- In a joint statement, the G7 leaders said, “We are not decoupling or inward-looking. At the same time, we recognize that economic resilience requires de-risking and diversification.”
- The move was largely showcased by US Treasury Secretary Janet Yellen when she spoke to the press at a meeting of G7 finance ministers and central bank governors earlier this month.
- Goldman Sachs economists Hui Chan and Andrew Tilton said there may be more action to follow with the Committee on Foreign Investment in the United States.
Chinese President Xi Jinping greets then US Vice President Joe Biden inside the Great Hall of the People on December 4, 2013 in Beijing, China.
Lintao Zhang | Getty Images News | Getty Images
The G7 leaders agreed that there was a need to de-risk, not decouple, from China, and acknowledged the challenges posed by the mainland’s practices that “distort the global economy.”
“We are not decoupling or inward-looking,” the G7 said in a joint statement released over the weekend as leaders met in Hiroshima, Japan. “At the same time, we recognize that economic resilience requires risk reduction and diversification.”
The leaders added, “We will seek to address the challenges posed by China’s non-market policies and practices, which distort the global economy. We will crack down on malicious practices, such as illegal transfer of technology or disclosure of data.”
Emphasizing the stance, President Joe Biden said at a news conference on Sunday: “We’re not looking to decouple from China, we’re looking to de-risk and diversify our relationship with China.
This means taking steps to diversify supply chains, he explained, “so we don’t depend on any single country for a necessary product. It means resisting economic coercion together and standing up to harmful practices that harm our workers. And that means protecting a narrow set of advanced technologies that are crucial to our national security.”
Speaking after a meeting of G7 finance ministers and central bank governors earlier this month, US Treasury Secretary Janet Yellen said China’s behavior was “something that should be of concern to all of us.”
“There have been examples of China using economic coercion on countries taking actions that China is not satisfied with from a geopolitical perspective,” she said, citing trade disputes between China and Australia and Lithuania as examples.
“We will strengthen resilience in the face of economic coercion,” the G7 leaders said in their statement. “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 world’s leading democracies said the group would “reduce excessive dependencies in our vital supply chains” while emphasizing the need to cooperate with China, citing its role in the international community and the size of its economy.
“We are willing to build constructive and stable relations with China, and recognize the importance of frankly dealing with China and expressing our concerns directly to it. We are working for 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 seeking to curb US investment in China, according to media reports.
Such rules mean stricter guidelines for US companies that will be required to report new investments in Chinese tech companies to the government, According to Politico. According to the publication, deals in important sectors such as microchips will also be prohibited.
British Prime Minister Rishi Sunak also told reporters that London is open to following the US’s lead on restrictions on Chinese investment, The Financial Times reported.
Ahead of the G-7 summit at the end of the week, Goldman Sachs economists Hui Shan and Andrew Tilton said they expect the Committee on Foreign Investment in the United States, or CFIUS — a US government agency that reviews deals involving foreign investment in the United States. The United States to see if the deal violates the country’s national security.
In a note reviewing the package of measures earlier this month, they said there may be “more focus on improving existing tariff and export and investment control regimes once the basic frameworks are in place”.
“We expect them to have a fairly narrow focus on advanced semiconductors and related technologies, in parallel with export controls last fall, and we don’t expect significant restrictions on secondary market portfolio investments.”
The impact of a widening rift between the United States and China could lead to more damage, economists at Allianz said in a note on Wednesday.
“The economic repercussions of a further decoupling between the West and China could be far-reaching,” they wrote, adding that the damage to China’s economy could be “far-reaching.”
“China could retaliate by reducing the supply of important raw materials in which it holds a dominant position, which could severely disrupt global supply chains,” they said.
“But this is unlikely because it is already applying some form of foreign investment restrictions and is still eyeing economic pragmatism.”
There could be further escalation in US-China relations after Washington concluded its negotiations with Taiwan on a number of trade terms on Friday, marking a potential deal in the first part of bilateral relations. The “21st Century Trade” initiative.
The first agreement under the initiative includes: customs management and trade facilitation, good regulatory practices, local regulation of services, anti-corruption, small and medium-sized enterprises, The Office of the United States Trade Representative said in a statement.
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“This achievement marks an important step forward in strengthening economic relations between the United States and Taiwan,” US Trade Representative Catherine Tay said of the agreement.
China has repeatedly warned against deepening bilateral relations between the United States and Taiwan.
Goldman Sachs has argued that with the Taiwan factor, the focus of US-China tensions may shift from trade to military.
“The most immediate focus has been on building Taiwan’s military capabilities to deter conflict,” US political economists Alec Phillips and Tim Krupa wrote earlier this month, adding that they see “good prospects” that the US Congress passes additional support for existing schemes. .
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