, US Treasury Secretary Janet Yellen confidently argued in a speech that the US had no intention of decoupling from China. She emphasized that a “full separation” of the economies would be “disastrous” for both nations. A week later, US National Security Adviser Jake Sullivan firmly stated that the US was actively pursuing a policy of “de-risking” instead of “decoupling”, borrowing a phrase from European Commission President Ursula von der Leyen.

This rhetoric was strategically crafted to counter Chinese criticism that the US was taking actions, such as technology-related export controls, to restrict China’s economic growth.

The Biden administration has implemented several measures aimed at China’s technology sector. These include tightening semiconductor export controls and placing dozens of Chinese companies on the U.S. Commerce Department’s Entity List, which requires these firms to secure a special license to purchase U.S. technologies. Additionally, the U.S. has increased efforts to secure new critical mineral supplies from sources outside of China to address concerns about supply chain vulnerabilities. The strained relationship came into focus again this week when President Joe Biden sharply raised tariffs on imports of Chinese electric vehicles and other clean energy products.

Washington’s closest allies, especially in Europe, have become anxious about the aggressive economic discussions. Within the European Union, leaders have disagreed on how to shape their China policy. Most recently, French President Emmanuel Macron urged Europe not to simply follow Washington’s lead in its relations with Beijing. European Commission President Ursula von der Leyen has consistently advocated for reducing the risks in the relationship with China, rather than completely separating from it. In his speech, Sullivan also used similar language, and even directly acknowledged von der Leyen at one point.

De-risking encompasses reducing security threats from China and diversifying US dependence on Chinese supply chains. Whether Sullivan and Yellen’s reassuring words will be followed by concrete actions remains to be seen.

European companies are still optimistic about their prospects in China. Nearly 40% of companies in Germany and Spain and over 30% of firms in France expect an increase in their supply chain footprint in the country, according to a report by Allianz Trade. In contrast, only 27% of companies surveyed in the US were planning to expand in China.

A Strategy to Compete With China. Will It Work?

1. To build a viable technology manufacturing sector, from clean energy to semiconductors.
2. Tariffs on Chinese imports, which threaten those efforts.
3. Restrictions on access to money, technology, and know-how, which could help China compete.
4. A unified economic front with allies.

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