De-Risking as Viewed from China

"Old wine in a new bottle"

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“De-risking” is very much the buzzword at the moment within China’s EU and US watching circles. At best, it is seen as consolidating a decision by the West not to decouple from China (at least not fully). More generally, however, scholars in China tend to view this new slogan as doing little to reverse the “protectionist” and “China-sceptic” policies that are seen as being already well under way in both the US and the EU.

Although the West’s efforts and, as some would put it, “need” to engage more with China over the past few months have been welcomed, concern and pessimism over what this "de-risking future" might entail for US/EU-China relations was often evident in my conversations with scholars here in Beijing. One prominent Europe specialist commented that Western “de-risking” may end up pushing China to rely even more on itself and its domestic market. A China less connected with the world, bodes no good for anyone, remarked another.

Today’s edition consists of a selection of commentaries by Chinese analysts on the issue of EU and US de-risking.

I will be in Beijing until the end of the week followed by ten days in Shanghai. To those of you who may be reading this newsletter from China, I would love to hear from you.

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Author: Zhong Feiteng (钟飞腾) – Director of the Centre for Regional Security Studies and researcher at the Asia-Pacific and Global Strategy Research Institute, Chinese Academy of Social Sciences (CASS)
Published: 05 July 2023
Source: Shijie Zhishi

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• “In terms of the change in wording at least, 'de-risking' is softer than 'decoupling' … From China's perspective, the positive side of this shift is that, after several years of gamesmanship, the West has finally realised that a full 'decoupling' from China is impossible. In particular, Europe is not willing to maintain the same policy towards China as the US and has expressed its desire to make choices based on its own interests and long-term strategic needs.”

  • Washington’s adoption of this EU-initiated concept is both an acknowledgement of European autonomy and a sign that the US economy simply cannot do without China.

• “[However,] the US and Europe's so-called ‘de-risking from China’, with their emphasis on reducing ties with our country in the areas of technology and supply chains, is in fact much the same as ‘decoupling’ [实际上与“脱钩”是一回事].”

  • De-risking' and 'decoupling' are intrinsically linked, with the fundamental objective still being to ‘de-sinicise' [去中国化].”

  • “In the near future, ‘de-risking’ may well be replaced by yet another new term.”

• “Through de-risking, the West seeks to achieve three objectives:

  • “First, to ensure Western dominance in a number of emerging industries.”

  • “Second, to deny China access to technologies that can be used to enhance its strategic military capabilities.”

  • “Third, to strengthen as far as possible its manufacturing base at home.”

• “As to why there is a campaign to 'de-sinicise', it is the hegemonic mindset of the West that is ultimately at play. Instead of seeing a rising China as more conducive to world peace and development, China is being vilified as a source of ‘risk’ to the West.”

  • “Treating China as a risk rather than an opportunity will only continue to hinder the world's economic recovery.”

• The ambiguity surrounding the concept of ‘de-risking’ will continue to impede on the implementation of its related policies.

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Author: Jian Junbo (简军波) – Deputy director of the Centre for China-Europe Relations, Fudan University.
Published: 27 June 2023
Source: The Paper

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On why the EU has chosen the term “de-risking”:

1. The use of the word “risk" implies that the EU is facing a threat from China. Therefore, “de-risking” will allow Brussels to legitimise any of its protectionist trade policies by implying that China is to blame for these.

   1. Jian thus fully agrees with his colleague from Sichuan University Yuan Hang (原航), who stated that “de-risking” is “a discursive trap [designed] by the EU … [which] shifts the blame onto the other party [i.e. China], stigmatises it, and subjects it to its moral judgment, which [in turn] serves as a moral basis for its [i.e. the EU’s] subsequent actions.”

2. Nevertheless, de-risking should provide Brussels with more flexibility in its approach towards China.

   1. “As the ‘de-risking’ rhetoric grows in popularity in Europe, the true meaning of this term and its actual impact on the [EU’s] economic policy towards China have not yet been clarified or clearly defined. This is perhaps what Europe wanted to achieve: a vague term with an unclear meaning that provides enough room for a more flexible European economic policy towards China.”

3. The choice of the term “de-risking” rather than “decoupling” has allowed Brussels to find a suitable middle ground between pro-decoupling and pro-engagement voices in Europe. This should allow for greater unity within the EU when it comes to the PRC.

   1. Unity is one of several reasons why Brussels may choose not to delineate the contours of this concept further.

4. The adoption of this same term by the US should help Brussels and Washington improve the coordination of their economic policies towards the PRC. Despite notable disagreements between the two when it comes to China, “de-risking will become the glue that holds their common China agenda together.”

Implications for China:

1. Although inherently ambiguous, this “de-risking” process is set to continue the EU’s trend towards the “securitisation” [安全化] of its internal market and the reduction of its multiple dependencies on China. ‘De-risking’ is also set to be used as a means to hinder China’s technological rise.

