China’s Response to ‘De-risking’ Strategy of the West

The annual parliamentary sittings of China’s National People’s Congress and the Chinese People’s Political Consultative Conference—usually held at the same time—are important political events, with speeches of leaders at the meetings reflecting the country’s policy trajectory. During the last sessions of both in March 2023, President Xi Jinping noted that western countries led by the United States (US) are seeking to “contain and encircle” China, posing challenges to its development. For the Chinese, 2023 is the ‘year of the rabbit’, signifying hope and prosperity. However, data from the last two quarters belie expectations of an economic recovery. At their annual meeting too, the Chinese legislative bodies set a modest target of 5 percent growth in GDP for the coming year. This brief examines the Chinese assessment of de-risking initiatives being undertaken by the US, and how it is responding. Attribution: Kalpit A. Mankikar, “China’s Response to ‘De-risking’ Strategy of the West,” ORF Issue Brief No. 669 , November 2023, Observer Research Foundation. Belt and Road China de-risking Debt Trap diversification Economic strength National Security Supply-Chain US U.S. as Enemy No. 1 Since the establishment of ties between Communist China and the United States (US) in the 1970s, there has been increasing economic interdependence between the two. More recently, the West has begun to recognise that they must alter their approach in response to a changing China. As a new German strategy paper on China noted, “China is simultaneously a partner, competitor and systemic rival.” [1] The paper notes that China is reducing its dependencies on Europe but Germany’s dependencies on China have increased; such unilateral reliance on important preliminary products and sophisticated technologies make countries vulnerable to political pressure. [2] It said Germany will aim to diversify economic relations that will bring down dependence on China in critical sectors. [3] When Donald Trump was US president, the fashionable jargon was ‘decoupling’—disengaging from China, or reversing the four-decade-old economic intertwining. In the Joe Biden era, the focus is on ‘de-risking’—defined by US National Security Adviser Jake Sullivan as building “resilient supply chains”. [4] The West’s approach has been primarily that of instituting export restrictions on semiconductor technology, and curbs on outbound investment into advanced technology sectors in China, among others. [5]