G7 Summit’s ‘De-risking’ Pledge: Balancing Economic Ties and Security Concerns with China

The recent three-day summit of the Group of Seven (G7) leaders in Hiroshima, Japan concluded with a pledge to “de-risk” without resorting to “decoupling” from China. This approach, reflecting concerns from European and Japanese leaders, highlights the diverging perspectives within the G7 regarding China’s role in the global economy.

The G7 leaders, including US President Joe Biden, expressed their concerns about “economic coercion” by China and their intention to reduce exposure to the Chinese economy in various sectors, such as chips and minerals. However, differences in opinion emerged among G7 members in the lead-up to the summit, particularly regarding the extent of investment restrictions on China. The United States advocated for targeted controls, while Germany, France, and Japan exercised caution due to potential economic repercussions.

French President Emmanuel Macron’s recent visit to Beijing, during which he called for the European Union to reduce dependence on the United States, further highlighted the divergent outlook within the G7. These differing perspectives prompted a pragmatic approach in the language of the G7 communique, emphasizing that the aim was not to impede China’s economic progress and development, and that each country would act in its national interest.

A Japanese government official, speaking on the condition of anonymity, acknowledged the differences among G7 nations, particularly concerning US investment restrictions on China. However, the official highlighted that the summit was still able to convey a message that transcended these differences.

As discussions unfolded among G7 members, the language of the communique was carefully adjusted to strike a more balanced tone, according to a French presidential official. The official emphasized that the core message conveyed at the G7 was the European position, which views China as a partner, complementing their interests, but also as a systemic rival. This nuanced approach aimed to present a unified front while acknowledging the complexities of China’s role in the global landscape.

The G7 also made a conscious effort to employ language that would not alienate members of the “Global South,” referring to non-aligned emerging countries like India that the G7 seeks to engage with. The aim was to avoid giving China a pretext to complain and to maintain a balanced approach within the G7, as stated by Mikko Huotari of the Mercator Institute for China Studies.

The G7’s nuanced pledge to “de-risk” from China reflects the divergent perspectives and concerns within the group. While the summit sent a message regarding economic engagement with China, it also emphasized the need to balance interests and maintain a pragmatic approach. The challenge for the G7 lies in finding common ground and working towards a unified strategy that effectively addresses the complex dynamics of China’s economic influence while fostering positive global engagement.

White House national security adviser Jake Sullivan addressed reporters in Hiroshima, stating that the United States would present its own strategy regarding outbound investment controls after engaging in comprehensive consultations with G7 partners. This statement drew a rebuke from China, leading to the summoning of Japan’s envoy in protest. The Global Times, a state-backed media outlet, referred to the G7 as an “anti-China workshop” in response to the developments.

In a separate move that further escalated tensions, China announced its decision to block US firm Micron Technology Inc. from selling memory chips to key domestic industries. This action serves as a potential indication of further friction between China and the United States.

Jonathan Berkshire Miller, a director at the Macdonald Laurier Institute, a public policy think tank, noted that the G7’s adoption of the “de-risking” approach allowed for a consensus among its members regarding China. This shift in language demonstrates that US allies not only recognize the risks associated with deep economic engagement with China but also acknowledge the impracticality of completely severing economic ties with the country.

The decision to lay out the United States’ own approach on outbound investment controls following consultations with G7 partners underscores the complexities and importance of aligning strategies among like-minded nations. While this move indicates a unified front among G7 members, it also highlights the delicate balancing act required to navigate the multifaceted relationship with China. The G7’s approach aims to mitigate risks while maintaining essential economic ties, acknowledging that a complete decoupling is unlikely to be a feasible solution.

As tensions continue to rise, it remains to be seen how the relationship between the G7 nations and China will evolve. The interconnectedness of the global economy and the intertwined interests of different nations make finding a common ground challenging. The G7’s nuanced approach, marked by the “de-risking” strategy, demonstrates an understanding of the risks associated with economic engagement with China while striving to strike a balance between economic cooperation and addressing legitimate concerns. The evolving dynamics will require ongoing dialogue and coordination among G7 partners to effectively manage the complexities of their relationship with China.

Being the only Asian member of the G7, Japan stands out as a country with potentially more to lose if China were to retaliate. IMF data from last year reveals that mainland China was Japan’s largest export market, amounting to $145 billion, and its biggest source of imports, reaching $189 billion.

Following the release of the communique, the G7 leaders themselves adopted measured language when discussing China. President Biden expressed his expectation of a thaw in relations with Beijing in the near future. German Chancellor Olaf Scholz assured that G7 nations would continue making significant investments in China while managing risk exposure.

President Biden also highlighted that the aim of “de-risking” was to ensure that the United States did not become overly dependent on any single country for essential products. The reluctance to decouple entirely from China stems from the understanding that it would be a challenging and impractical endeavor.

Kunihiko Miyake, research director at the Canon Institute for Global Studies, noted that the motivation behind de-risking is to prevent technology and manufacturing capabilities that could pose security concerns from reaching China. Miyake further remarked that, in substance, de-risking and decoupling carry similar implications. However, it remains uncertain whether Beijing perceives a distinction between the two concepts.

Miyake emphasized that the change in terminology from decoupling to de-risking does not imply that China will be unaffected. The intention behind the adjustment in language is not sufficient to guarantee a positive response from Beijing.

As the G7 countries navigate their relationship with China, it is clear that Japan, given its extensive economic ties with China, has a vested interest in managing the situation carefully. The interdependence of economies underscores the complexities involved in striking a balance between risk mitigation and maintaining crucial economic relationships. The G7’s adoption of a de-risking approach reflects a pragmatic recognition of the challenges associated with decoupling while aiming to address security concerns and safeguard critical technologies. The ongoing dialogue and engagement with China will shape the future dynamics of the global economy and geopolitical landscape.

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