   1. “On the surface, ‘de-risking’ appears to be milder than ‘decoupling’. Whereas the former is primarily concerned with security, and apparently allows for normal communication to be maintained in areas where security is not involved, 'decoupling' denotes a separation, a complete break at all levels. This is indeed true in terms of the severity conveyed by these terms, but the problem is that de-risking is extremely ambiguous in meaning and is based on a broad generalisation of ‘security risks’. This leaves a huge amount of room for ‘de-risking’ policies to operate in. Although it may not be as bad as decoupling, it will not be as benign as we may imagine.”

   2. “For our country, the ‘de-risking from China’ rhetoric that is currently in vogue in Europe is actually quite deceptive and dangerous [具有相当大的欺骗性和危险]. As mentioned previously, its ambiguity is largely intentional on the part of the Europeans. China should understand the true intentions of their ‘de-risking from China’ [rhetoric] in light of their growing geopolitical awareness.”

   3. “'De-risking' will operate on multiple levels and is set to pose an ongoing challenge to China-EU relations. Thus, the development of appropriate hedging strategies at different levels will be a continuing priority for China. Nevertheless, as long as China continues to upgrade its industries and open up to the outside world, the risks posed to our country by Europe's ‘de-risking from China’ policy will continue to diminish, or even disappear.”

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Female author: Sun Ru (孙茹) – Researcher at, and former deputy director of, the Institute of World Political Studies, China Institutes of Contemporary International Relations (CICIR)
Male author: Wang Lei (王磊) – Associate researcher at CICIR’s Institute of World Political Studies
Published: 24 May 2023 (8 June 2023 in English)
Source: China-US Focus

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• “The American edition of de-risking is similar to the European one in advocating economic and industrial security, the diversification of the supply chain, the protection of basic technologies and sensitive high tech via a “small courtyard with high walls” and collaboration with allies and partners.”

• “There are arguably multiple drivers behind the de-risking strategy proposed in Europe and the United States:”

  • “First, decoupling is not achievable. Although the voice for decoupling has been loud in recent years and relations between China and the West have been challenged in many fields, their economic and trade ties are complementary, mutually beneficial and hard to sever.”

  • “Second, … Europe and the U.S. want to use China's strength in addressing major regional hot spots such as the Ukraine crisis … Europe and the U.S. cannot bypass China in dealing with global challenges.”

  • “The third element is China’s remarkable achievements in diplomatic good offices. It has published a position paper on the conflict between Russia and Ukraine, set up a phone conversation between its President and Ukrainian President Volodymyr Zelenskyy, and sent the special representative for Eurasian affairs on a European tour. It has also actively brokered the resumption of diplomatic relations between Saudi Arabia and Iran and championed a series of initiatives such as the trilateral dialogue between China, Afghanistan and Pakistan, giving a steady push to international and regional peace and stability. All of these things have forced Europe and the United States to face up to China’s role as a responsible and constructive major country.”

• “The shift from decoupling to de-risking reflects some positive adjustments in the European and American attitudes toward China … [and is] conducive to bringing Europe’s and America’s China policies back on track.”

• “Furthermore, Europe and the U.S. have demonstrated an inclination to engage and have dialogue with China … America and Europe are both increasing communication and dialogue with China and shifting their emphasis from competition and confrontation to dialogue and cooperation.”

• “However, we must also see that de-risking does not mean any fundamental change in the European and American China strategies. The EU still sees China as a partner, a competitor and a systemic rival, with increased competitiveness in their relations. It continues to regard China as its No. 1 competitor and has not changed its strategy to contain, encircle and suppress China.”

• “The de-risking proposition in Europe and the U.S. represents the latest development in their strategic adjustment and is an improvement … It is, however, not enough.”

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1. Zhao Minghao (赵明昊), professor at the Institute of International Studies, Fudan University, on the US’s plan ‘de-risk’ from China.

• “Although the Biden administration intends to appease the US business community and allies by toning down the rhetoric of its ‘decoupling’ policy, the ‘securitisation’ of its economic and trade policy towards China is in fact still increasing. In practice, US policies reveal a pattern of ‘selective and managed decoupling’."

• Source: The Paper (26.06.2023)

2. Wu Huiping (伍慧萍), deputy director of the Centre for German Studies at Tongji University, discussing Germany’s national security strategy, ‘de-risking’ and the Franco-German tandem:

• “The existence of different standpoints and different voices within Europe can provide us with a handhold [抓手] to win over more China-friendly forces. In a similar vein, Germany's China strategy has been delayed due to considerable internal disagreements. This outcome is not a bad thing for us.”

• Source: Guancha.cn (27.06.2023)

3. Zhao Yongsheng (赵永升), director of the Centre for French Economic Studies at the University of International Business and Economics (UIBE), on the EU’s ‘de-risking’ plan and EU-China relations:

• “Regarding [Josep] Borrell's claim that 'derisking cannot be a slogan. It has to translate into policies’, I believe that this will be extremely difficult to put into practice. After all, slogans are easy to chant, but policies are difficult to formulate. The question is, what kind of products from what kind of companies belonging to what type of industries can be put under the ‘de-risking’ category without falling into the predicament of ‘decoupling’?”

• Source: Global Times (26.06.2023)

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