U.S. - China Relations: Decoupling to De-Risking

The Trump-era U.S. focused on decoupling from China.
The U.S. is shifting its policy on China from decoupling to de-risking.
The EU has declared that its approach to China will be based on de-risking, ensuring it through its Leader’s Communique at G7 Summit.

How was the diplomatic ties between the U.S. and China so far?

The diplomatic ties between the U.S. and China establishment in 1979.
Both the countries embarked on a path of increasing economic interdependence.
China gained immensely from this relationship and its economic and military power grew, to challenge the primacy of the U.S.
Trump Era – The Trump administration made it a point to attack the gargantuan bilateral trade imbalance in favour of China.
The U.S.-China ‘trade war’ started and the US started following ‘Decoupling’ policy.
Biden Era – Over time, the Biden administration added its own features into the China policy inherited from Trump changing it in to ‘de-risking’.

Decoupling is a term used to refer to the unwinding of deep economic and commercial ties between two nations, whereas de-risking means removing or avoiding risks rather than managing it.

What is ‘de-risking’?

De-risking – It means having resilient, effective supply chains and ensuring the economy cannot be subjected to the coercion of any other country.
De-risking aims to limit such an enmeshed effect only in areas where it challenges the U.S. national security and industrial competence.
The U.S.’s de-risking activities – Recent legislations such as the Bipartisan Infrastructure Law, CHIPS and Science Act as well as the Inflation Reduction Act reflects this new approach.
The U.S.’s geo-economic initiatives also reflects the spirit of de-risking such as,
Partnership for Global Infrastructure and Investment (PGII)
Indo-Pacific Economic Framework for Prosperity (IPEF)

Why U.S. is de-risking?

The policy change has been announced in the wake of several events of high geopolitical significance.
The global economy is trying to rebound from the disruptive years after pandemic.
The U.S.-China rivalry had peaked due to the tension across the Taiwan Strait and the spy balloon.
The ongoing Russia-Ukraine conflict and the Chinese President Xi Jinping’s visit to Russia proposing a peace plan.
Xi Jinping’s ‘peacemaking diplomacy’ is extended to West Asia.
These recent developments have made U.S. to reconsider its earlier approach towards China.

What could be the geopolitical implications of de-risking?

The U.S. adopting the path of de-risking will keep its allies closer in its geopolitical rivalry against China.
It has already won a significant victory in Japan at the G-7 summit.
On the other hand, China has expressed its disapproval in painting China as the actor responsible for heightening geopolitical risks.
De-risking helps the West’s moves to counter China’s rise much more sustainable by facilitating a united front among allies.
Countries like India will benefit from de-risking by leveraging its benefits like attracting supply chains.