De-Risking or Decoupling? China- US Bilateral Trade Falls More Than 10% This Year

Analysts have criticized the new ‘de-risking’ strategy that the U.S. is currently using against China, explained by U.S. National Security Advisor Jake Sullivan in April, clarifying that national security was over economic costs. These de-risking policies might affect bilateral trade, which fell by 11.2% to $217.9 billion during the first four months of 2023.

‘De-Risking’ Is a Euphemism for Decoupling U.S. and China Relations, Analysts State

Analysts are criticizing the ‘de-risking’ strategy of the US against China. The term, which was mentioned by the U.S. National Security Advisor Jake Sullivan last month, is used to explain the position that the U.S. is adopting in front of the growth and policies of China on the Russia-Ukraine conflict. And while U.S. Treasury Secretary Yanet Yellen has previously stated that a full decuple of the economies of the two countries would be “disastrous,” Chinese analysts believe that this is just a semantics choice.

Zhou Xiaoming, a senior researcher at the Centre for China and Globalisation, has stated that this ‘de-risking’ strategy has ‘nothing short’ of decoupling in action, as it seeks to limit the economic interaction with China to just the necessary. Xiaoming explains:

The U.S. 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”.

This approach would be responsible for the inclusion of more Chinese companies in the called ‘entity list’ of the Office of Foreign Assets Control (OFAC), and the recent tightening of the export controls on chips to China, but might expand to other fields in the future, Xioaming states.

Possible Effects on Trade

Xiaoming believes that this de-risking strategy seeks to also undermine the relations that China has with the world, stating that ‘Washington clearly sees decoupling as critical to its strategy of reducing China’s economic ties with the rest of the world.”

However, this might also be affecting American consumers and companies. According to the General Administration of Customs of China, bilateral trade has fallen by 11.2% year over year during the first four months of 2023, after having registered a $690 billion record in 2022.

The European Union (EU) has also recently proposed to de-risk its relationship with China, facing a strong answer from Foreign Minister Qin Gang, who stated:

China does not export its system, and it follows a path of peaceful development, pursues a mutually beneficial strategy of opening up, stays true to and safeguards the international order underpinned by international law, and opposes hegemonic, domineering and bullying practices.

What do you think about the de-risking strategy applied by the U.S. government against China? Tell us in the comments section below.