The US decoupling from China
Jorge Costa Oliveira
Globalization has relocated countless companies and vast capital to China. Many supply chains depend on Chinese companies, as we saw when medical and sanitary supplies were needed to combat the Covid pandemic. The economic growth of China and several emerging countries has not only lifted hundreds of millions of people out of misery and poverty, but has also created new markets for capital goods and advanced innovation and technology products produced in Western countries.
Despite the virtues of globalization, the economic revolution it caused has created discontent in various segments of the population, which has been ridden by reactionary and xenophobic sectors in major Western countries of which the election of Trump in the United States is the best example; riding on an ultranationalist and protectionist policy of returning companies (and jobs) that have relocated, reducing imports and dependence on foreign businesses.
All of this is embedded in a narrative of strengthening U.S. national interests, in particular its national security and military supremacy at the global level. When it was in power, the Trump administration gradually evolved from this initial narrative to what is called decoupling, that is, the greatest possible separation of the U.S. from China on all levels – a policy that has been reinforced by the Biden Administration and that is now generally accepted in the U.S. Congress.
After a period in which China’s growth was seen as an excellent business opportunity for American companies and another new high potential market, there came the realization that China’s global GDP would surpass that of the U.S. and that China’s military power would also grow and rival that of the U.S., as well as its global influence. In short, the rise of China came to be seen as a threat to America’s influence in the world.
On other levels, Chinese influence is not yet as visible, but it is nevertheless growing – from development financing to increasing the relevance of the renminbi as an international currency, from the creation of intellectual property rights to the production of relevant capital goods (cars, airplanes, advanced industrial equipment).
In order to maintain global hegemony, U.S. sovereign bodies have adopted a multi-faceted strategy of decoupling in regard to China. This is aimed at preventing access by relevant Chinese companies to: (i) the U.S. market, (ii) U.S. financial markets, and (iii) relevant technologies. In addition, they have stipulated (iv) a ban on any U.S. Person having a relationship with “Communist Chinese Military Companies” (CCMC) and, accordingly, (v) the blacklisting of Chinese companies, in particular the Entity List and those of the Departments of Defense, Commerce, and Treasury. The number of CCMCs rose from 130 in 2018 to 532 in 2022.
Although the volume of foreign trade between the two countries remains high (notwithstanding the tariff war started in 2018 by the U.S.), the American government will continue to enforce decoupling. The consequences for other global economic blocs are important and one must look closely at its implications for Europe.
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