Why China wants to be a risk
De-risking is an ugly name for an interesting idea. When explaining how they hope to manage future relations with China, a growing number of Western leaders describe some version of risk management. This approach is presented as a middle path between the impossibleie, trying to contain or isolate a country of Chinas size and importanceand the intolerablenamely, dependency on an autocracy that often bullies smaller countries. The European Commission president, Ursula von der Leyen, is a prominent user of the term. The head of the European Unions permanent executive says that it is neither viable nor in Europes interest to decouple from China, a vital trading partner and leading player in efforts to tackle climate change and other global challenges. Instead, citing Chinas growing repression at home and assertiveness abroad, she calls for de-risking ties. De-risking is actually a catch-all for several defensive strategies. Mrs von der Leyen emphasises diplomatic candour, to avoid misunderstandings. Before a recent visit to Beijing she spelled out Chinese actions that damage trust, from unfair trade practices to Xi Jinpings embrace of Vladimir Putin, even after Russias atrocious and illegal invasion of Ukraine. In the same vein, on April 18th foreign ministers from the Group of Seven (G7) club of rich countries listed behaviours for China to avoid, among them forcing foreign firms to hand over technologies or data in return for market access and supporting the cyber-theft of commercial secrets. For good measure, G7 ministers warned China against using force to resolve territorial disputes, including in Taiwan (a scenario which could, by itself, devastate the global economy). In America, the EU and elsewhere, de-risking can involve screening and even curbing investments in and out of China, as well as subsidies for rebuilding domestic industries, to reduce Chinese dominance of vital supply chains. It can also describe the use of national-security tools. To prevent China from building potent weapons with foreign technologies, America, Japan and the Netherlands are restricting exports to China of cutting-edge semiconductors and the equipment needed to make them. Liberal democracies are even turning to risk management in such fraught domains as human rights. Foreign criticism will not end Chinas iron-fisted rule over Xinjiang. In the name of fighting Islamic extremism in that far-western region, authorities have demolished mosques, jailed poets and sent Uyghurs to re-education camps, coercive work programmes and harsh boarding schools. But democracies have a right to protect consumers from buying the fruits of repression. Americas Uyghur Forced Labour Prevention Act, enacted in 2021, bars goods from Xinjiang and those that use inputs from the region, unless traders can prove they were not made with forced labour. In the past ten months, customs agents have impounded almost a billion dollars worth of goods including solar panels, a product that often uses polysilicon mined and processed in Xinjiang. Without singling out China by name, the EU has proposed its own ban on products of forced labour. Alas, to succeed, these various strategies will have to overcome a large obstacle: Mr Xis China does not want to be de-risked. Start with diplomatic candour, and the supposed benefits of handing China lists of behaviours that make Western powers cross, or concessions (eg, international commitments over climate change) that would make Europeans and others cheer. In reality, China is increasingly confident that lectures from America and its allies are resented by many countries, especially poorer ones. America-scolding comments by two presidents, Emmanuel Macron of France and Luiz Inacio Lula da Silva of Brazil, during recent visits to China, further confirmed this view. Chinas foreign ministry duly spurned the statement issued by the G7 in terms calculated to appeal to the global south. A spokesman accused the group of arrogance and of pointing fingers condescendingly, in a way that runs counter to the prevailing trends of todays world. Nor does China want its supply chains de-risked by outsiders. Quite the opposite: Chinas dominant role as a producer of vital goods and commodities is Mr Xis stated goal. Some years ago the Communist Party boss called foreign dependence on Chinese supply chains a powerful countermeasure and deterrent capability. In contrast, Mr Xi repeatedly urges China to avoid dependence on foreigners and achieve self-reliance in key technologies. Where everything is a matter of national security It is risky for foreign firms in Mr Xis China even to screen their own supply chains for abuses. The Central Political and Legal Committee, a powerful law-enforcement body, marked National Security Education Day on April 15th by warning Chinese citizens about the devious ways of foreign enemies, including in the realm of economic security. One case study involved a Chinese supply-chain auditor punished under anti-espionage laws for helping a foreign NGO concoct allegations of forced labour in Xinjiang. That reflects an unhappy trend, says a supply-chain expert. A few years ago Chinese suppliers tolerated foreign audits as a sign of quality control. Today, he says: anything related to forced labour, broadly defined, is a total no-go. You cant ask those questions without endangering everyone you contact. Major auditing firms refuse to work in Xinjiang, citing restrictions on access. Revealingly, when self-interest calls, China will allow foreigners to conduct due diligence. In late 2022 American officials were allowed to visit chipmaking firms in China to check that they were not selling US technologies to military end-users. That reflected a contest of strength. America dominates many fields of chipmaking and had threatened to put Chinese firms on a blacklist. De-risking is not a foolish way to approach relations with China. When trust collapses, continued engagement requires risk management. Still, expect China to call de-risking just another form of containment. Decoupling will not be easily avoided. Read more from Chaguan, our columnist on China: Why Xi Jinping is not another Chairman Mao (Apr 5th) Joe Biden attempts to defang the Chinese tiger (Mar 30th) The revealing appeal of Chinas cheapest city (Mar 22nd) Also: How the Chaguan column got its name