G-7 leaders agree on China’s ‘de-risking’ approach

  • The Group of Seven leaders said in a joint statement, “We are not disengaged or turning inward. At the same time, we recognize that economic resilience requires de-risking and diversification.”
  • The move was largely previewed by US Treasury Secretary Janet Yellen when she spoke to reporters at a meeting of G7 finance ministers and central bank governors earlier this month.
  • Goldman Sachs economists Hui Shan and Andrew Tilton said there may be more measures to follow by foreign investment groups in the United States.

Chinese President Xi Jinping shakes hands with US Vice President Joe Biden at the Great Hall of the People in Beijing, China on December 4, 2013.

Lindao Zhang | Getty Images News | Good pictures

Leaders of the Group of Seven agreed to reduce risk rather than disengage from China, and acknowledged the challenges posed by the continent’s practices “distorting the global economy”.

“We are neither disengaged nor turning inward,” the G-7 said in a joint statement issued over the weekend when leaders met in Hiroshima, Japan. “At the same time, we recognize that economic resilience requires de-risking and diversification.”

The leaders added, “We will seek to address the challenges posed by China’s non-market policies and practices that are distorting the global economy. We will confront abusive practices such as illicit technology transfer or data disclosure.”

Reiterating the position, President Joe Biden told a news conference on Sunday: “We’re not looking to disengage from China, we’re looking to de-risk and diversify our relationship with China.

Taking steps to diversify supply chains, he explained, “so we’re not dependent on any one country for the products we need. Together is resisting economic coercion and harmful practices that hurt our workers. That means protecting a narrow set of advanced technologies. Critical to our national security.”

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Speaking after a meeting of G-7 finance ministers and central bank governors earlier this month, US Treasury Secretary Janet Yellen said China’s behavior was “a matter of concern to all of us”.

“There are examples of China using economic coercion on countries that take actions it is not happy with from a geopolitical perspective,” he said, pointing to China’s trade disputes with Australia and Lithuania as examples.

In their statement, the G-7 leaders said, “We will develop resilience to economic coercion. We also recognize the need to protect certain advanced technologies that could be used to threaten our national security without unduly restricting trade and investment.”

The group of world’s leading democracies said it would “reduce overdependence on our critical supply chains” while stressing the need to cooperate with China, citing its role in the international community and the size of its economy.

“Recognizing the importance of honest engagement with China, we are ready to build constructive and sustainable relations with China. We express our concerns directly to China. We act in our national interest,” the statement said.

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President Joe Biden’s administration has previously briefed industry groups such as the Chamber of Commerce on measures to curb US investment in China, according to media reports.

Such rules would mean stricter guidelines for U.S. companies that must notify the government of new investments in Chinese tech firms. according to politics. Contracts in critical sectors such as microchips will also be banned, according to the release.

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British Prime Minister Rishi Sunak told reporters that London is ready to follow the United States’ lead in curbing Chinese investment. Financial Times reported.

Ahead of the weekend G-7 summit, Goldman Sachs economists Hui Shan and Andrew Tilton said they expected action by the Committee on Foreign Investment in the United States, or CFIUS, the US government agency that reviews deals involving foreign investments. The US is looking into whether the transaction violates the country’s national security.

In a note previewing the package of measures earlier this month, they said, “more focus can be placed on refining the existing tariffs, export control and investment regimes once the basic structures are in place.”

“In line with last fall’s export restrictions, we expect them to be more narrowly focused on advanced semiconductors and related technologies, and do not expect significant restrictions on secondary market portfolio investments.”

The impact of the widening rift between the US and China could lead to further damage, the Alliance’s economists said in a note on Wednesday.

“The economic implications of a further disconnect between the West and China could be far-reaching,” they wrote, adding that the damage to the Chinese economy “could be minimal.”

“China could retaliate by reducing supplies of critical raw materials that it dominates, which could severely disrupt global supply chains,” they said.

“But it already uses some form of outward investment restrictions and still looks towards economic pragmatism.”

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Commenting on the agreement, US Trade Representative Catherine Tai said, “This achievement represents an important step in strengthening the US-Taiwan economic relationship.”

China has repeatedly warned against deeper bilateral engagement between the US and Taiwan.

Goldman Sachs argued that with the Taiwan factor, the focus of US-China tensions could shift from trade to military.

“The immediate focus is on developing Taiwan’s military capabilities to prevent a conflict,” U.S. political economists Alec Phillips and Tim Krupa wrote earlier this month, adding that they see “good odds” against the U.S. Congress providing additional support for existing plans. .

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