Competing or collaborating?
The G7 summit in Hiroshima last weekend was striking for its coherence and bluntness on China. It was not that long ago that the G7 was an ineffective grouping, writing communiques that were quickly forgotten (or failing even to do that while Mr Trump was in office). But it has a new lease of life in an era of strategic competition, and particularly since the Russian invasion of Ukraine.
Economic risk & resilience
Beyond the security concerns in Asia and Europe, a key focus of the G7 meeting was on managing the economic risks from China. The G7 agreed to ‘coordinate our approach to economic resilience and economic security that is based on diversifying and deepening partnerships and de-risking, not de-coupling’.
Our policy approaches are not designed to harm China nor do we seek to thwart China’s economic progress and development. A growing China that plays by international rules would be of global interest. We are not decoupling or turning inwards. At the same time, we recognize that economic resilience requires de-risking and diversifying. We will take steps, individually and collectively, to invest in our own economic vibrancy. We will reduce excessive dependencies in our critical supply chains… We will foster resilience to economic coercion. We also recognize the necessity of protecting certain advanced technologies that could be used to threaten our national security without unduly limiting trade and investment.
The focus is to strengthen economic security by diversifying supply chains away from China, although many details remain to be worked out. The intensity of Western economic engagement with China will reduce over time, particularly in sensitive sectors, reinforced by Chinese policy to reduce its exposure to Western-oriented economies. Indeed, talks are underway to align US and EU approaches on screening outward investment to China around sensitive technologies; and this week Japan announced tough restrictions on exports of semiconductor equipment to China, aligning with the US and the Netherlands.
The G7 was also in coalition-building mode, discussing anti-economic coercion instruments to provide support to countries targeted by China because of political disputes. And there were attempts to develop relations with the Global South, by noting the new economic opportunities as supply chains were diversified out of China, and inviting the leaders of India, Brazil, Indonesia, and others.
The coherent G7 response to Russia’s invasion of Ukraine is being transferred across to China. And China has noticed. Despite early signs that US/China communication channels are reopening after several months (a ‘thaw’ in the words of President Biden), the logic of strategic competition remains intact: China blasted the G7’s statements and banned US semiconductor firm Micron from the Chinese market on Sunday.
The full note is available at: https://davidskilling.substack.com/p/competing-or-collaborating