US-China decoupling? Washington calls it 'de-risking', but Beijing blasts 'zero-sum cold war mindset'

Washington's repeated calls for "de-risking, not decoupling" from China's economy, has been a hard sell to Chinese leaders, analysts say after the two countries set up a mechanism this week to assess how they can jointly tackle sensitive trade and tech curbs in the coming months.

Hailing her "productive" China trip that marked "an important beginning" in managing bilateral tensions, US Commerce Secretary Gina Raimondo relayed the message once again to her Chinese counterparts this week that the US does not seek to decouple, nor does it intend to hold back China's economy.

Meanwhile, she insisted that the US would not negotiate in matters of national security, after Beijing and Washington debuted an information exchange mechanism on export controls - a move not expected to substantially ease export controls, as Beijing desires.

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"I was very clear that, for all of our controls ... we're not interested in changing them and we are not interested in negotiating them," she said on Wednesday in Shanghai.

On Friday, the Ministry of Foreign Affairs had some strong words on the matter, at a regular press conference. It accused the US of comprehensively "containing" China through wars of tariffs, trade, tech, chips and rules.

The US has beefed up restrictions to choke off China's access to advanced technologies, which has been widely viewed as damaging bilateral relations.

"What the US is doing is not competition but enforcing its zero-sum cold war mindset," ministry spokesman Wang Wenbin said. "China strongly opposes the suppression of the US in the name of competition, which will only push two countries towards confrontations and divide the world with the new cold war."

The comments were in line with China's repeatedly stated opposition to any moves that cut it off from the world's key supply chains. Officials have repeatedly slammed such attempts to de-risk economies as being false propositions and only detrimental to the global economy.

On Thursday, the Ministry of Commerce said US-China tensions represented the "biggest risk" now for multinational firms.

"We reckon that the best way to de-risk is to resume a healthy and stable trajectory in the bilateral trade relationship," a ministry spokesman said at a regular press conference.

China's ambassador to the US, Xie Feng, had expressed similar sentiment on Tuesday at a business forum in the US, while Raimondo was in China working to dispel concerns.

"China-US decoupling would pose the biggest risk [to the two countries]. Confrontation is the largest insecurity. De-risking from China means the loss of opportunities, cooperation, stability and development," Xie said.

In essence, the US is intensifying its "small yard, high fence" strategy, with the latest move to restrict the US' investment in Chinese semiconductors and AI coming when their advancements are badly needed to power the nation's tech strength and future growth.

"The 'fence' and 'yard' are by nature vague. Conceivably, the US side will continue to set the parameters when it comes to [the fence's] related height and width. The working group on information exchange helps to make the strategy tangible to Chinese participants therein, hopefully," said Zha Daojiong, a professor of international political economy at Peking University.

The US adopted the word "de-risk" after European Commission chief Ursula von der Leyen used it to address the EU's long-standing concerns over national security and trade with China.

Liu Zhiqin, a senior fellow with Renmin University's Chongyang Institute for Financial Studies, said that the US "cleverly disguises its unilateralism and protectionism" by using a common term in economics and putting Chinese companies on its sanction list under the concept of de-risking.

"It's, in fact, decoupling," he added. "America is telling people in the world that there is a risk to doing business with China, but [Washington] doesn't clarify in detail what those risks are about."

Heron Lim, an assistant director and economist with Moody's Analytics in Singapore, said that China is seeing a broader decoupling in the medium term from the current narrow de-risking of the US to limit Chinese access to technology and investment.

"The narrow measures are targeted at what is seen as future hi-tech, high-growth segments that could fuel the next wave of economic growth," he added.

Ker Gibbs, former president of the American Chamber of Commerce in Shanghai, said that "it's tomato, to-mah-to" in the diplomatic sphere, indicating no big difference between decoupling and de-risking.

"I think, to this day, we've created a completely decoupled digital economy," he added. "I don't think multinationals are going to pull out of China, but they will have to separate their China business from rest-of-the-world business."

Zhao Xijun, a finance professor at Renmin University, said that the crux of the matter is about the US leveraging national security to "suppress" China.

"If this problem is not resolved, issues related to trade and investment won't be settled," he added. "The US, on one hand, puts trade and investment on the political agenda, while it also doesn't want to give up the Chinese market."

Further efforts by China and the US to break the deadlock in trade and improve the external situation are hoped for, but the results remain unclear as an easing of tensions seems to have become overshadowed by hard lines on national security.

"China can adjust the strategy of tit-for-tat confrontation to create greater room for cooperation and to control areas of conflicts," said independent think tank Anbound, which is based in Beijing. "It is basically unlikely that China can completely reverse the situation, but China can beef up communication with the US to shrink the yard and lower the fence."

Additional reporting by Mia Nulimaimaiti and Luna Sun

This article originally appeared on the South China Morning Post (SCMP).

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