{"id":80594,"date":"2023-06-21T11:00:20","date_gmt":"2023-06-21T01:00:20","guid":{"rendered":"https:\/\/www.aspistrategist.ru\/?p=80594"},"modified":"2023-06-21T10:17:16","modified_gmt":"2023-06-21T00:17:16","slug":"the-risks-of-de-risking","status":"publish","type":"post","link":"https:\/\/www.aspistrategist.ru\/the-risks-of-de-risking\/","title":{"rendered":"The risks of de-risking"},"content":{"rendered":"
<\/figure>\n

We have just witnessed the birth of a buzzword. Suddenly, policymakers in the United States and across Europe want to \u2018de-risk<\/a>\u2019 the relationship with China.<\/p>\n

The term owes its new popularity to the equally sudden turn away from \u2018decoupling\u2019, which made the rounds for a while, until it turned out that almost no one favours a definitive break between China and the West. It is neither desirable nor even feasible to sever all ties with the world\u2019s second-largest economy<\/a>, so everyone has settled on a much vaguer concept.<\/p>\n

While decoupling is quite clear, de-risking is open to many interpretations. Risks are inherent in all economic activity, and in market economies, the willingness to take risks drives innovation, growth and greater prosperity. If an economy without risk were possible, it would offer no rewards, and thus would tend towards sclerosis.<\/p>\n

From huge multinational corporations to small family businesses, all economic actors constantly assess opportunities and risks, and seek to maintain a prudent balance between the two. While some risk is unavoidable, most try to manage it responsibly. In this sense, de-risking is a constant, uncontroversial feature of any open economy, and the de-risking of a national economy simply represents the sum of all economic players\u2019 efforts in this regard.<\/p>\n

With respect to China, most Western firms\u2019 risk\u2013reward calculus has already shifted in response to the country\u2019s increasingly state-centric and security-oriented economic policies. Now that China\u2019s growth prospects have dimmed, its economy is no longer as alluring as it once was. The latest report<\/a> from the European Chamber of Commerce in Beijing\u2014long respected for its robust analytical work\u2014paints a bleak picture of diminishing opportunities and greater risks. That conclusion is based wholly on what\u2019s happening in China itself, not on any of the political rhetoric emanating from Washington and Brussels. If China pivoted back towards embracing markets and openness, the European Chamber\u2019s assessment would change.<\/p>\n

Given recent experience, it\u2019s perfectly sensible to focus on making global supply chains\u2014the lifeblood of the global economy\u2014more resilient to shocks and disruptions. Every corporate board worth its salt already has that on the agenda. In these cases, de-risking is just business; it isn\u2019t personal.<\/p>\n

But the new political rhetoric takes things further. It implies that trade with China is inherently risky regardless of the domestic business and investment environment. Western leaders increasingly fear that China will use trade or other economic links to apply political pressure against Western companies or countries that it wants to punish. In fact, it has already done that to Australia<\/a>\u2014though to little effect.<\/p>\n

Is the risk of losing trade in the future a good reason to avoid trading now, when the option is still available? One normally doesn\u2019t commit suicide to reduce the fear of death, and one can still hope that Chinese authorities will recognise that most of their attempts at economic coercion have been unsuccessful. The same goes for the government\u2019s return to a more statist economy. History has shown that this approach simply does not work.<\/p>\n

But Western countries can\u2019t ignore the fact that China dominates<\/a> the supply of metals and rare-earth elements necessary for the transition to a low-carbon economy, and that it controls a massive share of the global market for photovoltaic cells<\/a> and electric vehicles<\/a>. Like oil, critical raw materials must be sought wherever they are located, and those locations aren\u2019t always ideal from a geopolitical standpoint. While it\u2019s only common sense for countries to mitigate their economic vulnerabilities and dependencies through diversification, they can\u2019t conjure critically important deposits where they don\u2019t naturally exist.<\/p>\n

There\u2019s only one way to meet the challenge that China poses as a dominant player in key green technologies: US and European industries must become as competitive as their Chinese counterparts. Until that happens, it makes little sense to forgo China-sourced products that are cheaper, better or both. Doing so would make it even more difficult for European and US companies to catch up, ultimately delaying the energy transition.<\/p>\n

For their part, Chinese officials have said<\/a> that they see no meaningful difference between de-risking and decoupling. They have a point. Until Western strategists move beyond simply endorsing a new buzzword to clarifying what it does and doesn\u2019t mean, such rhetoric may do more harm than good.<\/p>\n

Heightened tensions don\u2019t serve anyone\u2019s interests. Everyone agrees that decoupling should be avoided. The task now is to de-risk the concept of de-risking before we undermine our economic prospects unnecessarily.<\/p>\n","protected":false},"excerpt":{"rendered":"

We have just witnessed the birth of a buzzword. Suddenly, policymakers in the United States and across Europe want to \u2018de-risk\u2019 the relationship with China. The term owes its new popularity to the equally sudden …<\/p>\n","protected":false},"author":527,"featured_media":80599,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"footnotes":""},"categories":[1],"tags":[52,3564,3399,35,2750],"class_list":["post-80594","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-china","tag-de-risking","tag-decoupling","tag-risk","tag-supply-chain"],"acf":[],"yoast_head":"\nThe risks of de-risking | The Strategist<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.aspistrategist.ru\/the-risks-of-de-risking\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The risks of de-risking | The Strategist\" \/>\n<meta property=\"og:description\" content=\"We have just witnessed the birth of a buzzword. 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